Part 2: The Ultimate Bitcoin Privacy GuideKehinde LAWAL
Thanks for being a loyal fan of this blog, now, lets dive into PART 2👇.
The Bitcoin Cash Hard Fork
Because nothing is ever easy, on 1 August 2017 Bitcoin split into two derivative currencies: Bitcoin Classic (BTC or XBT) and Bitcoin Cash (BCH or BCC). This split is known as the Bitcoin Cash hard fork and the reasons are highly technical.
BTC Vs. BCH
If you had any Bitcoin in your wallet and have possession of the private keys, then you are now also entitled to claim an equal number of Bitcoin Cash coins. Thus, if on 1 August 2017 you had a wallet with one Bitcoin in it, you still have that Bitcoin and can nw also claim one Bitcoin Cash coin (BCH).
If you are just starting with Bitcoins, then you’ll need to decide between purchasing Bitcoin Classic or Bitcoin Cash. Some points to bear in mind are:
- Bitcoin Classic is much better established and far more vendors accept it as a form of payment.
- Most Bitcoin wallets and many exchanges don’t accept Bitcoin Cash.
- However, Bitcoin Cash allows for more transactions per second. This translates to faster payments and lower fees.
- 1,500 more blocks were mined on the Bitcoin Cash chain than on the original one.
- The market price for Bitcoin Cash has fluctuated wildly over the last month, but in general it has seen steady growth.
As already noted, this article was written just one month after the hard fork. It will be interesting to see how the situation develops. For the purpose of this article, I will assume regular Bitcoin (Classic) is used. However, while there may be big differences between the currencies from an investment viewpoint (on which I am not qualified to comment), there is almost no difference in the front-end of how they are used. Indeed, they are based on the same code. As such, you can expect to see more Bitcoin Cash versions of existing Bitcoin software going forward, as tweaking code for the new currency is almost trivially easy.
Your Anonymous Bitcoin Wallet
In order to do anything with Bitcoin, you need a Bitcoin wallet. This is software that stores your Bitcoin and allows you to receive and send (that is, pay for stuff with) Bitcoins. As with most things Bitcoin, there is an almost overwhelming number of options available.
Types Of Bitcoin Wallets
The first thing to do is decide whether you want a mobile, web or desktop wallet. Each sort has its own advantages and disadvantages. The main types are:
- Desktop wallet – the most secure option, giving you complete control over your wallet. It also means that you are solely responsible for backing up and securing your wallet.
- Mobile wallet – very handy, as you can carry it in your pocket and use it to pay for things in stores or exchange funds in person. If you lose you phone, however, say goodbye to your Bitcoin!
- Web wallet – certainly the most convenient type of wallet, as you can access it from just about anywhere. Web wallets are also the least secure kind of wallet, as they are held on a server by a third party. This means that you have to trust the website hosting your wallet not to abscond with your money. In addition, problems with the server, or the company suddenly closing down, may result in loss of money. You should therefore never use pure web wallets to store large amounts of money.
Hardware wallets designed to store your Bitcoins offline, and physical wallets (basically a printout of kind of your private keys), also exist.
A recommended tactic is to store large savings as securely as possible (preferably offline), while keeping a small amount of Bitcoin in an anonymous bitcoin wallet for performing transactions.
I and BestVPN.com cannot take any responsibility for the security or honesty of any software, website or service listed in this guide. I’ve tried to list only popular and reputable options, but I have no way of knowing if an app has malicious code built into it, or if the admins of a website will suddenly decide to abscond with your Bitcoin savings.
This is, in fact, pretty much precisely what happened to Mt. Gox, which once handled over 70% of all Bitcoin transactions worldwide. So please be careful.
Choosing A Wallet
Choosing a(n anonymous) Bitcoin Wallet is an important decision and one that you should research thoroughly. There is no such thing as the perfect Bitcoin wallet – they all have their pros and cons.
A good place to start is bitcoin.org, which provides a good list of options. Whichever wallet you choose, it is a very good idea to securely encrypt and make regular backups of it.
I have chosen Electrum as my wallet for this guide. It is free, decentralized, and open source. I like the fact that it gives me full control over my money and fees. It also offers two-factor authentication (2FA) to help prevent theft of my Bitcoin.
Although the code for Electrum is open source, I still need to trust that its developers don’t update the code with something nasty, and that it remains an anonymous Bitcoin wallet for me to use. The alternative would be to opt for a wallet such as Armory, which uses full node validation (Bitcoin Core) to validate and relay transactions on the Bitcoin network.
Bitcoin Core is very secure but requires 145GB of space on my drive. If I was storing a large amount of Bitcoin, I would use a Bitcoin Core Wallet. However, as I only need a small amount of Bitcoin to buy a VPN service, I consider this to be overkill.
Here is my new Electrum Bitcoin wallet. If you’re feeling generous, you can always send some Bitcoin to me using the address shown above!
A major downside with Electrum is that it discloses information to a third party. It uses central servers that can associate your payments together and log your IP address.
If you’re bothered about the central server connecting your payments together (which won’t be logged to your real IP anyway), you can mitigate this by creating a new wallet every time you perform a transaction. You can also take advantage of Electrum’s Tor functionality to hide your real IP address from a central server. (I have opted to connect to a single .onion server for maximum privacy.)
Electrum is available for Windows, macOS, Linux and Android, but it is not available as a web wallet. Reviews for the Android version of Electrum in the Play Store are disappointing, so I will stick with the Windows version.
If this was purely for personal use, I would use the Linux version. However, Windows has a much wider audience in terms of those reading this guide. A good introduction to installing and configuring Electrum on Windows is available here. A good beginners’ guide to using Electrum is available here.
When downloading any wallet from the internet, be sure to verify its digital signature.
Thanks for reading this article, if you have any questions, don’t hesitate to put it down in the comment box below👇👇👇.
Note: Part 3 of this article will be posted 9:00 AM tomorrow morning. I look forward to having you on our blog again. Happy Reading!