How to make anonymous payments with Bitcoin is a relatively important question that definitely needs answering. While it can have many different layers and it can be tackled from different perspectives, Bitcoin anonymity, or anonymity of its transactions and payments, can be improved with a few simple tricks or practices, which is what this article will look at.
Best practices for anonymous Bitcoin transactions
We have already compared Bitcoin privacy to some sort of a spectrum, where the different levels of what is considered anonymous is simply in the eye of the beholder. With that being said, there are some practices that almost anyone can implement that could allow them for anonymous Bitcoin payments without having to do much.
While the first two tips will be talking about privacy in the digital world as such, the three tips that follow are purely Bitcoin related. However, a combination of all of these practices can help with increased anonymity of Bitcoin payments.
Tip number 1: Tor – The Onion Router
First good tip to ensure more anonymous Bitcoin transactions, as well as increase the overall privacy of the user on the Internet, is the usage of Tor. The Onion Router (Tor) browser encrypts and routes the Internet traffic to random computer nodes on Tor network before they reach the final destination. It is thus very difficult to pinpoint the broadcaster’s IP address, meaning that the transactions as such are more private.
Tip number 2: VPN – Virtual Private Network
When it comes to purely logical comparison of what they provide, using VPN and Tor is fairly similar, when it comes to increasing the anonymity of Bitcoin transactions. While none of these tools has anything to do with Bitcoin as such, it is the overall improvement in anonymity that can immediately also improve the anonymity surrounding any Bitcoin transaction or payment.
Anonymous Virtual Private Network (VPN) is a network that does not store a history of the user’s activities on the servers. Its main role is to encrypt the Internet traffic of the user and reroute it through multiple servers, usually via different geographical locations, before they arrive at the final location.
This means that VPN in essence obscures the IP address of the user, which can be compared to CoinJoins obscuring the Bitcoin transactions. Yet, some VPNs also improve the security of the device as they screen for malware, which only adds reasons as to why anyone should use it. Improved privacy as well as security are definitely good reasons to use VPN when someone wants to receive a Bitcoin transaction in an anonymous manner.
Tip number 3: Generating new addresses
The very first rule of accepting Bitcoin in as anonymous a way as possible is to never reuse any address. Most of the cryptocurrency wallets already generate new addresses with every single transaction, but it is up to the owner of the wallet to check whether each address is unique.
This immediately ensures that it is more difficult to connect the identity with the given transaction, especially if the overall wallet has not undergone a KYC process. This is the absolute basis that is necessary to follow before anyone wants to improve the anonymity of Bitcoin payments more. Without generation of new addresses, the user can hardly benefit from the anonymous features that Bitcoin and different tools built around it offer.
Tip number 4: Lightning Network for small transactions
Lightning Network is another great way to improve the privacy for both, the sender as well as the receiver of Bitcoin payments. This off-chain layer-2 solution allows people to make sure that their transactions are untraceable, since they are not only not written to the blockchain, but also because the LN wallets do not require a KYC. In most of the instances, the wallets are easy to download and use, but need to be supporting Lightning Network, as Bitcoin transaction and Lightning transaction are two separate things.
Lightning Network is growing in popularity especially for smaller transactions, usually in terms of a couple of dollars. They are cleared almost instantly with negligible fees of few satoshis. Coupled with improved anonymity of both parties, LN offers a very attractive solution for anonymous Bitcoin payments.
Tip number 5: Bitcoin mixing or tumbling services
Last, but definitely not less important tip or trick to increase the privacy of Bitcoin transactions, mostly for the receiver, is the usage of tools such as CoinJoins, Bitcoin mixers or Bitcoin tumbling services. All of these are in most cases looking at one specific thing and that is to make the transactions more anonymous by obscuring them.
Usually, they do this by pooling numerous transactions together, after which they “shuffle” all the transacted bitcoins and satoshis and randomly redistribute it to the receiving addresses. By doing this, it gets increasingly more difficult for any Bitcoin or blockchain tracking companies, as well as governments, to follow who sends their capital to whom.
Or, if none of the above-mentioned options is to your liking, there is a simple solution to ensure accepting anonymous Bitcoin payments. And that is Whir. Whir is a privacy-oriented service that implements CoinJoin directly on its website, to allow for anonymous Bitcoin transactions.
The use of Whir is super easy and reminds of a traditional Bitcoin transaction. The only thing that is needed is to use the recipient addresses as given on the Whir website, which then makes sure that the transaction arrives to the receiver with complete privacy. Accepting Bitcoin anonymously thus becomes very convenient.
The answer to the question How to accept Bitcoin anonymously, has many different layers. But this article tried to provide some good practices to have in mind when the users want to increase their privacy not only in the digital world, but also in the world of Bitcoin. Most of these are not as complicated as they might look, which is why it is suggested to at least try to use them or get familiar with them, as this can get very handy in the future.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.