Like cash, Bitcoin is used for everything from everyday business to criminal activity. However, unlike physical cash, the blockchain is permanent and unchanging, which means that anyone from teenagers to the US government can track every single transaction without you even knowing. However, there are ways to add layers of anonymity to your Bitcoin transactions.
Anonymity may seem lighthearted to some of you, but Bitcoin anonymity is valuable for many reasons, some legitimate and some not so much.
On a personal level, you do not want your friends and family to realize how much you are investing in cryptocurrency. At the business level you need a system protection. Bitcoin is particularly valuable and volatile, which makes it a prime target for hackers and fraudsters and good litigation. But if nobody realizes that you have all these Bitcoins, then they will not come after that.
Another value of anonymity is the ability to keep your name out of sensitive transactions. Be it because you're a businessman doing a tricky merger, a kind of freedom fighter or a cybercriminal.
The handful of criminals using Bitcoin is the reason why you need to check your identity in order to buy anything. Anti-terror and anti-money laundering laws, commonly referred to as "Know Your Customer" (KYC), require companies to try to verify the identity of a customer and assess their potential risk of illegal activity. This makes it harder, but not impossible, to buy Bitcoin anonymously.
Weigh Your Risks and Needs
First, you must weigh how much risk you have and what your needs are. No matter how many measures you make and which layers of anonymity you add, if you paint a big enough target on your back, someday somebody will hit you. If you do not believe me, look at this speech by federal attorney Kathryn Haun as she has helped make two other federal investigators and the administrator of The Silk Road crashed
They are even start-ups with the sole purpose of tracking down cryptocurrency transactions. So if you really want to use 100% Bitcoin anonymously, you're in luck. Nonetheless, anonymity can be considered more as a sliding yardstick. The amount of anonymity you need as a Darknet administrator differs significantly from the anonymity you need to buy an Antminer.
In addition, anonymity has its price. On the conservative side, buying Bitcoin anonymously can quickly cost an additional 5-10%. Maybe even more, depending on how many layers of obfuscation you add. So put aside your ego and ask yourself, "How do I intend to use this cryptocurrency and what is my risk?" Then combine so many of the options we want to discuss, as your risk dictate and your budget allow.
I assume that you are already using Tor over a VPN. If you are not, then you should really be. Also, always use a new wallet address for each transaction and never carry your primary phone with you if you do any of the following. This will help to hide all patterns in your purchase, but it is not foolproof.
Option 1: Buy Bitcoin with a prepaid card
Let's start with the most natural method: Using a prepaid debit or credit card and an Exchange That allows you to buy without checking your identity.
This strategy is deadly. Go into your shop and buy a prepaid credit card. Then go online and register your card. The card companies do not check the information so you can enter everything. Next, go to an exchange like Coinmama or Virwox and buy some Bitcoin without verifying your account.
However, this plan is subject to strict restrictions. You can only do $ 150 at a time, due to the above laws that you already know. You can buy a prepaid card up to $ 500 plus $ 5 to buy it. However, on most exchanges, you are hedged for $ 150 plus fees without verifying your identity.
You also need to keep in mind that when you buy the card you are putting it on a surveillance camera. It is best to wait 1-3 months before using the card as most stores will have deleted the material by then.
Lastly, you may be able to create a sample of your purchases in stores or on the exchanges. This means that the prepaid card option is not really practical if you are a full cyber criminal with the FBI after you. But it's good enough if you just want a little extra layer of anonymity without too much cost.
Option 2: Use a Bitcoin ATM
Next is the Bitcoin ATM. It's very similar to the prepaid card method with similar limitations, but usually with a higher per-transaction limit. That means you can do up to $ 1,000 per transaction compared to the $ 150 prepaid card method.
Bitcoin ATMs work very much like regular ATMs. They go upstairs, put some money in and they deposit it into an online account. With about 2,000 Bitcoin ATMs in the US, they are not nearly as universal as ordinary ATMs. You need to consult a map like CoinATMradar or download an app on your iPhone or Android phone to find one in your area. Many of the ATMs are concentrated in big cities like Los Angeles, so if you do not live in a big city then maybe you have a long drive ahead of you.
Bitcoin ATMs vary depending on the manufacturer and operator from operator to operator. Some may not accept cash for payment but force you to use a credit or debit card, while others may take cash . CoinATMradar will show some of this information on the ATM list, but you may need to do some custom scouting. When cash is needed, withdraw the money from an ATM as much as possible so you do not create a pattern. The same applies if you need to buy a prepaid card as described in the previous step.
The biggest limitation to your anonymity when using a Bitcoin ATM is the fact that virtually everyone owns a camera and unlike the cameras in a convenience store, you can not assume that the pictures or videos will be 1-1. 3 months to be deleted. So, if you're a drug lord, that's not the way to go, unless you trust an idiot to do the work for you.
I recommend seeing this short piece of Vice on Bitcoin ATMs. It shows a sample transaction and gives some good insights from operators and manufacturers of Bitcoin ATMs:
Prepaid cards and Bitcoin ATMs work well if they are the most prominent threat There are some curious neighbors and some children who interfere, but if you take cryptocurrency and anonymity seriously, then you should buy Bitcoin from another person in cash. This is called peer-to-peer trading.
How serious do you need to be? Well, that's the method that criminals use frequently, and the minimum purchases are higher than the maximum investment of the two previous methods, which means you have to talk about thousands of dollars in Bitcoin. Again, this is the most expensive because your colleagues often charge several hundred dollars for on-site service.
The oldest and most popular platform for peer-to-peer trading is LocalBitcoins, although there are other options like Paxful and the Bisq Network
These sites offer a range of options for buying Bitcoin from like-minded people, such as the exchange of various types of gift cards and the initiation of bank transfers or bank checks. But the tried and true method has always been to take a briefcase full of money and meet someone. Here are a few examples of LocalBitcoins from people who are ready to meet and exchange money for bitcoins in the Los Angeles area (at that time the Bitcoin price was $ 7,495.81):
The advantage of buying your Bitcoin is minimizing your online footprint and the amount of personal information the seller has for you. Plus, you have much more control over the setup, including location and surveillance cameras. In this way, you can wait for the surveillance camera shots and meet in much more random locations to prevent patterns from forming.
There are some precautions you need to take when doing this type of transaction. Never forget that you pay thousands or potentially hundreds of thousands of dollars in cash, so the opportunity is ripe for theft, armed robbery and fraud. You should always meet in a busy but not crowded public place with good Wi-Fi such as a university, library or café. If the seller does not meet you in public, find another safe place.
Be careful above all that is too good to be true. Expect to pay more than you would spend on an exchange like Coinbase. If you sell the Bitcoin to you, it is immediately suspicious.
You must somehow communicate with the seller, so it is recommended that you use a burner phone specifically for this purpose. The best thing would be to leave all your electronics at home and use a burner phone specifically for this transaction and then never use it again. If you still want to work with the same seller, you can always get their number from the LocalBitcoins listing, or get a business card from them when you complete the transaction, and then contact them from a new burner phone in the future. Avoid giving them information about themselves.
Option 4: Trade Altcoins
The best way to safely use Bitcoin is not to use Bitcoin at all. Bitcoin is the forefather of all coins, but since its invention, other cryptocurrencies have been added, much more geared to anonymity and security. So if privacy and anonymity are important to you, then you should use one of the privacy coins like Dash or Monero.
Unfortunately, these altcoins are not as well-known as bitcoins, so to get them, you have to use Bitcoin as a kind of gateway coin. There are several Monero ATMs out there. However, they are far from being commonplace. Therefore, the best way to buy Bitcoin as anonymously as possible is to use one of the three aforementioned methods, preferably a peer-to-peer cash transaction, to exchange these bitcoins for a private coin. Monero uses a service like Changelly.
There are two main limitations to using this method. First, you will have more change fees when you switch from Bitcoin to Monero. Second, these altcoins are not widely accepted, so there are only a handful of places where you can buy things. Often these will be places like darknet markets, VPN services and encrypted emails.
You can, however, use these privacy coins to hide your bitcoins. You can buy Bitcoin as you like, then switch to a private coin and switch to a few different purses, then move back to Bitcoin, effectively hiding the original Bitcoin buyer. This brings us to the bonus step: tumbling.
Tumbling is not a way to buy bitcoin anonymously. However, it is something you should do to anonymize your Bitcoin. Tumbling Services try to anonymize your Bitcoin by throwing it into a large pot of other coins and then randomly brushing out some of the coins to return it to you. This is most effective if you do it several times through different providers. Most companies offering these services are located on .onion websites. This means that you have to execute Tor to find them. One on the Clearnet is Privcoin
What does all this mean?
In simple terms, if you're trying to hide from the FBI, the NSA or the like, your best bet is to buy Bitcoin in cash from someone you find on LocalBitcoins, and then those Bitcoins two or three times drop. Then move her to a private coin like Monero, then back to Bitcoin, where you can use her anonymously. Even if you do all that, there is no one hundred percent guarantee that the government can not throw enough money and zero days at the problem to find you, if they want to.
On the other hand, if you just want to add privacy to your life, use a Bitcoin ATM if one is available in your area, so easy.