How can we guarantee anonymity when we transfer Bitcoin? It might come as surprise, but Bitcoin is not so anonymous as it is being advertised by many. It is actually very tricky to hide bitcoin transactions; stay totally anonymous when using it.
This is because every Bitcoin transaction is saved in blockchain, which means it can be tracked. It is true that Bitcoin transactions are not linked to anyone particular and addresses all are public. But still, to hide bitcoin transaction, it is possible for many government agencies to track people down using IP addresses and information from different cryptocurrency exchanges.
It is quite commmon that people publish their name with their address somewhere online, which can often can of worms to many Bitcoin users. Also, it is possible to trace people sniffing into their WIFI-connections. Smart minds can math IP addresses to proof of ID.
Anonymity is based on the trust to hide bitcoin transactions. You have to trust the people you are sending Bitcoins to. You have to trust their methods of securely storing private information.
Here is a list of techniques to stay anonymous and hide Bitcoin transactions:
- Bitcoin washing/tumbling
- New Bitcoin address for every transaction
- Stealth addresses
- Privacy coins, Zcash/Monero or similar
Zcash for example is quite unique cryptocurrency. It is 2nd generation coin, maybe not as advanced as new ones (proof-of-work nowadays means outdated!). All Zcash transactions are encrypted in the blockchain, which means it’s very hard to access transaction details. Zcash-s unique technology is called zk-Snarks.
There are more ways to hide bitcoin transactions. CoinJoin is a service that links users who want to make similar payments and then allows them to pay together. End result is your bitcoins will be mixed and it will be very much harder to identify them.