Questions to achieve full anonymity

[alexkrypto]

I've a few questions that I hope someone can help me out


- Why do we need to run Bitcoin full node or EPS (Electrum Personal Server) to provide full anonymity. How is it any different from using Trezor with Tor browser, or using Trezor with Electrum running on Tor?

- If this is the case with Bitcoin where I have to run Bitcoin full node or EPS to achieve full anonymity, does this apply to Ethereum as well and I have to run Ethereum full node, or it is sufficient to use TOR browser when receiving or sending ETH?

- Do I need to worry about Xpub being transmitted any time when making transactions or just making sure during initialising it for the first time it does not get leaked?

- Which way is better? generating seed phrase using ian coleman offline then restore it on trezor to ensure Xpub is not leaked to ISP or any VPN, or to use Electrum offline with Trezor to generate seed phrase?

[hatshepsut93]

- Why do we need to run Bitcoin full node or EPS (Electrum Personal Server) to provide full anonymity. How is it any different from using Trezor with Tor browser, or using Trezor with Electrum running on Tor?

When you run some sort of light wallet, it will be communicating with servers asking them about all the addresses from your wallet, so that you can get your transaction history and balance and be notified about new transactions. This makes it very easy to track you, and on top of that they can also record your IP address. Companies like Chainalysis run a lot of these spy servers to harvest data, so every time you launch a light client like Electrum you risk getting tracked by them.

That's why it's important to run your full node, maybe even over TOR, since you won't need any servers and it's impossible for peers to track you in a similar manner.

[pooya87]

you will never achieve "full anonymity" when using bitcoin because it is not designed that way. everything you do is increasing your privacy to the point that you can be almost certain that you are anonymous. if you want full anonymity then you must use physical cash with some additional steps!!

- Why do we need to run Bitcoin full node or EPS (Electrum Personal Server) to provide full anonymity. How is it any different from using Trezor with Tor browser, or using Trezor with Electrum running on Tor?

to hide your IP address. technically a third party can figure out which transactions belong to you when you create and broadcast a transaction even though there are methods to make it harder. so using TOR would hide your IP and makes it even more difficult to figure out who you are even if they could find which transaction came from you.
running your own full node compared to using another node through your Electrum client also removes the fact that you have to send all your addresses to that node and it can link them all together.

- Do I need to worry about Xpub being transmitted any time when making transactions or just making sure during initialising it for the first time it does not get leaked?

it depends on the wallet type you are using, full nodes don't share xpub with the world since there is no reason for it.
SPV clients also shouldn't share your xpub with the nodes they connect to but that should be a case by case analysis of the implementation to be sure. but with most SPV client you are sharing all your addresses with the nodes you connect to so it still makes very little difference when privacy is involved.

- Which way is better? generating seed phrase using ian coleman offline then restore it on trezor to ensure Xpub is not leaked to ISP or any VPN, or to use Electrum offline with Trezor to generate seed phrase?

keys must be generated offline on an air-gap computer and never online. if it is online then you have more things to worry about than your privacy.

[witcher_sense]

- Which way is better? generating seed phrase using ian coleman offline then restore it on trezor to ensure Xpub is not leaked to ISP or any VPN, or to use Electrum offline with Trezor to generate seed phrase?

To achieve full anonymity it is better to generate your mnemonic phrase manually, without using online or offline tools whatsoever since they can be still compromised. However, this approach is rather for paranoids. In order to manually create mnemonic phrase, you first have to generate a decent level of entropy by flipping a coin 256 times, for example. Then you have to find a checksum for this entropy and this is the hardest part. Checksum is the first 8 bits of SHA-256 hash of your big 256 binary number. It is possible to hash numbers by hand, there are many guides on the internet on how to do that.

Useful links:
https://medium.com/coinmonks/mnemonic-generation-bip39-simply-explained-e9ac18db9477
https://crypto.stackexchange.com/questions/50993/sha-256-by-hand
https://www.quora.com/How-is-it-possible-to-calculate-and-do-a-SHA-2-hash-by-hand-so-I-know-that-the-NSA-is-not-fooling-everyone
https://hackaday.com/2014/09/29/mining-bitcoins-with-pencil-and-paper/#more-133640

[joniboini]

To achieve full anonymity it is better to generate your mnemonic phrase manually, without using online or offline tools whatsoever since they can be still compromised.

You can use a live OS with pre-installed Electrum on an air-gapped PC to create your seed too. After the generation is complete you can wipe the disk if you're paranoid about it. Anything can be compromised but that's why verifying files, airgap pc, etc exist.

[witcher_sense]

You can use a live OS with pre-installed Electrum on an air-gapped PC to create your seed too. After the generation is complete you can wipe the disk if you're paranoid about it. Anything can be compromised but that's why verifying files, airgap pc, etc exist.

You're right and that approach you mentioned is perfectly fine and recommended for most people who cares about security and safety. However, I don't think it is suitable for true paranoids. By using air-gapped computer and other things you still rely on software in terms of generating of randomness and other calculations. Using of open-source software might help so that you can check and read code for yourself, but this requires additional coding skills. I also don't recommend manual hashing because it is too complicated for unexperienced users and can make things even worse.

[alexkrypto]

P.S. I only mention parts which haven't mentioned by other member.

- Why do we need to run Bitcoin full node or EPS (Electrum Personal Server) to provide full anonymity. How is it any different from using Trezor with Tor browser, or using Trezor with Electrum running on Tor?

To avoid the possibility server log set of your addresses, which can be used to trace you. Your anonymity could gone completely even if one address is linked with your identity.

Thanks for your response, but how does running a full node or EPS is any better than using Trezor with TOR browser?

Even if the server get logs, it will have addresses of TOR which is hard to trace back to me, correct me if i am wrong.

Another thing, even if I run a full node, at the end, it needs to use internet to broadcast transactions, right? so if i use my IP address without TOR / VPN then it doesn't really achieve anonymity, right?

[pooya87]

Thanks for your response, but how does running a full node or EPS is any better than using Trezor with TOR browser?

Even if the server get logs, it will have addresses of TOR which is hard to trace back to me, correct me if i am wrong.

Another thing, even if I run a full node, at the end, it needs to use internet to broadcast transactions, right? so if i use my IP address without TOR / VPN then it doesn't really achieve anonymity, right?

when you use Trezor which is an HD wallet you can have multiple addresses that you would keep separate.
lets consider this scenario as an example:
* address1 is for payments you receive for your online jobs
* address2 is for buying groceries
* address3 is for trading
* address4 is for buying VPN,...
(when addressN is used the change is send to addressN_1 then addressN_2,...).

now when you use Trezor with something like Electrum with or without Tor and even without spending any coins (just updating balance) the Electrum node can know and log that address1, address2, address3, address4,... that weren't linked together in any way before are linked. address3 is linked to your real IP (since you were using a centralized exchange) now all addresses 1 to m are linked to your identity without even being linked together.

but if you used your own node with or without Tor other nodes on the network have very little ways of knowing if addresses 1 to m are linked together. and even little ways of knowing if a transaction coming from a certain address belongs to you. because all they see is a full node "relaying" transactions that may or may not originate from that node.

[alexkrypto]

you will never achieve "full anonymity" when using bitcoin because it is not designed that way. everything you do is increasing your privacy to the point that you can be almost certain that you are anonymous. if you want full anonymity then you must use physical cash with some additional steps!!

- Why do we need to run Bitcoin full node or EPS (Electrum Personal Server) to provide full anonymity. How is it any different from using Trezor with Tor browser, or using Trezor with Electrum running on Tor?

to hide your IP address. technically a third party can figure out which transactions belong to you when you create and broadcast a transaction even though there are methods to make it harder. so using TOR would hide your IP and makes it even more difficult to figure out who you are even if they could find which transaction came from you.
running your own full node compared to using another node through your Electrum client also removes the fact that you have to send all your addresses to that node and it can link them all together.


I am sorry. I still try to get my head around your explanation and please bear with me. If I don't use full node or EPS, my node will have to broadcast the transactions, so if i use my IP address (without VPN or TOR), my transactions will be leaked to ISP, right?

Lets assume, i use VPN / TOR and full node, the transactions will be broadcast using TOR address, but then how is it any different from not using full node and just use TOR and let a third party broadcast the transactions?. The third pary who broadcast the transactions won't be able to link my transactions to me because I am using VPN and TOR, and the IP address received on third party is coming from TOR.

- Which way is better? generating seed phrase using ian coleman offline then restore it on trezor to ensure Xpub is not leaked to ISP or any VPN, or to use Electrum offline with Trezor to generate seed phrase?

keys must be generated offline on an air-gap computer and never online. if it is online then you have more things to worry about than your privacy.


This is an interesting "if it is online then you have more things to worry about than your privacy.". Can you please elaborate on this more? . Are you saying generating seed phrase using Trezor or Ledger while i am online could lead to something worse than privacy? I am interested to hear your thoughts on this since you brought it up

[alexkrypto]

Thanks for your response, but how does running a full node or EPS is any better than using Trezor with TOR browser?

Even if the server get logs, it will have addresses of TOR which is hard to trace back to me, correct me if i am wrong.

Another thing, even if I run a full node, at the end, it needs to use internet to broadcast transactions, right? so if i use my IP address without TOR / VPN then it doesn't really achieve anonymity, right?

when you use Trezor which is an HD wallet you can have multiple addresses that you would keep separate.
lets consider this scenario as an example:
* address1 is for payments you receive for your online jobs
* address2 is for buying groceries
* address3 is for trading
* address4 is for buying VPN,...
(when addressN is used the change is send to addressN_1 then addressN_2,...).

now when you use Trezor with something like Electrum with or without Tor and even without spending any coins (just updating balance) the Electrum node can know and log that address1, address2, address3, address4,... that weren't linked together in any way before are linked. address3 is linked to your real IP (since you were using a centralized exchange) now all addresses 1 to m are linked to your identity without even being linked together.

but if you used your own node with or without Tor other nodes on the network have very little ways of knowing if addresses 1 to m are linked together. and even little ways of knowing if a transaction coming from a certain address belongs to you. because all they see is a full node "relaying" transactions that may or may not originate from that node.

Thanks for the explanation. Your assumption is one of the addresses is linked to my identity. What if none of addresses is not linked to my identity?. I dont need to use full node. Tor will be sufficient, am I right?

I still don't get this part "but if you used your own node with or without Tor other nodes on the network have very little ways of knowing if addresses 1 to m are linked together."
My node will broadcast transaction so if it uses my own node without Tor then anyone with little investigation and analysis can link it to me because the IP address (of my node) belongs to me which comes from my ISP

[pooya87]

My node will broadcast transaction so if it uses my own node without Tor then anyone with little investigation and analysis can link it to me because the IP address (of my node) belongs to me which comes from my ISP

a bitcoin full node is normally "relaying" lots of transactions. another node that is connected to your node has no way of knowing whether a transaction that your node send it was originated from your node (if it is your transaction) or is it just another transaction that it received from a third node and is passing it along.
of course if you turn your relay off and only broadcast single tx messages it becomes apparent which transactions come from you.

it is not "little investigation" if the node is relaying all transactions. because they have to be connected to a very large number of nodes in the network to be able to figure out which node send a certain transaction first. it is so much harder nowadays since nodes add some randomness to how they broadcast txs.