Mantaining Anonymity--What to do if you compromise yourself

[xanmanluca]

Hello BTC forums,

So the biggest quality bitcoin has which serves as an advantage to all the other currencies, is the ability to stay anonymous. Now after reading an article about anonymity (Link here: https://bitcoin.org/en/protect-your-privacy) I came to realize that I exposed my identity, by using circle to deposit directly from my bank account to bitcoin...I wasn't thinking. This was my first bitcoin transaction EVER, I am new to bitcoin but have done plenty of research.

So my question is, did I just kill my anonymity for good by making that small mistake? Or will my anonymity rejuvenate once I spend all the BTC from that transaction? (since my compromised address is attached to it)

In the future, if I make transaction from the same bitcoin wallet not associated to the same BTC that I received from my bank, will those transactions be anonymous? Or will it be possibly linked back to me somehow...

Thanks guys! #FirstPostBtw

[BurtW]

I suggest you get a deterministic wallet for many reasons:  your privacy, ease of backup and long term fungibility of the Bitcoin system.  I use the Trezor wallet but with a little research you can find other deterministic wallets.

Deterministic wallets never reuse the same Bitcoin address.

Now about your other coins.  Just send them to a trading account somewhere (Bitfinex, localbitcoins, any account will do) then wait a while, say a few days, then transfer your balance back to your brand new Trezor or other deterministic wallet.  You will not get your same coins back from the exchange.  When you deposit them they go into their big accounts for trading, when you transfer your balance out you will get different coins.

Or to more instantly exchange your current coins for new ones use bitmixer.io.

Get your deterministic wallet all set up and then send your BTC to bitmixer.io and for a fee they send you back new coins to your new wallet.

From then on always make deposits to your wallet onto the next address given to you by the wallet (the next one in the sequence).  Do this every time.

That is a good start.

[xanmanluca]

I suggest you get a deterministic wallet for many reasons:  your privacy, ease of backup and long term fungibility of the Bitcoin system.  I use the Trezor wallet but with a little research you can find other deterministic wallets.

Deterministic wallets never reuse the same Bitcoin address.

Now about your other coins.  Just send them to a trading account somewhere (Bitfinex, localbitcoins, any account will do) then wait a while, say a few days, then transfer your balance back to your brand new Trezor or other deterministic wallet.  You will not get your same coins back from the exchange.  When you deposit them they go into their big accounts for trading, when you transfer your balance out you will get different coins.

Or to more instantly exchange your current coins for new ones use bitmixer.io.

Get your deterministic wallet all set up and then send your BTC to bitmixer.io and for a fee they send you back new coins to your new wallet.

From then on always make deposits to your wallet onto the next address given to you by the wallet (the next one in the sequence).  Do this every time.

That is a good start.

Hello, thanks for the reply.

I've done a bit of research on deterministic wallets and I understand they are more secure because of the master key, and can't be spent by a hacker, also recoverable in case of a virus on your computer. However, aren't all of these potential problems easily avoided by backing up an encrypted version of a bitcoin core wallet on a USB?

Also I don't understand the hierarchical aspect at all, i'll read up on that more in order to have a better understanding. Biggest thing that i'm concerned about, why is a deterministic wallet more private than just a regular bitcoin core wallet? I can't find anything about that on the internet. Thanks!

[owm123]

Hello BTC forums,

So the biggest quality bitcoin has which serves as an advantage to all the other currencies, is the ability to stay anonymous. Now after reading an article about anonymity (Link here: https://bitcoin.org/en/protect-your-privacy) I came to realize that I exposed my identity, by using circle to deposit directly from my bank account to bitcoin...I wasn't thinking. This was my first bitcoin transaction EVER, I am new to bitcoin but have done plenty of research.

So my question is, did I just kill my anonymity for good by making that small mistake? Or will my anonymity rejuvenate once I spend all the BTC from that transaction? (since my compromised address is attached to it)

In the future, if I make transaction from the same bitcoin wallet not associated to the same BTC that I received from my bank, will those transactions be anonymous? Or will it be possibly linked back to me somehow...

Thanks guys! #FirstPostBtw

Since bitcoin is only pseudo-anonymous (http://www.bitcoinisnotanonymous.com/), whenever a single address of yours is linked with your real identity, all future and transactions involving this address can be be linked to you. Blockchain does not forget its past, unfortunately.

You can try to break this link by mixing or moving the bitcoins into anon altocoin, and than back to your new bitcoin address.

[xanmanluca]

Hello BTC forums,

So the biggest quality bitcoin has which serves as an advantage to all the other currencies, is the ability to stay anonymous. Now after reading an article about anonymity (Link here: https://bitcoin.org/en/protect-your-privacy) I came to realize that I exposed my identity, by using circle to deposit directly from my bank account to bitcoin...I wasn't thinking. This was my first bitcoin transaction EVER, I am new to bitcoin but have done plenty of research.

So my question is, did I just kill my anonymity for good by making that small mistake? Or will my anonymity rejuvenate once I spend all the BTC from that transaction? (since my compromised address is attached to it)

In the future, if I make transaction from the same bitcoin wallet not associated to the same BTC that I received from my bank, will those transactions be anonymous? Or will it be possibly linked back to me somehow...

Thanks guys! #FirstPostBtw

Since bitcoin is only pseudo-anonymous (http://www.bitcoinisnotanonymous.com/), whenever a single address of yours is linked with your real identity, all future and transactions involving this address can be be linked to you. Blockchain does not forget its past, unfortunately.

You can try to break this link by mixing or moving the bitcoins into anon altocoin, and than back to your new bitcoin address.

gosh all this stuff is so confusing, forgive me for asking the same questions but i need to clarify; Let's say I mix my bitcoins and receive them to a new address using the same core wallet, from there on out i'll be anonymous? assuming I don't make anymore mistakes after that?

[BurtW]

For maximum security, maximum privacy and maximum long term fungibility of the Bitcoin system every Bitcoin address should be used exactly twice:  once when the address gets funded from another address or addresses and the second time when all the coins at that address get spent.

A good deterministic wallet does just that automatically.  Every time you want to make a new deposit into your wallet the wallet will give you a new Bitcoin address.  Every time you spend money from your wallet the wallet will automatically select one or more of your currently funded addresses to make up the amount you want to send.  Any change due back to your wallet will go to a brand new address.

Do not worry about the inner workings so much.  It is this use of each address only once that we want.  Could other wallets be used that do this same thing?  Could you ensure that you use other wallets in this way?  Sure.  But with a good deterministic wallet this is the default behavior.

With a deterministic wallet you need to only keep track of one thing:  The 24 code words that encode the initial seed to the system.  That is it.  You keep those 24 words safe and private and you are good to go.  No other backups are ever necessary.  You do not need to remember to backup your wallet periodically, you do not have to worry about loss or destruction of the media used to back up the wallet (USB stick as an example).  Also you do not have to worry that when you go to read back your USB stick it has become unreadable because of electron migration over time.

24 words, redundantly stored in safe private places.  Done.

From these 24 words you can not only recover your current balance and your currently funded Bitcoin addresses but the entire history of all Bitcoin transactions ever made into and out of the wallet from the first funding transaction to the last.  This, opposed to a non deterministic wallet that grows over time as you use it since it has to remember every address ever used in order to reconstruct your transaction history.  A data file that grows larger over time and you have to remember to back up versus backing up the seed and keeping it VERY safe.

[xanmanluca]

For maximum security, maximum privacy and maximum long term fungibility of the Bitcoin system every Bitcoin address should be used exactly twice:  once when the address gets funded from another address or addresses and the second time when all the coins at that address get spent.

A good deterministic wallet does just that automatically.  Every time you want to make a new deposit into your wallet the wallet will give you a new Bitcoin address.  Every time you spend money from your wallet the wallet will automatically select one or more of your currently funded addresses to make up the amount you want to send.  Any change due back to your wallet will go to a brand new address.

Do not worry about the inner workings so much.  It is this use of each address only once that we want.  Could other wallets be used that do this same thing?  Could you ensure that you use other wallets in this way?  Sure.  But with a good deterministic wallet this is the default behavior.

With a deterministic wallet you need to only keep track of one thing:  The 24 code words that encode the initial seed to the system.  That is it.  You keep those 24 words safe and private and you are good to go.  No other backups are ever necessary.  You do not need to remember to backup your wallet periodically, you do not have to worry about loss or destruction of the media used to back up the wallet (USB stick as an example).  Also you do not have to worry that when you go to read back your USB stick it has become unreadable because of electron migration over time.

24 words, redundantly stored in safe private places.  Done.

From these 24 words you can not only recover your current balance and your currently funded Bitcoin addresses but the entire history of all Bitcoin transactions ever made into and out of the wallet from the first funding transaction to the last.  This, opposed to a non deterministic wallet that grows over time as you use it since it has to remember every address ever used in order to reconstruct your transaction history.  A data file that grows larger over time and you have to remember to back up versus backing up the seed and keeping it VERY safe.

Burt, you are the man! thanks for clearing that up

Now you mentioned that the deterministic wallet doesn't have to keep track of every transaction like core does, are you referring to the blockchain? If so, would that mean that all deterministic wallets use 3rd party blockchain service? and if so, isn't that something i should avoid?   

thanks

[BurtW]

Burt, you are the man! thanks for clearing that up

Now you mentioned that the deterministic wallet doesn't have to keep track of every transaction like core does, are you referring to the blockchain? If so, would that mean that all deterministic wallets use 3rd party blockchain service? and if so, isn't that something i should avoid?  

thanks

Deterministic wallet balance and transaction history reconstruction:
  Reconstruct the sequence of public/private key pairs from the seed and look them up on the blockchain

Core (and other) wallet balance and transaction history reconstruction:
  Iterate over the list of public/private key pairs kept in the wallet.dat file and look them up on the blockchain

In all wallets the balance and history of your wallet is kept on the blockchain and your wallet needs access to the blockchain in order to work.

[xanmanluca]

Burt, you are the man! thanks for clearing that up

Now you mentioned that the deterministic wallet doesn't have to keep track of every transaction like core does, are you referring to the blockchain? If so, would that mean that all deterministic wallets use 3rd party blockchain service? and if so, isn't that something i should avoid?  

thanks

Deterministic wallet balance and transaction history reconstruction:
  Reconstruct the sequence of public/private key pairs from the seed and look them up on the blockchain

Core (and other) wallet balance and transaction history reconstruction:
  Iterate over the list of public/private key pairs kept in the wallet.dat file and look them up on the blockchain

In all wallets the balance and history of your wallet is kept on the blockchain and your wallet needs access to the blockchain in order to work.

Thanks Burt,  appreciate it. Gonna get myself a Deterministic wallet! 

[BurtW]

I learned something new today:  the new wallet at blockchain.info is a deterministic wallet!

This is great news.  Just go to https://blockchain.info/wallet/#/signup and create a wallet there.  Be sure to use a strong password that you can remember and go into the security section and set up all the security there including two factor authentication, etc. and you have a safe, convenient, web based, deterministic wallet.

It has a way for you to write down the words that encode your seed so do that and keep your seed word list secure - that is the only backup you will need to backup all your future bitcoin addresses and all your future bitcoin transactions.

Very cool.

[alyssa85]

Hello BTC forums,

So the biggest quality bitcoin has which serves as an advantage to all the other currencies, is the ability to stay anonymous. Now after reading an article about anonymity (Link here: https://bitcoin.org/en/protect-your-privacy) I came to realize that I exposed my identity, by using circle to deposit directly from my bank account to bitcoin...I wasn't thinking. This was my first bitcoin transaction EVER, I am new to bitcoin but have done plenty of research.

So my question is, did I just kill my anonymity for good by making that small mistake? Or will my anonymity rejuvenate once I spend all the BTC from that transaction? (since my compromised address is attached to it)

In the future, if I make transaction from the same bitcoin wallet not associated to the same BTC that I received from my bank, will those transactions be anonymous? Or will it be possibly linked back to me somehow...

Thanks guys! #FirstPostBtw

As long as Circle isn't hacked, no-one receiving your coins will be able to match your bank account to your bitcoin addresses.

Unfortunately hacking is quite common. A while back Mt Gox was hacked and all the data dumped on the net, and there were people on this forum busily mining it to see what big "names" had been doing with their coins. There was even a thread on here about Craig Wright's purchases in 2013, even though it was a complete invasion of his privacy and people were examining his purchases and expenditures without his consent (while claiming to be libertarians who would be horrified if the NSA did that!)

Unfortunately the exchanges are a weak point in the system.