Bringing your crypto online, in a truly anonymous way is tricky, since the nature of crypto, and specifically the blockchain is by its nature a ledger of transactions to and from other hashes on other crypto wallets.

The positive of this is 100% push accountability of one’s crypto wealth, and open public ledger available to the public, which identifies the input and output hash on the Blockchain. This is great. And precisely an accurate way to authenticate transactions, in real time and without 3rd party intermediaries interfering with the integrity of the transactions.

But this has a slight problem when it comes to privacy, because of the fact that it is an open public ledger available to the public, which identifies the input and output hash on the Blockchain. But it can only identify the address hash of a crypto wallet, not the name, address and social security number of the person who controls the crypto wallet.

This is why it is said that crypto is pseudo anonymous, it is one shift removed from a crypto wallets owner’s identity. That identity must be purposefully linked and tied to a crypto wallet, usually by way of a hot crypto wallet that is tied to a centralized, regulated exchange that shares the private keys and the details of the personal identity of the compromised hot wallet, obtained by the mandates of KYC/AML that most centralized crypto exchanges are compelled to have by order of the law.


    Step to the left, if you want to be right.

This inlays the problem of the pseudo anonymous nature of the crypto wallets and the pair bonding of those hot wallets to your personal identity and then to a centralized, regulated, crypto exchange. You are connecting the address to you, doing 2 things, confirming that you know what crypto is, and that you own and still control a wallet that you have confirmed is yours.

That is the first miss-step, and privacy trap the crypto system has in store for any crypto user. The immediate compromise of your privacy, and the quasi custodial surrender to a centralized crypto exchange.

To be clear and to give yourself true anonymity going into the crypto eco-system you will need to step to the left, first. Do not provide an index of your identity to the stewardship of any crypto wallet, do not surrender KYC information, and if you must input KYC/AML data, or it is apart of your strategy for mis-direction, then be mindful that at the very moment you submit KYC/AML, you will be a target and a known crypto user.


    Best Foot Forward, P2P, Crypto ATMs, Bisq, localbitcoins

With a clean crypto wallet, with fresh and newly minted addresses, try the following options to obtain BTC anonymously,

P2P
(offline, irl)

One strategy is good old-fashioned physical meetings, at Meetups or using peer-to-peer marketplaces like Paxful, it’s possible to find a seller to meet in person by filtering by location, fiat currency, and amount of Bitcoin you’re after. Of course, this requires a degree of trust on both the buyer and seller’s part, and cash-in-person offers are relatively few and far between on such sites.

If you happen to know a Bitcoin miner, you can also pay to access freshly minted Bitcoin without any transaction history, but they may charge a premium for their newly minted BTC.

Crypto ATMs
(offline, irl)

If you want to buy Bitcoin and remain anonymous, one option is to use a Bitcoin ATM.

Like a regular ATM you can deposit cash and in some models of Crypto ATMs receive cash and ideally you can purchase Bitcoin while retaining your privacy.

I have not come across much cash in “purchasing limits’ ‘ limitations to obtain BTC through Crypto ATMs. There are a few but not many I have seen, but I have noticed some cash out limitations that would flag or require additional identification after a certain dollar amount threshold. If you need to obtain a larger sum of BTC, or cashing out a large sum of fiat, you may need to seek other options.

Also, you are trusting the hardware and software of the CryptoATM itself, while on the whole, it may be secure, the transaction itself is still out of your hands and it is certain the CryptoATM will log the crypto wallet address, for its own logs.


    Buying Bitcoin anonymously online

Obviously, offline strategies can only take you so far; the crypto industry’s home is on the Internet, after all. The good news is that there are plenty of ways to reduce the digital footprint of your Bitcoin, including peer-to-peer exchanges, privacy-preserving browsers, and tumbling services available on the dark web.

Peer-to-peer exchanges

Also known as decentralized exchanges, peer-to-peer exchanges arrange trades directly between users, without the exchange itself holding any funds. Bisq, is a popular P2P decentralized exchange, it can be intimidating, as it is a bit complex for the newbie, but the source code is available and it has a strong base.

There is also LocalBitcoins, potentially the world’s largest peer-to-peer crypto exchange; it lets you link up with buyers and sellers individually, as well as choosing your preferred payment method.

Bottom line, by using a peer-to-peer exchange, you can ensure that there’s no centralized entity — vulnerability to a hack on an exchange holding your KYC data. But to seal the deal and ensure a greater level of security through anonymity, you’re going to need some additional tools.


    Better Anonymity tools and Bitcoin tumblers

TOR/VPN
Use TOR, The Onion Router. TOR obfuscates your online activity by sending your data to different servers (aka. TOR nodes), all of which are heavily encrypted. This makes it incredibly difficult (but not impossible. TOR exit nodes can be compromised) for someone to identify you. It is also important to use a VPN (a virtual private network) on top and in unison of TOR, just in case the first and last machines you connect to via TOR are owned by the same person.

Tails
Next up is Tails, or The Amnesic Incognito Live System, which can and should be run alongside TOR. Tails forces all of your computer’s incoming and outgoing connections through TOR itself, and blocks any non-anonymous connections automatically.

Tumbling
Once you are accustomed to using these anonymity tools, it’s time to think about using Tor to find Bitcoin tumbling services. Tumbling (also known as mixing) involves sending your Bitcoin to a tumbling service so that it is returned to you at a different address, thereby obscuring your crypto trail.

There are many Bitcoin tumblers out there, but, in the spirit of anonymity, it’s safest to use a tumbler that is available on the dark web, like BitMixer or Gram’s Helix. At the very least, make sure to use a decentralized tumbler like CashShuffle, so you don’t have to trust a centralized entity with your data.

Tumblers that are operated by 3rd parties can be problematic and while you may not have to trust a centralized and regulated exchange, you are trusting 3rd party software.

It’s worth noting that dark web services like tumblers are used by bad actors such as money launderers, and have come under intense scrutiny from law enforcement in the past. Infact, a the dark web mixer named Helix was shut down by law enforcement, US Attorney Timothy J. Shea of the District of Columbia commented that,

“For those who seek to use Darknet-based cryptocurrency tumblers, these charges should serve as a reminder that law enforcement, through its partnerships and collaboration, will uncover illegal activity and charge those responsible for unlawful acts.”


Take-Aways:

    1. Bitcoin isn’t anonymous. At best, it’s pseudo-anonymous; you can hide your real identity easily enough, but anyone can trace your transactions on a public ledger and leverage that information to find out who you really are.

    2. Bitcoin is pseudo-anonymous; transactions can be traced and centralized exchanges hold know-your-customer (KYC) information. That KYC information is an additional vector of attack to compromise your identity and give the attacker the capability to form more effective spear phishing attacks on you.
   
    3. The know-your-customer (KYC) data held by cryptocurrency exchanges is a prime target for hackers, with several exchanges and even the behemoth exchanges like Binance and Coinsquare having been hacked in recent years and who can forget the exchange hack that started it all Mount Gox.

    4. Options for buying and using Bitcoin anonymously include peer-to-peer exchanges, Bitcoin ATMs and dark web tumbler services.