Part 3: The Ultimate Bitcoin Privacy Guide

Part 3: The Ultimate Bitcoin Privacy Guide

Welcome back to Part 3 of “The Ultimate Bitcoin Privacy Guide“: How to keep your Bitcoin and Cryptocurrencies safe from hackers.  Click here to read Part 1 and Part 2.

👏👏👏Thanks for being a loyal fan of this blog, now, lets dive into PART 3👇.

How to Buy Bitcoins Anonymously

There are many ways to buy Bitcoin anonymously. These vary depending on which country you’re in. It is therefore probably best to search online for options available in your area. How to Buy Bitcoins provides an excellent list of resources for almost every country.

Ideally, you want to buy Bitcoins as anonymously as possible so it cannot be traced to your real-world identity. Broadly speaking, there are three main approaches you can take. In rough order of anonymity, from lowest to highest:

1. Buy Then Mix

This is not the most anonymous method of buying Bitcoins, but it is the most convenient. It does nevertheless ensure a fairly high degree of anonymity.

Using this method, you do not actually buy Bitcoin anonymously at all. You simply purchase it from an automated Bitcoin exchange such as CoinBase. To make the Bitcoin more anonymous, you then launder it using a “mixer” service.

A mixer service basically anonymizes your Bitcoin by swapping it for other Bitcoin that has no connection to you. This makes it very difficult to follow the chain back to you. Difficult, but not impossible. Bitcoin laundry services are, of course, not free.

Almost all automatic exchanges require you to prove your real-world identity. In this case, it is easy to determine that you’ve purchased Bitcoin, but not what happens to it after it has been mixed.

I will look at mixing Bitcoin later in this guide. You can also mix Bitcoin that has been bought more anonymously in order to further increase its anonymity.

2. Buy Online From A Seller

Websites such LocalBitcoins.com or the #bitcoin-otc IRC chatroom on Freenode (otc = over-the-counter) allow you to meet private Bitcoin sellers online.

You can buy Bitcoin anonymously in this way without registering your real name anywhere. As the seller is a private individual, tracing the transaction is much more difficult than if it was done through a big, centralized exchange where everything is recorded.

bitcoin otc

#bitcoin-otc uses a fairly involved feedback system. It is well worth taking the time to understand this. You’ll need to hash out the payment method with the seller. A list of IRC clients is here. Private sellers may accept all sorts of payment methods – up to and including meeting up in person for cash payment.

3. Bitcoin ATM Machines

There are now many places in the world where you can buy Bitcoin by inserting cash into an ATM machine. If you wish to use a Bitcoin ATM as anonymously as possible, be sure to pick one that doesn’t require any form of personal validation (this is up to the ATM operator).

Most Bitcoin ATMs are located in shops and similar places. Remember that  most of these have timestamped CCTV security systems. Interested parties could, in theory, use these to de-anonymize you.

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My Experience

I used LocalBitcoins.com to buy my Bitcoin. It is an international online marketplace for in-person Bitcoin trading.

For maximum anonymity, you can search for someone who lives nearby and arrange a face-to-face meeting with them to buy Bitcoins anonymously with cash. Alternatively, you can buy online and pay with a bank transfer or other agreed method.

Options for this include cash bank deposit, cash sent by post, and paying with gift cards. Please be aware that cash, gift cards and similar payments are not covered by LocalBitcoins.com’s escrow system by default.

Buyer trust scores can help mitigate this problem. However, cash and gift card payments are still among the riskiest ways to buy Bitcoin in terms of the potential to lose your money. I therefore strongly recommend only making small Bitcoin purchases in this way.

The Process

  1. Register An Account On LocalBitcoins.com. You need a valid email address for verification, but there is nothing to prevent you using a disposable email account for this.
    Note that if you use a disposable email address, you won’t receive messages and notifications. However, you can access these directly through the website.

  2. Next, search to find a seller who matches your criteria.

    Local Bitcoins
    For comparison, here are prices in USD. On 25 October 2017, CoinBase listed the price of a Bitcoin at $5,482.36. As you can see, prices listed by individual LocalBitcoins.com sellers are a significantly higher than this. Such is the price of privacy.Local Bitcoins
    It is increasingly common for sellers to require that buyers prove their identity. While I am sure there are many perfectly good reasons for this (such as combating fraud), this runs counter to the idea of buying Bitcoin anonymously.
    I, therefore, filtered results with the ‘SMS not required’ and ‘ID not required’ filters. Note that even with these filters selected, many sellers did, in fact, ask for ID in their small print. Others would not sell to VPN or Tor users.

  3. Check Out The Profile Of Your ProspectBitcoin Trade
    This seller is not the cheapest available, but has 500+ trades with a 98% feedback score and requires no ID check. He also permits purchases when using a VPN or Tor, although use of Tor is not recommended.For the purposes of this guide, I’m going pay via bank transfer. It’s easy, but still affords a fair degree of privacy as I’m dealing with an individual private seller. Plus, I plan to launder the Bitcoin afterward! I found plenty of sellers who accept various forms of cash and/or store card payment from anonymous buyers. It’s worth noting that, in general, the more anonymous the payment a seller accepts, the higher the cost per Bitcoin – and the higher the risk of losing your money.The price for paying with Amazon Card Codes was over twice the going exchange rate for Bitcoin.
  4. Buy The Bitcoin

    Buying Bitcoins 6 1
    The requested coins are held in escrow (that is, temporarily by LocalBitcoins.com) until the seller receives payment. You must make the payment before the payment window finishes, or LocalBitcoins.com will cancel the trade.

    This escrow system is designed to protect both buyers and sellers. If either side in a transaction reports a problem, LocalBitcoins.com will hold onto the Bitcoin until both sides are happy. If required, it will provide arbitration.

    Paying by bank transfer is not very anonymous, as the seller will receive a bank transaction number. However, I plan to further anonymize the purchase by transferring the funds to another wallet and then laundering them.

    Once you’ve paid the seller, there is usually a short wait for the transfer process to complete and the payment to be confirmed. Once the seller has confirmed the payment, the Bitcoin is released from escrow and credited to your LocalBitcoins.com wallet. LocalBitcoins.com creates this when you set up a new account.

    Local Bitcoins
    You can check out transactions in your LocalBitcoins.com wallet.

    Like eBay, LocalBitcoins.com relies on a reputation system. You are therefore expected to leave feedback on the seller once a trade is complete.

  5. Move The Bitcoin To A Private Wallet

    Although not strictly necessary if you just want to spend your Bitcoin openly, this improves both privacy and security (assuming you keep your private wallet somewhere secure).
    For maximum privacy you should create a new wallet address each time you transfer funds. This helps prevent an adversary from linking different Bitcoin transactions you make together.

    Send Bitcoins

  6. Sending Bitcoin to your wallet (or anywhere else, for that matter) is easy. Just enter your wallet’s address and the amount you wish to send. Note that transfers are subject to a Bitcoin network transaction fee.Sending Bitcoins

  7. After a few minutes, the Bitcoin should appear in your personal wallet (wallet #1). Yay! If you are concerned that interested parties might actively trace your Bitcoin transactions, you should now create a second new wallet (wallet #2) and transfer your funds into that.

It isn’t hard for an adversary to trace transfers from wherever you bought the coins to wallet #1. For example, LocalBitcoins.com knows the address of wallet #1. By sending the coin from wallet #1 to wallet #2, you can reasonably claim zero knowledge of, or responsibility for, what happens to funds in wallet #2. All you need is a plausible excuse for why you transferred the money to another person.

If you plan to mix your Bitcoin, wallet #2 should be created on the Tor Hidden Services dark web. Electrum is good for this as it supports Tor.

Depending on your threat model and how anonymous your initial purchase was, you can now start spending your Bitcoin. Alternatively, you can further improve anonymity by mixing the Bitcoin before spending it.

Thanks for reading this article, if you have any questions, don’t hesitate to put it down in the comment box below👇👇👇.

Note: Part 4 of this article will be posted 9:00 AM tomorrow morning. I look forward to having you on our blog again. Happy Reading!

Article Source: BestVPN.com

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