Why would you want to have an anonymous Bitcoin wallet and how does it work? This article answers there questions and much more.
The general consensus when it comes to Bitcoin is it’s a great cryptocurrency. Besides being the one that essentially started the digital currency great, it is an excellent model of crypto. For all the flaws it undoubtedly has, the strengths of its system are too good to overlook.
But let’s face the facts. Using Bitcoin in an anonymous manner is difficult. Possible, but difficult.
The act of properly hiding your identity in the digital world is rather hard to do. This is mainly because you will typically leave behind several digital footprints. Bitcoin is, of course, part of the digital world, so it’s also tricky to be completely anonymous when using it.
By their very design, Bitcoin transactions do not link to a person or identity. Public addresses are common in transactions, being alphanumeric strings that go on public record on the blockchain. The name, physical address, or email of a person is nowhere to be found in the transaction. However, it is still possible to track down a person’s identity by using public address information and IPs.
Nevertheless, you can secure your privacy and effectively become an anonymous user. That is, if you are able to take care of certain things.
First and foremost, you must not ever let your Bitcoin address become subject to exposure in public. To prevent this, you should use a new Bitcoin address every time, which you can use IP obfuscation methods for. Alternatively, you can switch to anonymous Bitcoin wallets. These will do it for you at the backend.
So, how does one go about creating and using an anonymous Bitcoin wallet? For that matter, are there any notable examples? This article will dive into that.
Anonymity, or lack thereof
Realistically speaking, you will reveal your identity multiple times in a single day. For example, spending money using traditional payment methods, like a debit card or bank account, exposes your identity. The reason for this is the financial institution that you use has all of your personal information in its records.
Not only this but every time you send or receive funds electronically, the bank knows how much you are sending and who you are sending it too.
This is where Bitcoin diverges from the norm. Rather than disclosing your real-world identity, whenever you send or receive funds, you transact on a peer-to-peer basis. This basically means that it does not go through a third party. Moreover, your funds link to a Bitcoin address, which has no attachments consisting of your details.
The original purpose of allowing users to transact anonymously was to remove any need for a third party. Unfortunately, there are some who twist its system of operation and instead use it for the wrong reasons.
When people commit crimes, they obviously want to keep their identity under wraps. The outcome of this is Bitcoin allows people to buy and sell illegal goods online. As a result, law enforcement is unable to figure out who is responsible for the transaction.
The most important thing to keep in mind when attempting to remain anonymous is to not reveal your identity. Especially not when you are first purchasing Bitcoin. This is because every transaction that occurs on the Bitcoin blockchain is available for pretty much everyone to view. Therefore, it’s easy to trace your transactions back to your original address.
With that in mind, we can start going over the steps for creating an anonymous Bitcoin wallet.
Step #1 – Anonymous hardware and software
When you think about it, you can never really know whether something or someone is watching you or not. So, your first step when constructing an anonymous wallet is to protect yourself. You can do this by purchasing a cheap laptop computer and then getting rid of the hard-drive.
Now, on the topic of which software you should use, there is no easy answer. In fact, it is arguable. However, a common suggestion is that you connect to the Tor network using TAILS. This is a live DVD (or a live USB) whose purpose is to preserve your privacy and anonymity. TAILS can aid in the anonymous use of the Internet, leaving little to no trace on the computer you are currently using. It also helps you use state-of-the-art cryptographic tools for the encryption of your files, email, and instant messaging.
It is important to note that you should not connect to the network from your home.
You should spend a day or two using TAILS so that you can familiarize yourself with the LinuxOS. Eventually, you will feel comfortable enough to continue. When you reach that point, you can move forward by booting up the LiveCD and establishing a connection. Browse through the Tor network and make sure that you are under protection.
Step #2 – Creating the anonumous bitcoin wallet
Now you are at the point where you can actually create a wallet. For this step, there are an array of methods to carry it out. Probably the easiest way is to use the code at bitadress.org. According to the advice /u/SpenserHanson from Reddit gave to to /u/anon_spender:
- Save bitaddress.org.html to your computer.
- Close the browser.
- Disable the WiFi on your computer.
- Open bitaddress.org.html in the browser.
- Generate an address and then record the private keys.
- Close the browser window.
Step #3 – Funding
Now we get to the trickiest part of this entire process: the funding of your wallet. In this particular case, you would likely not want to go to a site like Coinbase. There, you would link up your bank account before starting to send coins to your anonymous address. That wouldn’t be very smart.
Instead, the best way to go about retrieving coins is to know someone who is willing to send you some. However, even then, you will wind up leading a trail directly back to your friend.
The best suggestion for this situation is to make cash deposits through BitInstant or ZipZap. You can give them false information, such as using the new email you created, over the Tor network. And you can do this from a site like Hotmail or Yahoo. Here, there is no requirement for a phone number to sign up; a stark contrast to a site like Gmail. Make sure that your new account forwards your email to another account, like Tormail. You won’t, in all likelihood, need to use the email more than once for confirmation. Furthermore, you may want to create a brand new address with every deposit, just to be on the safe side.
Of course, there are numerous other options you can go with. A variety of companies will sell you bitcoins in an anonymous manner via Bank of America cash deposits. However, there’s something important to remember about big banks. As soon as you walk into one and give them money, you are on camera. So, if you want to keep what you are doing discreet, avoid them.
Step #4 – Spending with the anonymous bitcoin wallet
At this point, you might be curious about buying things with bitcoin. For this, you will want to connect through to TAILS and download a lite client like Electrum. With this, access your account. Every time you want to spend on something, you will have to re-download, but the process takes less than a few minutes. Granted, you are probably safe enough to spend directly from the client.
However, if you want to take extra precautions, you should send the funds to a second wallet. You can do that by way of a ‘mixing’ service. Afterward, you send them to a third or fourth or fifth wallet through those services.
The core requirement of a Bitcoin mixer is to successfully hide user identity. Bitcoin mixing is a process that sets out to completely break the linkability or traceability. The mixing process severs the link between Bitcoin addresses with one of two methods. They either create temporary addresses or swap coins with other addresses sharing the exact same value. As a result, the trail becomes exceptionally hard to follow on the blockchain. It is important to note that the creation of ‘mixing wallets’ should not be with the use of the Tor network. This is mainly because the Tor exit node may be subject to monitoring.
In order to create a mixing wallet, you will need a surefire way to hide your identity without utilizing Tor. The best way you can do this is to sign up for a VPN service through the use of a public WiFi hotspot. Afterward, you pay with bitcoin. One of the best services out there is known as Private Internet Access. You can access their service via a public computer and connect to the VPN. Once you do this, you are able to safely create mixing wallets. And you can do so without the risk of exposing your password to the network.
There is an array of examples of anonymous Bitcoin wallets, but the ones below are the best of the bunch.
Ledger Nano X
The Ledger Nano X Wallet is the successor of the Ledger Nano S hardware device. The initial launch of the Nano X was earlier this year. In this short amount of time, it is making a name for itself. It’s been a popular tool for the safe security of your cryptocurrencies, however the company did experience a data hack.
Essentially, It is a paid device and provides value for money due to it being a mobile device with a Bluetooth feature. In this sense, one can easily use it with any iOS and Android device.
As for security, it is a non-custodial wallet that allows you to control your private keys. Additionally, you are able to use it with an infected device. Ledger Nano X can also be handy as an anonymous Bitcoin wallet if you conceal your ISP using a VPN.
The Samourai Wallet is for the more obsessive users. Samourai Wallet prides itself on being “the most private and anonymous bitcoin wallet.”
It is a brand new wallet that will keep your bitcoin transactions private and your identity a secret. Moreover, it makes sure that your funds are secure at all times. The team behind Samourai is very serious and they know what they are doing. In their introduction, they state the following:
“We are privacy activists who have dedicated our lives to creating the software that Silicon Valley will never build, the regulators will never allow, and the VC’s will never invest in. We build the software that Bitcoin deserves.”
The encryption of this wallet on the device is with the use of AES-256 encryption. Furthermore, it never communicates with any servers. Putting that aside, you get amazing features such as PIN code and seed word backup for safe fund storage.
The Rahakott Wallet is for people who want privacy protection. Plus, those who want to remain anonymous while conducting transactions in several other currencies, including Bitcoin.
Rahakott is a web multi-currency wallet that permits its users to execute anonymous transactions. In the short amount of time since its inception, it was successful in processing $20 million in bitcoin. Furthermore, there is no need to include your phone number or email ID to make a wallet on this platform. Thus, there is no need to worry about losing your personal data.
It is available in four different languages (English, Chinese, Japanese, and Russian) and it supports the following cryptocurrencies:
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- Litecoin (LTC)
- Ethereum (ETH)
- Dash (DASH)
- Zcash (ZEC)
It also includes SegWit support. In addition, you have the option to select a variety of security features. Some of these include OTP, password, or 2-FA authentication for your wallet.
PINT is a multi-currency HD wallet. It helps with the storage, management, sending, and receiving of six blockchain assets. These include:
On top of that, PINT is also a self-hosted wallet. With it, you are in complete control of your private keys by backing-up the seed. Moreover, there is no need to reveal any personal information like your phone number or email while using the wallet. The PINT app has an inbuilt Tor feature that aids in maintaining anonymity while transacting in various assets.