A lot of people still think Bitcoin as a private and anonymous payment network, when in reality it is one if not the most transparent payment network in the whole world. And there are many ways you can leak your precious financial data that could lead to identifying your Bitcoin transaction activity on the network.
However, with a proper understanding of the technology one can mitigate and indeed use the network in a very private and anonymous way. But this requires the use of the right tools, services, and habits that must be in place in order for Bitcoin to actually provide strong base level anonymity.
This also means that it is your responsibility to learn the risks and mitigate them by using the right software and best practices in order to protect your privacy.
Once a Bitcoin address is connected to your real-world identity, anyone with a few clicks of a button can get an insight into your full transaction history within the Bitcoin blockchain.
The lack of privacy within Bitcoin network also creates an additional problem regarding fungibility, because the transactions are open to everyone if, for example, you receive Bitcoins by anyhow, that are tied to illegal activities, certain parties could deem these coins to be dirty, and therefore less valuable then clean Bitcoins.
Although the chances of such happening to you are slight, it is still important to learn the best privacy-enhancing tools in order to break and obfuscate your transaction history.
That being said, in this article we're gonna look at some of these privacy-enhancing tools, products, and services we think every Bitcoiner should know about.
Samourai Wallet is the most advanced privacy-focused, open-source Bitcoin mobile wallet today. The wallet offers its own implementation of CoinJoin, called whirlpool that can be used to anonymize users' Bitcoins.
The wallet is built by privacy activists who have dedicated their lives to creating this incredible piece of software that Bitcoin truly deserves.
Samourai was a pioneer in incorporating segwit, and it's developers are the front fighters of decentralization, security, financial privacy, and fungibility.
Samourai doesn't just have the best CoinJoin implementation(Whirpool), but by default, it also comes with a large number of other incredible transaction enhancing features that can truly change the way we look at Bitcoins privacy today.
Some of these features include a completely separate and configurable Dojo server, full offline mode, STONEWALL, PayNyms, Ricochet, and Whirlpool.
Not only the wallet can be used like any regular Bitcoin wallet but it's built-in features such as Whirpool make sure anyone can properly anonymize their Bitcoins when it's needed.
Note that some of the Samourai's advanced tools, might be difficult to use for newbies.
Wasabi is an open-source, privacy-focused Bitcoin desktop wallet with a trustless CoinJoin implementation, that can be used to anonymize your Bitcoins.
Similar to Samourai Wasabi as well is build to by privacy enthusiasts who are dedicated to benefiting the Bitcoin blockchain space by providing tools that help users reclaim their privacy, and make Bitcoins more fungible.
With Wasabi users can send, and receive Bitcoins, stay in full control of their private keys. And although Wasabi is far easier for average users to use then Samourai, the core design is still pure magic when it comes to anonymizing your coins.
The CoinJoin feature is built directly on the Wasabi wallet, and can also be used straight away once users launch the app without further settings or tinkering.
OXT is an high level interactive unfiltered map of the whole Bitcoin blockchain.
Unlike regular Bitcoin block explorers, OXT, lets users see so-called landscape details, and metrics, currently unavailable elsewhere.
The site also provides a variety of different blockchain metrics, and charts ranging from blocks, transactions, fees, addresses, distribution, and more.
One of the exciting features of OTX for example is the ability to browse known directories, meaning users can with a click of a button discover Bitcoin addresses of the largest known entities, and see exactly how many coins there are.
Some of these entities include Bitcoin faucets, mining pools, dark markets, to everything from the largest Bitcoin exchanges and more.
Know Your Coin Privacy (KYCP) is a web browser-based online privacy explorer tool, that lets users visually inspect the entire history of their coin's privacy using a single UTXO.
The platform gives anyone the ability to search Bitcoin transactions ID:s and then visually see the degree of privacy in the transactions, and how it's linked to other transactions with various metrics.
These measures can for example then be used to determine the quality of privacy within joint transactions such as CoinJoins.
The site also provides a half of fame Bitcoin address list with popular and known transactions, that users can look up to, in order to get started using the platform.
Although KYCP does not see your searches, as it has no way to log any of the data. Proper use of VPN and Tor are always suggested when browsing personal transactions.
KYCP also has all of it's hosting files available and auditable on Github.
All Private Keys, is a Bitcoin private key database and search analysis tool.
To this day the site has collected leaked Bitcoin private keys from a variety of different sources, including Github, forums, search engines, and more. And currently, it holds over 1889807 leaked keys in their database.
Through the platform, users can check and learn a variety of safety measures regarding private keys, blockchains, and what algorithms can do.
However one of the most useful tools regarding this platform is probably the ability for anyone to search Bitcoin addresses, and see if they are mentioned on public forums, or whether some of the addresses have a relationship to scams and more.
Users can also check their own address in the database, and see If the private key is secure. Alternatively, the platform also provides monitoring and warns about any leaks by email.
Have I been Known? (HIBK) is a new Bitcoin address search analysis tool against surveillance.
Though the use of platform users can quickly by searching to see if the address has any privacy issues and whether it has been made public through one way or another.
Although HIBK just launched recently and is still fairly new, the platform has a deep focus on the fungibility of Bitcoin and provides a great deal of information regarding the threat posed by Big brother and surveillance state.
What is CoinJoin?
A CoinJoin is a special Bitcoin transaction where multiple peers combine their transactions together in order to spend these coins in a single transaction. This way from looking outside, as each transaction equals the exact same amounts of inputs, and outputs, it's almost impossible to define which Bitcoins belong to who.
The goal of CoinJoin transactions is always to gain more privacy by breaking the link to the original chain of inputs. Therefore it's also very important after the completed CoinJoin transaction that no coins are spent with non Conjoined coins, as this would link the coins, and break the just gained privacy.
Currently, two of the easiest ways to do CoinJoin transactions securely is to use either Samourai's Whirpool or Wasabi wallet, as they both enable non-custodial trustless and private ways of doing this properly.
Ways to mitigate risk, and improve privacy
To start, first, you must realize what is your threat model, and what is it that you are hiding from. Obviously, for each people this is different, and therefore you should be able to answer this question yourself.
Here's a quick summary with some general information and thoughts that you might want to consider and improve when it comes to privacy in your day to day life when using Bitcoin.
- Understand Bitcoin traceability, and do not reuse addresses. Bitcoin address should only be used once to receive money, and never to be used again after the money is spent.
- Try to avoid revealing real information about yourself when transacting, many of the exchanges for example do not require you to fill KYC documents for trading Bitcoin.
- Browse and broadcast transactions in the Bitcoin space through either TOR or by using proper Bitcoin VPN, in order to hide your computer's IP address.
- Run Bitcoin full node, or light wallet, never leave your coins in hot wallets, such as Coinbase.
- Break the surveillance of your coins by using correctly implemented Coinjoin, such as Samourai or Wasabi.
- Use proper wallet like Electrum when transacting in order to avoid creating change addresses, and spend the entire UTXO always if possible.
- Understand by default when using Windows, you have no privacy, to begin with, consider using better more privacy-focused Linux solutions like Tails and Qubes OS.
To sum up
Over the few years, Bitcoin privacy-enhancing features have developed rapidly, not only Samourai, and Wasabi have raised the bar for other projects but they've also come up with new industry standards that should be realized by a larger community.
Things like PayNyms and Conjoined transactions shouldn't be a thing few wallets are specialized with, but something totally ordinary, because as the more people participate, the more privacy the Bitcoin community can gain as a whole.
So now it's time to hear from you, let us know what you think in the comment section below.
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