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Protect your Privacy with Bitcoin

Basics Bitcoin

Bitcoin is mistakenly considered to be an anonymous payment option. The truth is, Bitcoin is the most straightforward payment option in the world. Meanwhile, it can also provide decent privacy when used appropriately.

Understanding Bitcoin traceability

Bitcoin operates with a never-done-before level of transparency that most people are not familiar with.  All Bitcoin transactions are public, detectable and irrevocably stored in the Bitcoin network. The Bitcoin address is the only evidence that shows where the bitcoins are stored and where they are sent. This address is privately generated by a user’s wallet. Nevertheless, when these addresses are used they become associated with all the transactions that they are involved with. Anyone can check the balance and transactions of any bitcoin address. Bitcoin addresses cannot be fully private, as users have to reveal their identity most times in order to receive goods or service. Due to the blockchain being permanent, something that cannot be traced at the moment might become traceable in the future. Therefore, bitcoin addresses shouldn’t be revealed and just be used once.

Use new addresses to receive payments

The most important advice in order to protect your privacy is to use a different bitcoin address every time you receive a payment. This way, transactions are separated and cannot be related to one another. People who send money to you don’t see what other addresses belong to you and how you use them.

Be careful with public spaces

It is not wise to publish your bitcoin address on any website or social network unless it is for public donation or no-transparency payments. Also please remember that if you decide to move any money between your addresses from this address, they will be publically connected. Furthermore, it is wise not to post any information regarding your transactions that would possibly let someone associate your Bitcoin address with you.

Your IP address can be logged

The Bitcoin network is considered to be a peer-to-peer network, therefore, it is possible to log someone’s IP address. It would be wise to use a tool like Tor to cover your computer’s IP address because any Bitcoin nod can be mistakenly considered as a source of a transaction when it really isn’t.

Limitations of mixing services

There are available services online offering to mix the traceability between some users by using independent Bitcoin addresses and sending and receiving the same amount. The degree of legality in those services varies and one must be cautious to which rules apply to each service. Furthermore, you are requested to trust the people who run those services in order not to steal or lose your money. Mixing services can work for small amounts of transactions but it is extremely difficult to apply to large transactions.

Future improvements

There is room for many improvements to secure privacy. For example, being able to avoid connection of multiple addresses during a payment. Address changes in the Bitcoin Core might be generated in wallets over time. The wallet interfaces can be improved in order to become user-friendlier. At the moment research is also being done to improve other extended privacy features like being able to join other users’ transactions.