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How Anonymous is Bitcoin?

How Anonymous is Bitcoin?

Once heralded by the dark markets as an anonymous payment option, the anonymity of bitcoin is being questioned more and more as adoption continues to increase.

Tracking of Bitcoin

Because the btc blockchain itself is a public ledger, companies like chainalysis are making a business out of tracking transfers between wallets of gambling sites and dark markets for exchanges, governments and financial institutions.

This can be a problem when sending funds from a gambling website to an exchange because they are required to watch these types of transactions as part of their kyc process. An easy solution many people use is to make one “hop” to a wallet not connected to a bitcoin exchange before transferring your bitcoin to the exchanges wallet for withdrawing funds. Whether this will last forever is still unknown though. 

Keeping your Privacy with Crypto

The easiest option to hide your identity or transactions is to trade for an altcoin after buying bitcoin. This can backfire though if there is a price drop with the crypto you traded it for, losing precious bitcoin when you exchange it back.

Starting with Anonymity First in Bitcoin

The anonymous bitcoin exchanges that serve customers worldwide will always have customers while legislation and regulation in different countries have lead to a few countries banning bitcoin.

Luckily, trading and storing bitcoin is similar to file sharing and anyone with an internet connection is allowed to participate. Decentralized exchanges like bisq will continue to thrive in areas the laws become prohibitive.

There are also bitcoin mixers for bitcoiners that want to obscure the origin or transactions done with other btc holders. A site like bestmixer will take many types of crypto (also one of the lowest fee mixers) and send customers back fresh new coins that nobody can trace back to their original ones.

Future Bitcoin Anonymity

As privacy concerns surrounding bitcoin become more of a concern, the methods for obscuring transactions increase as well. Since the early days, solutions like CoinJoin and wallets like wasabi and Samouri have offered different levels and options for anonymity.

MimbleWimble the protocol Grin is based on being used in some way with bitcoin in the future has long been rumored. LiteCoin’s Charlie Lee has also announced plans to focus on confidential transactions, since LTC is a bitcoin fork, any privacy solutions would technically work for both blockchains.

With security and stability being priority #1 with bitcoin, the likelihood that increased privacy solutions will be added to the protocol within a few years is highly likely. While it may not be perfect for everyone in its current form, transacting anonymously with bitcoin is still extremely easy for the true holder’s, many of whom use it only to pay other holders and avoid exchange cash outs altogether.