Back in 2009, when Bitcoin was first released, it was considered anonymous. The technology at that time wasn’t able to trace Bitcoin transactions. Fast forward to today, Bitcoin transactions can be easily tracked. With advancements in technology, there isn’t just one way to track Bitcoin. Some of the ways Bitcoin is being tracked include IP monitoring, trace analysis, and web-spidering. Bitcoin as of today is pseudo-anonymous at best.
If you want to remain completely anonymous while using Bitcoin, it is not merely enough to anonymize your already existing Bitcoin; you must also know how to buy, store, and cash-out Bitcoin anonymously. You can check out the guides below to learn all that:
If you are that serious about privacy, you shouldn’t be using Bitcoin in the first place. You should be using privacy coins which are far more superior to Bitcoin in terms of anonymity. Here are some of the best privacy coins available today:
You can check out the complete list of privacy coins here.
However, if you already own some Bitcoin and you want to obscure the trace between you and your Bitcoin, this article is for you. Today we will look at the best ways to anonymize your already existing Bitcoin.
1) Using a Bitcoin Mixer (Tumbler)
The most convenient way to anonymize your Bitcoin is to use a Bitcoin Mixer. Simply explained, what a mixer does is it mixes your Bitcoin with other users’ Bitcoin and send back your Bitcoin to a completely unrelated address owned by you, essentially breaking the trace. Some mixers have introduced random delays and randomized transaction fees to make it even more difficult for someone to trace the Bitcoin. Here are some of the best Bitcoin mixers available today:
However, Bitcoin mixers aren’t the perfect solution. There are 2 main problems when it comes to Bitcoin mixers. One, a Bitcoin mixer service can still track your Bitcoin. Although it is extremely difficult for an outsider to track your Bitcoin, the mixer service you used can easily re-establish the link between your input and output transactions. So you are not anonymous in the eyes of the Bitcoin mixer. If the mixer service gets financially compensated or pressured to release your information to abide by the law, there is a high chance that your information will be handed over.
Secondly, there is an ever-increasing number of fraudulent Bitcoin mixer services; meaning that, when you send Bitcoin to these mixers, there is no guarantee that Bitcoin will be returned to you, essentially stealing users’ Bitcoin.
Fortunately, there is a solution for that. So far you’ve only read about centralized Bitcoin mixers. Decentralized mixers eliminate both these problems. One such solution is JoinMarket. It is a software to create a special type of Bitcoin transaction called CoinJoin Bitcoin transaction. There are 2 parties involved in this type of transaction. The market makers and market takers. Market taker is able to create a CoinJoin at any time. And the market maker is available to participate in the CoinJoin transaction at any time. The takers pay a small fee for that. You can check out JoinMarket here.
Decentralized mixers eliminate the need to trust someone to mix your Bitcoin. As more and more people participate in solutions like JoinMarket, they significantly improve Bitcoin’s privacy.
2) Convert Bitcoin to a Privacy Coin and then Convert Back to Bitcoin
Another way to anonymize your Bitcoin is with the use of a cryptocurrency exchange and privacy coins. This is how you do it:
- Deposit Bitcoin to a cryptocurrency exchange.
- Convert your Bitcoin to a privacy coin like Monero.
- Withdraw privacy coin to an anonymous address.
- Signup to another cryptocurrency exchange anonymously.
- Deposit privacy coins to this exchange.
- Convert to Bitcoin.
- Withdraw Bitcoin to an anonymous address.
It is very important that you do not signup for cryptocurrency exchanges that have KYC (Know Your Customer). Almost every cryptocurrency exchange has KYC; however not all cryptocurrency exchanges require KYC from the get-go. You will go through KYC only if you want to increase the withdrawal amount. Exchanges like Binance and KuCoin allow you to withdraw up to 1 BTC daily, without KYC. You can use these exchanges to your advantage.
It is very important that you stay anonymous while signing up for cryptocurrency exchanges. Never use your real name or email. You can create an anonymous email with Protonmail or create a temporary email. These exchanges can see your IP address when you visit their site. Flash cookies and web beacons can also track your activity. Using TAILS operating system can eliminate all these problems. It is an operating system that is designed with privacy in mind. You can check out TAILS here. It is important that you know the limits of TAILS. You can learn what TAILS cannot do here.
As opposed to using centralized cryptocurrency exchanges, you can also use decentralized cryptocurrency exchanges to anonymize your Bitcoin. Here are some of the best decentralized cryptocurrency exchanges available today:
3) Cloud Mine on An Anonymous Pool
For this method to work, you need to join a hash power marketplace like Nicehash or MiningRigRentals. It doesn’t really matter if you signup for these services anonymously or not. What is important is that you join an anonymous mining pool. The payout address must also be anonymous. Here is how you anonymize Bitcoin using this method:
- Create an anonymous Bitcoin wallet anonymously.
- Join an anonymous mining pool anonymously.
- Join a hash power marketplace like Nicehash or MiningRigRentals.
- Deposit Bitcoin to hash power marketplace.
- Buy hash power in hash power marketplace and mine Bitcoin in the anonymous mining pool.
- Withdraw Bitcoin from the mining pool to the anonymous wallet you created.
You can check out anonymous Bitcoin mining pools here. Check out anonymous Bitcoin wallets here. If you are new to buying hash power, check out our guide here. Just like any other method, use TAILS os while using this method; it makes it even harder to track you.
One problem with this method is the anonymous mining pool you signup to. They still have your worker name which can be traced back to the hash power marketplace. Even though it is an anonymous mining pool, there is no guarantee that they will keep your information private, especially if they get financially compensated to release that information. So there is some level of trust involved here.
4) Sell Bitcoin for Cash and Buy Back Bitcoin Anonymously
Selling Bitcoin for cash and buying back Bitcoin is another way to anonymize your Bitcoin. It doesn’t really matter how you sell your Bitcoin. The most important step in this method is to maintain anonymity while buying back Bitcoin with cash.
Here is how you anonymize Bitcoin using this method:
- Signup to a peer-to-peer exchange anonymously.
- Create an advertisement as a buyer of Bitcoin for cash or look for already existing offers in the “Cash in Person” category.
- Open the trade and follow the seller’s instructions.
- Meet the seller in person and exchange cash for Bitcoin.
Just like any other method, you must be anonymous while signing up for peer-to-peer exchanges. The Bitcoin wallet you use must also be anonymous. This is already explained in other methods.
This method of anonymizing Bitcoin works fine but there is one small problem. The person you are meeting in person still knows your real identity. If you do not like to meet anyone in person, you could use a Bitcoin ATM. You can check out the map of all Bitcoin ATMs here. But again, these ATMs have cameras installed in them and there are many other cameras along your path to Bitcoin ATM. Maybe wearing a hoodie, glasses, and applying black spots on your face will thwart these cameras?
How to Maintain Anonymity
After you have successfully anonymized your Bitcoin, it is equally important to maintain anonymity.
- The Bitcoin wallet where you have stored your Bitcoin must never be connected to public or private WiFi.
- Whenever you want to send Bitcoin to someone, always broadcast it via Tor network on a secure operating system.
- Never send Bitcoin from this wallet to a service or website where you have already provided personally identifiable information.
- This wallet must always be offline.
Bitcoin is a cryptocurrency that can be easily tracked by someone with the right knowledge. Having a public ledger that records all transactions makes it even easier to track. This is why privacy coins like Monero grew in popularity. There will always be a need for privacy in the world of cryptocurrency. With technology advancements, there come new ways to track your Bitcoin activity, and also ways to defeat these systems. Above are some of the ways to anonymize Bitcoin at present time.