- The Essence of Bitcoin’s Anonymity
- How to Use Bitcoin Anonymously
- How to Enhance Your Privacy When Using Bitcoin
- How to Protect Your Privacy When Transacting With Crypto
- The Best Anonymous Bitcoin Wallets
- Types of Anonymous Bitcoin Wallets
- Must-Have Features of Trustworthy Anonymous Bitcoin Wallets
- The Future of Anonymous Crypto Wallets
The mysterious Satoshi Nakamoto launched Bitcoin with the purpose to provide users with such a financial system that does not rely on any external intermediaries to process transactions while also allowing everyone to send and receive funds in a totally confidential manner.
In this guide, we will speak about anonymity in the sphere of cryptocurrencies, list a number of the best anonymous Bitcoin wallets, and give some pieces of advice on how to enhance your privacy when you are getting into the digital currency game. We will also highlight the must-have features of the best anonymous crypto wallet.
We will also touch on the regulatory issues associated with the anonymous use of virtual currencies to help you decide whether such wallets have a future.
The Essence of Bitcoin’s Anonymity
In reality, it is almost impossible to hide your identity. Debit and credit cards are linked to bank accounts, which, in their turn, contain the lowdown of an account holder, including their full name, place of residence, financial status, contact information, and the whole enchilada.
Financial institutions you are dealing with have all your personal details in full view. Your bank is aware of all the monetary transactions you are involved with, it knows the ins and outs of both the sender and the recipient of the payment, and continuously monitors how much capital you have in your disposition.
This is where cryptocurrencies like Bitcoin are different. Such financial systems do not reveal your identity when you make a payment, but allow you to send or receive transfers in a peer-to-peer manner, meaning without the mediation of any third party. What is more, your electronic tokens are tied to the crypto wallet address that does not have your personal data.
So, initially, anonymity in Bitcoin was necessary to remove the need for external parties like banks to process transactions. Unfortunately, many bad actors leveraged that property of the Bitcoin network for their own, not very good, purposes.
People began to use Bitcoins on the DarkNet to buy illegal goods and services, causing governments of the whole world to adopt laws that would take anonymous crypto wallets under control.
You will not be able to use Bitcoins anonymously if you disclose your identity when first purchasing tokens. This is because every transaction that occurs on the crypto blockchain can be viewed by every user of that blockchain, so, if required, your financial operations can easily be retraced to your initial address.
How to Use Bitcoin Anonymously
Obtaining your first BTC tokens for national fiat can hardly be done with total anonymity because such services are generally provided by centralized crypto exchanges like Binance and Coinbase.
With a platform like that, you must provide your personal info to ensure compliance with know-your-customer (KYC) and anti-money-laundering (AML) requirements before you can buy Bitcoin, Ethereum, or other top altcoins for national money like USD or EUR.
Identity verification usually requires the upload of your ID document, a selfie, proof of address, and proof of income. These measures are necessary to prevent sleazy persons from using the crypto network for their illegal activities. Otherwise, users would be able to easily break the law and engage in money laundering, tax dodging, and fraudulence without ever revealing their identity.
The exchange will then host a wallet for you on your behalf, and, surely, it is the exchange that will have full control over your wallet, not you. Though such platforms do not ensure anonymity when handling your transactions, they present a hassle-free way to swap dollars for tokens.
On the flip side, the provision of your personal information means the inability to use crypto anonymously. Still, you can fulfill Bitcoin transactions in a more or less anonymous manner and without breaking the law.
How to Enhance Your Privacy When Using Bitcoin
Bitcoin is often thought of as an anonymous payment system. But actually, Bitcoin is, perhaps, the most transparent payment network ever. Nevertheless, Bitcoin can ensure a decent level of privacy when used wisely. Bear in mind that it is your responsibility to apply the best practices to safeguard your privacy when you want to send or receive virtual assets.
Briefly about Bitcoin’s traceability
Bitcoin operates with an unusually high level of transparency that most people have no clue about. The history of all transactions, occurring within the Bitcoin network, is public, traceable, and stored on the Bitcoin blockchain.
Bitcoin addresses are the only details used to define the allocation of Bitcoin tokens and the destination where they are sent. These addresses are privately generated by each user’s wallets.
However, once an address is used, it gets tainted by the history of all transactions in which it has been involved. Any user of the Bitcoin network can view the balance and all transactions of any address. Since users generally are required to disclose their identity to pay for services or goods, Bitcoin addresses cannot remain completely anonymous.
Since the transaction history is permanently stored in the blockchain and cannot be changed, it is important to understand that something that is not currently traceable may become easy to trace in the future. For these reasons, Bitcoin wallet addresses should only be used once.
How to Protect Your Privacy When Transacting With Crypto
Have new addresses for transactions
To increase your privacy, it is wise to use a new Bitcoin address every time you make a transaction in cryptocurrency. Plus, you can create several crypto wallets for different purposes. This allows you to isolate each of your transactions, so it will be impossible to detect that they belong to one user. Users who send payments to you cannot see what other Bitcoin addresses you have and what you do with them.
Do not use public spaces
Unless you intend to receive public donations or payments with complete transparency, avoid making a Bitcoin address publicly visible on a website or social network. If you transfer some funds from this publicly available address to one of your other crypto addresses, they will be linked to the history of your public address, making it way easier to identify you.
Hide your IP
Given the peer-to-peer nature of decentralized cryptocurrencies like Bitcoin or Ethereum, it is possible to log the IP address of every transaction. Privacy-enhancing tools like the TOR browser may help you hide your device’s IP address so that it cannot be logged.
Obtain Your Own Full Node
Users who are going to transact on the Bitcoin peer-to-peer network need a good cryptocurrency wallet that is linked to a Bitcoin node. Such nodes verify payments and add new blocks containing transaction history to the Blockchain.
If you do not have your own Bitcoin full (fully-featured) node, you have to rely on someone else’s node to check the truth about your transactions and their amount and record the information on the ledger.
When you resort to third parties to approve and execute your transactional operation, the entire information about your operation will be completely under the control of the person who runs the full node.
The use of your own full Bitcoin node will enable you to communicate directly with the coin’s blockchain. You do not need the mediation of node operators, you do not have to trust anyone, as well as you do not need to ask anyone to verify your transaction. That way, you enjoy more privacy and more freedom with your Bitcoins.
Buy Crypto from Bitcoin ATMs
A Bitcoin ATM is one of the easiest ways to purchase some popular digital currencies for your cash. Since virtual coins are not physically existing units, you cannot withdraw them from an ATM as you do with fiat banknotes. Instead, you provide the machine with your crypto wallet address, and the device sends tokens to it. Some advanced Bitcoin ATMs can even generate a crypto address for you if you do not currently have any.
Still, not all Bitcoin ATMs will allow you to purchase cryptocurrencies anonymously but may require you to go through some identification. Other machines may not demand any identity verification, but they will limit you in the amount of Bitcoins you can purchase.
Buying tokens from a Bitcoin ATM may cost you more than through an exchange. This is so because building and maintaining such a complex machine is hard and expensive.
So, now that you know how to increase your anonymity when using cryptocurrencies, it is time to jump to the most important question of our discussion: what is the best anonymous Bitcoin wallet for today?
The Best Anonymous Bitcoin Wallets
If you are buying tokens for fiat from a Bitcoin ATM, the machine may generate an anonymous wallet address for you. But this does not apply to cryptocurrency exchanges with established AML and KYC requirements. For an added level of privacy, you may consider sending your digital assets from an online exchange platform to an anonymous crypto wallet.
The purpose of an anonymous Bitcoin wallet is to keep the person’s identity secret. Such a tool keeps your personal information and transaction details secure and hard to trace. This is achieved thanks to the use of a VPN or an anonymous browser like Tor to handle crypto transactions and continuously alternate the public key of your wallet.
An anonymous Bitcoin wallet uses encryption, saving you from the need to provide any personal information when you are creating the wallet.
TOR is software that makes your internet surfing anonymous. This browser continually changes the IP address of your computer or mobile smart device and encrypts your traffic by rerouting your network through multiple remote servers. That way, your machine shows a fake physical location than where you actually are now, enabling you to do private and completely secure anonymous transactions.
Like any other asset, BTC is a desirable target for hackers. So, it is critical to ensure you use a robust crypto wallet to secure your virtual funds. Here is a bunch of tips to improve the security of your cryptocurrency storage tool:
- Always turn VPN on when signing in to any web platform and before initiating any cryptocurrency transaction.
- Continuously upgrade the version of your cryptocurrency wallet.
- Never log in to insecure websites.
- Take measures against phishing scams.
- Use 2-factor verification.
When you store Bitcoins in an anonymous Bitcoin wallet, you never have to indicate any personal data. You can easily move coins in and out of your anonymous cryptocurrency wallet, without having to complete any identity verification.
However, because Bitcoin runs on a decentralized ledger, you are fully responsible for the security of virtual investments. Never forget: if you ever lose the private key to your Bitcoin wallet, restoring them will be practically impossible, and chances are that you will forever lose access to your digital currency kept in that wallet.
Types of Anonymous Bitcoin Wallets
Cryptocurrency anonymous wallets vary by type based on the device or platform they are supposed to be used. We shall speak about the recommended anonymous Bitcoin storage solution in each category.
A software wallet is a very straightforward solution for keeping and managing your digital finances. You only need to install the software on your computer to get going. Such a program will provide you with your public and private keys to let you easily send and receive Bitcoin transactions in your wallet.
Electrum is one of the greatest recommendations in this category. Optimized for Windows, Mac and Linux as well as Android, this nifty tool has been securing Bitcoin payments since 2011.
Electrum implements encryption of your private keys which are stored on your computer. If you wish, you can export your keys, so that they can be used with other Bitcoin wallets. This open-source software is released under the MIT License.
Free software to download, Electrum is also compatible with hardware wallets such as Ledger, Trezor, Keepkey, so you can keep your private key offline and go online with a watching-only wallet. Electrum also allows you to recover assess to your funds from a secret phrase.
This smart application can also support Multisig services, so that you can split the permission to spend your digital assets between multiple wallets. The verification of your Bitcoin transactions is done through SPV.
Note that Electrum will charge you a small fee every time you send a transaction from your Bitcoin wallet.
As the name implies, a mobile wallet presents an application to be installed on your smartphone or tablet. The app is downloaded from an official software marketplace for Android, Apple, or Windows mobile devices or from the developer’s website. An anonymous mobile crypto wallet is a convenient solution when you want to have all your digital assets at your fingertip and manage your virtual coins on the go.
While it is only compatible with Android smart devices, Samourai Wallet is a powerful tool for everyone who wants to remain anonymous while dealing with electronic coins. The developers declare Samourai to be “the most private and anonymous BTC wallet ever.”
It is a feature-rich app to keep your Bitcoin transactions private, with your identity properly hidden and your funds securely stored.
Samourai is an HD wallet, so that you will use any address only once for your transfers. If you are about to fulfill a transaction with a previously used address, the app will send you an alert not to do so.
A non-custodial wallet, Samourai returns sole control of your private keys to you, which are kept on your device and communicate with any server.
Another appeal behind this product is that it parses all past transactions before fulfilling a new transfer to ensure valuable private data about you and your wallet are not leaking.
Samourai supports Tor and VPN, so that all your transactions may be routed through an anonymous IP address for greater privacy.
The solution also features the Stealth mode that hides the wallet on your device and makes it visible only after dialing a secret code.
It is almost impossible to compromise the security of a hardware wallet. It presents a physical device with USB or Bluetooth to connect to your PC. A hardware wallet stores tokens offline, so your digital assets can hardly be hacked.
Ledger Nano X
Ledger Nano X is, probably, the most famous name in the market of anonymous Bitcoin wallets. A non-custodial wallet, Nano X is known for securing your coins safely with you being in sole control of your private keys. It is, surely, a paid solution and does not come cheap.
Bluetooth-enabled, Ledger Nano X can connect to any of your devices, be it Windows, MAC, Android, or Apple. The greatest appeal behind this solution is that it allows you to secure and manage over 1800 coin types, including Bitcoin, Ethereum, ERC-20 tokens, and others.
Connecting your hardware Ledger Nano X to a web wallet Ledger Live will let you grow your capital while your tokens continue to be properly secured. You can stake your Tron, Cosmos, Algorand, or Polkadot or lend your DAI, USDC, and USDT and generate revenues on your crypto holdings.
Must-Have Features of Trustworthy Anonymous Bitcoin Wallets
The market is awash with all possible anonymous Bitcoin wallets, so choosing the best option could be a daunting task. Here are a few factors to consider when shopping for a good private crypto asset wallet:
- Usage. How are you going to use your tokens? Whether you want to store big amounts of expensive coins or some cheap unpopular altcoins? For how long do you want to hold your investments, for the short or long term? For bigger volumes of valuable tokens to be held for the long haul, you should better opt for a hardware wallet.
- Two-factor authentication aka 2FA. This essential feature allows you to log in only when after verifying your identity in the cryptocurrency wallet. If your password is hacked, the thief would still have to pass the second level of authentication to access your wallet.
- Support for multiple signatures. Sometimes a wallet belongs to several people, such as business partners. Supporting multiple signatures helps you establish the security for the wallet that is required for multiple keys before allowing access to crypto finances. It also prevents unauthorized spending of funds or the wrongful transfer of coins to another wallet.
- Multi-currency. Many people invest in different coins to diversify their investment portfolios. It is more convenient to manage all your assets from a single place rather than having a separate wallet for each of your coins. Therefore, you may consider choosing a multicurrency anonymous BTC wallet.
- QR Scanner.If you want to access a mobile cryptocurrency wallet, you will need a QR code scanner. With such a feature, a mobile cryptocurrency wallet can quickly generate and scan QR codes for coin transfers.
- Backup. A reliable anonymous Bitcoin wallet always features a backup option. This will help you instantly back up your data in case your computer or smart device is not working.
The Future of Anonymous Crypto Wallets
Being able to send and receive virtual funds privately without centralized oversight is one of the biggest appeals of using anonymous Bitcoin wallets. But many governments, including China with its aggressive crackdown on cryptocurrencies, see crypto payments systems as a threat to national security.
The European Union announced to create regulations that would prohibit anonymous Bitcoin transactions in an effort to counter money laundering and wrongdoing.
The package contains several proposals to put private crypto wallets under government surveillance. For instance, it is suggested to impose an EU-wide limit of €10,000 on crypto payments and ensure complete traceability of operations with electronic tokens.
The EU insists on crypto platforms and exchanges to request the full name, address, date of birth, and account number of both the sender of crypto coins and the recipient.
“The Commission will also provide law enforcement agencies with access to these systems, speeding up financial investigations and discovery of criminal assets in cross-border cases,” the package says.
The package is now waiting for approval by the European Parliament and European Council and is supposed to come into force by 2024.
In the US, the Biden administration is reportedly stepping up efforts to trace cryptocurrencies used in cyberattacks and plans to offer rewards of up to $10 million for any data that will help catch criminals.
Given such threatening from the world’s powers, the future of anonymous Bitcoin wallets may not be that shiny as you may hope. By 2024, it may all end up with the fact that all your assets kept on an anon crypto wallet will be declared illegal and confiscated from you. Mull over that.
Choise.com is a licensed, compliant, hosted crypto wallet that always conducts due diligence on its customers to ensure dirty money is never washed through it, and cryptocurrencies are used exclusively by legally sound users. By doing so, we protect our consumers from being involved in suspicious cryptocurrency trading, so that all the operations they perform through Choise.com services are licit.
Choise.com thoroughly verifies all the users who want to set up an account and engage in crypto investing. We are committed to taking all necessary measures to close the door to money laundering and stop wrongdoers from using our services for their doubtful operations. All other users who want to use cryptocurrencies legally are more than welcome.