Bitcoin is widely known for keeping security in transactions and keeping you anonymous from anyone wanting to know who wait transactions they are making. But how does Bitcoin actually keep you anonymous?
Bitcoin Anonymous Addresses
The most important feature of Bitcoin is someones ability to generate a random wallet from any application that supports Bitcoin. When this wallet is generated it makes a public and private key. This public key is what people use to send bitcoin to your wallet. There is no requirements of name or identification when you generate a wallet. This means you are in no way connected to the address in the beginning.
How to avoid connecting you identity to a wallet
Many People when they generate a wallet the first thing they want to do is buy Bitcoin from an exchange and send the Bitcoin to your wallet. But because you need to identify yourself and use a bank account when you buy that Bitcoin; when you send that bitcoin to your wallet from an exchange your wallet address is automatically associated with your identity.
You can avoid this in many different ways, these alternate ways while being less convenient offer more anonymity.
Bitcoin ATM’s
Bitcoin ATM’s allow anonymity because its all cash. When you walk up to these ATM’s you first insert the amount of cash you would like to buy the Bitcoin for. Then you can scan your QR code for your wallet or enter the full public key manually. The Bitcoin should end up in your wallet. The fees for these types of transactions will be higher than normal but the level of anonymity it gives is worth it.
CoinJoin
CoinJoin is another way that you can use to enhance your anonymity. This method involves combining multiple transactions into a single transaction, effectively obscuring the source and destination of each individual transaction. CoinJoin works by combining the inputs and outputs of different transactions, which makes it difficult to track the flow of funds. The downside for these transactions is the higher transaction fee. But this fee is very small.
Looking at Bitcoin balance
Many people when using a hard-wallet have to look at their account balance with an app by searching up their public key. This can be problematic because your IP address can now be connected to your Public Key which reveals your wallet identity. The best way to avoid this is using the Tor network.
TOR is a network that allows you to browse the internet anonymously, and it can be used to access Bitcoin without revealing the user’s IP address or location.
