How to use bitcoin anonymously?

As you probably already know, bitcoin cash is not anonymous (this property was never part of its original design). Bitcoin transactions are chained together in a permanent public record. Analysis of the blockchain may reveal a lot information about your transactions [1] (e.g., recipients of your payments, addresses in your wallet or the balance of your wallet). The following sections contains everything you need to know in order to prevent such kind of blockchain analysis.

There are currently three main methods how you can make your transactions more private. The first method is called CoinJoin [2] and is based on "joining" your transactions with transactions of other users. Most advanced project based on this method is JoinMarket [3]. This method is very secure, but unfortunately not fully implemented yet. However, the development process continues and the user base is slowly growing. The second method is called Confidential Transactions [4]. In simple terms, this method encrypts amounts in your transactions and helps obfuscate chain of the transactions. This method is not yet part of bitcoin implementation, but may be implemented in the future.


how bitcoin cash mixing service works
Figure 1: Basic workflow of a Bitcoin Cash Mixing Service

The oldest and most often used method is bitcoin mixing (see Figure 1) which works on similar basis as mix network [5]. The bitcoin cash mixer receives bitcoins to input addresses and sends out different amounts from different input address. This method requires trusting the mixer, but is sufficiently secure when used properly. Manny of our users mix their bitcons for the first time. Because mixing your bitcoin cash properly requires to follow some simple rules, we decided to write a manual that will make this operation much easier.

Buying bitcoin cash

The first step is of course to get some bitcoins. Unfortunately, there is no easy way to buy bitcoins fully anonymously (we will solve that problem later). Most of the bitcoin cash exchanges have Know Your Customer (KYC) policy. That means you have to provide your ID, driver's license or passport before buying some bitcoins. Even when the identity verification is not required your bitcoin cash will be still linked to your bank account or your face (when buying in person). Therefore, feel free to chose the service which requires the lowest possible amount of information.

create a new participation
Create a new participation


The next step is simple. Just rewrite the captcha code and click on the continue button (see Figure 8).

rewrite the captcha code
Figure 9: Rewrite the captcha code



Don't forget to save the Letter of Guarantee. It is important.

letter of guarantee
Figure 11: Letter of guarantee


Your participation will be confirmed after 3 confirmations in the blockchain (see Figure 13).

participation is confirmed
Figure 13: Participation is confirmed


And that's it. your bitcoin cash will be send with delay you provided in the participation form (see Figure 14). Thank you for reading this manual.

the bitcoins have been received
Figure 14: The bitcoin cash have been received

Selling bitcoin cash

Our users often ask us if the mixed bitcoins are "clean" bitcoins. In other words, they ask if they may sell the bitcoins directly to a third party. The bitcoins you get from us have no connection to your own identity, but they have a connection to multiple identities of other users (as every bitcoin does).

In most cases and in most jurisdictions you may sell the bitcoins directly. However, companies like Coinbase and many others are known to keep track of incoming and outgoing transactions. If you want to sell the bitcoins to a service which censors the transactions and may reject the transaction because of it's origin (e.g., the Coinbase), then we recommend cleaning the coins even further. This can be done by using any service which allows you to deposit bitcoins on a bitcoin account and withdraw them later. Therefore, it is a legit origin of the transaction.

If you live in a country with a lot of laws restricting human rights (Iran, Turkey, China, etc.), we recommend to make at least two deposit-withdrawals via bitcoin services in a different jurisdictions. Remember that those services might relase any user data to law enforcement if ordered to do so. Some examples of services we can think of are a Bitcoin exchange in Philippines, Mexico, Brasil, South Africa, combined with Localbitcoins, a gambling website, etc. Just make sure the services are legal in your jurisdiction.

Best practices

In the end, we present to you list of best practices that will help you to keep your transactions private.

  • Always assume that all transactions from a particular wallet are linkable (never buy anonymous stuff and personal stuff with bitcoins from the same wallet).
  • Always use Tor Browser when you are buying something with bitcoins from the anonymous wallet (your real IP address will remain unknown to the merchant).
  • Always connect to Electrum servers via Tor (your real IP address will remain unknown to the Electrum server admin).
  • Use Tor URL instead of clearnet URL whenever possible. URL of our darknet mixing service is http://bchmixizghs6jary.onion/.
  • Use the Tor Browser with disabled JavaScript if the mixing service supports it (LE used some JavaScript exploits in the past to deanonymize Tor users).
  • Use at least two mixing services in a row to anynimize the bitcoins. Like this: LocalBitcoins.com → mixing service A → mixing service B → anoynymous-wallet (your transactions will remain private also in the case when one of the mixing services is compromised).
  • If the mixing service requires user registration then use a different account for every mixing operation (this will prevent the mixing service to enumerate all your wallets).
  • Use only well established mixing services and look for reviews on the internet before using them.
  • Use only encrypted communication channels to contact the mixing service (unencrypted email can be easily intercepted). Bitmessage for example, is encrypted, anonymous, decentralised and uncensorable.

References

  1. Fergal Reid; Martin Harrigan (2011). "An Analysis of Anonymity in the Bitcoin System"
  2. Gregory Maxwell (2013-08-22). "CoinJoin: Bitcoin privacy for the real world". bitcointalk.org.
  3. Chris Belcher (2015-01-09). "Joinmarket - Coinjoin that people will actually use". bitcointalk.org.
  4. Gregory Maxwell (2015-06-09). "Confidential Transactions, Content privacy for Bitcoin transactions". bitcointalk.org.
  5. David Chaum, Untraceable electronic mail, return addresses, and digital pseudonyms, Comm. ACM, 24, 2 (Feb. 1981); 84-90
  6. Thin Client Security - Bitcoin Wiki