Bitcoin Forum

How do we use Tor with Bitcoin?

This article: http://www.dailytech.com/Cracking+the+Bitcoin+Digging+Into+a+131M+USD+Virtual+Currency/article21878.htm, states that it is best to use Tor with bitcoins as transactions can still be used to locate you via IP address.

There has been a major study done showing how Bitcoin transactions, if not carried our properly, can unmask a buyers and sellers.  The study is in German.  But the key is--always use anonymous email accounts and always use IP anonymizers. 

Tor creates a socks5 proxy on localhost(127.0.0.1) you can configure your bitcoin client receive/send data to other nodes through this proxy.

Right. Port 9050.

Tor alone won't protect you much, though. See:
https://en.bitcoin.it/wiki/Anonymity

Forgot to mention that, thanks.

You will want to let your client download the full blockchain before connecting over tor.
After connecting over tor the client will just be able to barely keep up.

Connect through Tor before downloading the block chain. 
I've never had this problem.  He probably just used a slow node.  You can configure Tor with the torrc file to only use fast nodes if speed ever does become a problem.

You'll be able to keep up, but  starting at 0 blocks and trying to get to the current one would take ages so you could download the most recent one
chain without tor then configure your client to use it and TOR

The latest version of Tor browser bundle will use random ports when connected. Just look at the message log to see what port the socks listener is on and use that number in Bitcoin settings.

If you need to remain anonymous that your even using Bitcoin I guess you have no choice but to download the whole blockchain through Tor. Otherwise you could download the whole chain normally then connect to Tor and then send your payments you want to send through Tor.

But as mentioned it's the addresses and how they are associated outside the network that is usually where the anonymity is lost.

To keep anonymity while downloading, install Bitcoin, download the blockchain, and then copy over blkindex.dat and blk0001.dat to your anonymous system. Install the Bitcoin client there, and before starting it, copy the files to it's data directory.

the files  blkindex.dat and blk0001.dat should be the same across all bitcoin installations. just the rest of the datadir and ofcourseyour wallet will make you identifiable.

Tracing transactions to IP addresses flat out doesn't work, since it only gives you the IP address of the node that relayed the transaction, not the node the issued it. For example, my most recent transaction was relayed by an IP address in Sverdlovsk, Russia which is almost, but not quite, on the other side of the world from my real location in Australia. I don't think there's any point in using Tor for Bitcoin. You can if you want, but I don't think it accomplishes anything.

There are two ways transactions can be traced, and Tor will not protect you from either of them: first, investigators could try to put names to bitcoin addresses, which could be done fairly easily if you buy or sell bitcoins using a non-anonymous payment method. Second, they can ignore bitcoin completely and focus on the physical delivery of the goods you're buying/selling with bitcoin. Any number of things could attract attention to your deliveries, and once they track the package to your location, you're busted, and they won't really care where the money came from.

That's pretty much exactly what happens. Has been a number of occurrences were the first few packages are let in so customs/police can build a case against you. They don't give a stuff if you paid with BTC or blocks of cheese....

*edit* and when police come knocking.. they will take your PC / anything electronic.. and in Aus (dunno about other countries) you will get into a lot of trouble for withholding passwords.

It could be possible to operate many nodes and monitor tx's from an address. Eventually you could figure out what node was sending the tx's first by looking at where it's coming from first all the time.

Great information guys.
Thanks

In this case of a global network monitoring, wouldn't Tor offer an efficient protection? Sorry to hijack the thread but I can't totally figure out how works the Bitcoins network.

Yes Tor would protect against this.

You need to chain 7 or more SOCKS proxies then use TOR
Hopefully your IP will be safe (and internet is slow).

I'm not sure to agree with you sir, the only interest to chain socks (v4a or v5, btw does the Bitcoin client sends DNS requets and  worse use UDP? I must admit I didn't sniff anything yet), would be to hide the fact you're using Tor, but it wouldn't hide anything in the case of a DPI. You can shout as much as you want "good luck I'm beyond 7 proxies", it will just make LOL pretty hard the ISPs, since all the packets are logged, the only interest of socks is to avoid IP filters.

Watching.

Who knew the newbies were getting into nitty gritties? Its great.

Well, being assigned to the troll-proof-jail doesn't necessary means you're a total newb about everything...