Bitcoin Forum

​Bitcoin is anonymous! Almost every newbie believes that. I know I did, I even boasted about it to my friends. I am sure that many newbies are like me and think that Bitcoin transactions are encrypted and cannot be tracked. But after joining the forum and months of research I come to find out this isn't true.
https://www.reddit.com/r/CryptoCurrency/comments/onajts/anonymity_and_cryptocurrencies/
   Bitcoin is not anonymous but pseudonymous. What does it mean?
All of the anonymity of Bitcoin solely rests on the fact that the address of your crypto wallet is not connected to your identity in any way. When you open a new wallet, you should not provide any information about yourself. But if you have registered your wallet in crypto exchanges that require kyc verification, then there is a high chance that you and your crypto wallet can be connected.
   Bitcoin cannot be anonymous and transparent at the same time.  Bitcoin is built on the blockchain network. What is the blockchain network? Blockchain is a public journal where every transaction ever made is recorded. Anyone can find out using blockchain explorer how much money is in a bitcoin wallet, when and from which address the money came.
If one receives bitcoin that is connected to a criminal address will that person be indicted too? Will every address connected to such account be tagged also? There is limited supply of bitcoin in circulation so such scenario is very possible. If that happens how does one clean the slate?
  
 

At first I also thought that it is anonymous, but encrypted transactions? I had never read that anywhere when I was a newbie. There is no encryption schemes in Bitcoin. Only hash functions used for the PoW mechanism & for the address generation, and the elliptic curve digital signature algorithm (ECDSA).

Instead of defining where the “anonymity” of Bitcoin relies on, I think that it'd be more expedient to explain why it can't be characterized as anonymous. It's not directly the identity reveal. It's the fact that anyone at anytime can observe the addresses (the pseudonyms) you've interacted with including the amounts transacted. If you publicly announce your pseudonym plus the amount and the receiver's pseudonym, it's enough to call it pseudonymity instead.

It indeed has a limited supply, but theoretically, there will always be clean coins from mining. If one paid 0.01 blacklisted bitcoins to the miner, they essentially aren't blacklisted anymore. It's an interesting topic, I had begun that discussion regarding the fungibility. Here's the link: The fungibility of Bitcoin — Long Term (https://bitcointalk.org/index.php?topic=5339658.msg57080402#msg57080402)

That was what I thought lol

Thanks for the corrections. I will update the topic as I gather more information

Are miners allowed to do that? I will definitely read the topic...thanks again

Yes. Each time a block is solved the miner gets the 6.25 freshly mined bitcoins plus the fees. These fees have no connection with their blacklisted outputs and thus, they're whitelisted.

Even though bitcoin is open and transparent, you can achieve some degree of anonymity using it. You will never be 100% anonymous 100% of the time, but you can be "pseudo-anonymous".

For example, if you received some bitcoin from an exchange you made KYC, those coins will be somehow linked to your personal documents and identification.
However, you can send those coins to a bitcoin mixer or to a coinjoin service. Those services will mix your coins with someone else's coin, and give you back other coins which are not linked to the ones you sent them, in a fresh new address.

You can read more about this kind of service here:

https://bitcoin.org/en/protect-your-privacy

If you had a discussion with a lot of senior members on this forum about anonymity you would find out that a lot of them think Bitcoin is fool proof anonymous and they will die on that sword. I was reading a topic from a couple of years ago and there was multiple legendary members arguing that it is anonymous. It is not just newbies which believe this but those that have been registered for 3+ years.

It depends on how you define taint, it is such a broad definition that you almost always can twist it around to suit your goals. Most often, taint is determined by tracing the paths of the coin, with the UTXOs created having assigned some level of taint and decays with the number of transactions that it is associated with. It doesn't make sense to label every tainted coins the same, because almost all of the coins are tainted.

I understand that the current general take is that taint isn't assigned to block rewards from the TX fees. But it doesn't make sense as it'll just provide the miners a way to obtain clean coins without much effort; by including the tainted coins as fees. It remains to be seen if that would change anytime soon.

This isn't true. Most would still consider it as tainted, even if a portion of it gets sent to a random address.

Even Monero can't get your anonymity to 100% at all times. For example, by using lightweight wallets your security is significantly decreased. 100% anonymity is a difficult goal and requires much more than changing the way you use Bitcoin. You have to change your lifestyle to achieve it.

reading the posts here i just realized that it isn't that clear what anonymity even means - at least not to me

if you know the name of someone, but don't know where to find this person, is this person anonymous?

is it a question about perspective? am i anonymous for some, but not for others?

if we talk about bitcoin and say it is not anonymous, are we talking about the holder of the bitcoins (the holder of the private key to be exact)? or are we talking about the bitcoins, from where they came and where they go?

 ??? ???

It was anonymous for them. They could have hidden themselves behind any number of VPNs while mining without being discovered. As long as they don't interact with KYC systems, then they can possibly stay anonymously pseudonymous. Still, that means that they are limited in the ways they could use their fortunes.


That is not anonymous but identified.

Often, yes. You could have been identified through a way that you didn't realize, such as browser fingerprinting https://www.eff.org/deeplinks/2017/11/panopticlick-30

For owners of addresses that have not been linked to an individual, they are anonymous.
They are also pseudonymous, in that their addresses specifically ties to an individual or group.
For addresses that have been linked to an individual, like through KYC, they are identified.
Identified addresses to/from a major exchange are anonymous to most of us but link to identifiable individuals.

So, normally people say bitcoin is pseudonymous. Not quite anonymous, not quite identifiable.

isn't every address linkable to an individual?
isn't every individual identifiable?

does this mean anonymity is a shade and not something you are or you are not? again: i think it is about pespective

Every address is linked to an individual but depending how that individual has created the wallet
containing the address determines the level of anonymity.

Tips to preserve anonymity

Dont use a hardware wallet, you will have to provide a name and postal address to
buy one use a self generated paper wallet instead.

Stay away from centralised exchanges where you have to provide personal details, use local
bitcoin sellers or decentralised exchanges.

Use a VPN on your computer when browsing the internet and transacting with Bitcoin.

Stay away from FREE e-mail providers like gmail, spend a little for anonymous and
encrypted email and VPN like PROTON.

It isn't. You don't have to reveal your identity to create an address or a wallet for that matter. Software wallets do not fingerprint you.

Or use a dropship. You can use an air-gapped wallet as well but that is subjected to your technical competency, a paper wallet might not be as secure, depending on how you generate and use it.

VPN doesn't provide sufficient privacy for the user. In fact, some of them keep logs and actively tries to break your privacy. Don't use VPNs if you want to preserve your privacy.

There's a hereby failure of the differentiation between anonymity & privacy. Anonymity is when you want from people to know what you're doing, you just don't want them to know that is you doing it. Privacy is when you want to keep certain activities for yourself only. Monero can get you 100% anonymity, because there is no way to track me down unless I gave you my secret keys. If you use a lightweight client, you're ruining your privacy, not your anonymity.

True. I'd define it as a condition where the TXOs are being censored by individuals. For example, exchanges.

If you don't connect your Bitcoin address with your identity or your bank account than nobody will ever know that those Bitcoins belong to you and you can sent them to anyone.
Bitcoin is public ledger so every transaction can be seen but you can also use mixers like Chipmixer that will make tracking of your coins almost impossible if you do it correctly.
In ideal situation Bitcoin would be better with some integrated solution for private transaction but it can still happen in future, maybe with some sidechain or second layer solution like Lightning.

I agree with BlackHatCoiner, there is a slightly difference between privacy and anonymity.

Indeed lightweight clients are bad for privacy , but they are very convenient. There are various degrees of privacy, and not everyone need all privacy possible in every transaction all the time.

For example, an address with small amounts with coins that were just cleaned in a mixer  may be used in a lightweight client without any problem. But your life saving wallet may be running in a full node.

apologies but I didnt say every address is linked to an identity, they are linked to a person,
its up to us to decide how much of our identity we want to reveal!

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Interesting about the VPN. If I buy a VPN service using Bitcoin without revealing my identity
is that not a safe way of browsing the web?
(apologies for going slightly off topic)

Use decentralized services and crypto exchanges where verification is not required.
There are still such exchanges, for example https://www.hotbit.io
You are safe as long as you do not interact with services that force you to provide your personal information.
If you are afraid that you will be accused of a crime, buy bitcoins on well-known crypto exchanges that provide purchase documents.
I'm about https://www.coinbase.com/

You did mention about how the individual creates the wallet, any software wallet that you are using will not reveal any unnecessary information to a third-party during a wallet creation. If yours does that, then you should stop using it.
No. VPNs are not designed for privacy beyond encryption of the traffic between the VPN server and your computer. Your VPN provider is able to intercept your traffic, see the origins of your traffic and perhaps decipher plain-text traffic as well. There is a reason why people don't recommend using VPNs if you are really concerned about your privacy.

I stand corrected on both counts.

Re: VPN's I have to do some research and a possible comparison between VPN and TOR.

Its simple you should be looking for VPN providers that do not keep logs but that is hard to find because any company can claim they do not keep logs but do with Tor there is a risk to because anyone owning the exit node will be able to look at the incoming and outgoing traffic. Tor is probably better in most situations but if you can find a VPN which does not keep logs then that is just as good but its proving it which is difficult.

I don't have an idea about VPNs and Tor network. I thought they are used by hackers who do not want to be found. What do you think of privacy coins? Does it make sense to buy privacy coins on a exchange?

Not necessarily. Malicious exit nodes can try to strip the TLS but it's probably quite ineffective in most scenarios because Tor always hardens and tries to enforce TLS. Onion addresses are not susceptible to this.

The only way for exit nodes to break the privacy is through analysing plain-text connections or through masquerading with a valid certificate. Otherwise, the exit node cannot determine the origin using the traffic alone. Solely going by this, Tor is better than VPN in terms of privacy. The VPN can do what a malicious exit node can try to do as well.

I think only work this VPN does is to protect the Ip address or location of the phone so that it will not be detect, so i don't really think that this have to do anything with coin transactions or exchanging of any cryptocurrency, except in a situation that the transaction you want to form is illegal.

Not really. The vast amount of user are likely legit, and do it due to privacy concerns. Bear in mind that you connect to a ton of sites each day, and that IPs can be ultimately used to geolocate you. You don’t necessarily want sites to know where you are from.

In some instances, ISPs may be required to provide information on you (due to court orders where the procedure is respected, if not skipped by some direct government requirement in loose countries). I recall a case of torrent users receiving lawyer letters claiming a certain amount of money to avoid being sue for downloading episodes from a certain pay-per-view tv series. The layers went through court, and obtained data from ISPs for bags of given IPs. Granted that technically, the series should not have been downloaded, but even so. Now take this example a step further and assume other ungreateful examples that once could potentially device. The idea is to shield yourself, even if strictly because you are 100% legit type person (hey, who's not?), but want your privacy respected (i.e. not Facebook/Instagram type profiles).