How to make your Bitcoin transactions more anonymous

Guest Author | May 26, 2015 | 4:30 pm

How to make your Bitcoin transactions more anonymous

Guest Author | May 26, 2015 | 4:30 pm

Bitcoin’s blockchain technology allows users to easily transmit funds while protecting their identities. This particular aspect of the disruptive technology has naturally attracted criminal usage; from online black markets selling drugs illegally, frauds and hacks, sex trafficking, money laundering, tax evasion, funding terrorist activities, etc.

However, users who believe in the anonymity principle of the Bitcoin protocol have started going to extraordinary lengths to cover their tracks as they circumvent the traditional financial system’s AML/KYC rules.

Bitcoin Tumblers

One common technique that users employ to protect their identities is by using tumblers or mixers. Bitcoin tumblers serve the same purpose for the digital currency as professional money launderers do for fiat currencies. Tumbler or mixer services break Bitcoin transactions into several smaller ones or exchange a set of Bitcoin for another of the same value minus a fee; a process equivalent to traditional money laundering. Breaking transactions into several smaller transactions makes it hard to trace the source of the transaction, thereby providing increased anonymity.

Among the primary Bitcoin Tumbler or Mixer services are BitLaunder and BITMIXER.IO.

No Risk, No Reward

In order to cover the tracks, a user has to take the services of a third-party. Before placing trust in a third party, a user must do his due diligence in order to avoid an unnecessary loss or theft of his Bitcoin.

How anonymous Bitcoin really is?

It must be noted that even though the blockchain – the public ledger of all the transactions in the Bitcoin network – does not record identities, it does require internet access. Theoretically, it then opens up the possibility of identifying or tracking down the user via the IP address to the Bitcoin nodes processing the transaction.

Not exactly anonymous, is it?

Dax Hansen, a partner at the Seattle-based law firm Perkins Coie LLP had rightfully said in an interview, “This conversation may eventually flip from Bitcoin’s anonymity to whether it is actually private enough.

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