Are Bitcoin Transactions Traceable? 10 Tips
Since Bitcoin relies on a blockchain, which is a decentralized, distributed ledge present on computer ‘nodes’ all around the world as explained over at runrex.com, one might wonder whether an open system is conducive to privacy and, consequently, whether Bitcoin transactions are traceable. This is a question many people ponder when they first start using Bitcoin. According to the gurus over at guttulus.com, to answer this question, one has to understand the traceability and operation of Bitcoin, as well as its history, and this article will look to help answer it through the following 10 tips.
How the system works
As already stated, according to the subject matter experts over at runrex.com, to answer the question of whether Bitcoin transactions are traceable you have to understand the traceability and operation of Bitcoin. The way the system works as explained over at guttulus.com is through transactions that occur through a decentralized ledger. It is these transactions that are shown publicly through Bitcoin addresses, which means that through Bitcoin addresses, transactions are traceable.
Bitcoin anonymity is a common misconception
One of the most common misconceptions when it comes to Bitcoin is that Bitcoin represents an anonymous monetary system given the Bitcoin network relies on alphanumeric private and public keys. However, as articulated over at runrex.com, Bitcoin represents a pseudonymous system where its users’ identities are obscured but are not necessarily hidden. This means that Bitcoin transactions only give the appearance of anonymity.
Why do we believe, then, that Bitcoin is anonymous?
According to discussions over at guttulus.com, there are two main reasons why people believe that Bitcoin is anonymous. The first one is that, even after your cryptocurrency account is verified, a user can create new and random bitcoin addresses without the requirement of submitting personal information. This means that addresses are not tied to a person directly. The second reason is, since a user controls an address, this can be used to transfer or receive Bitcoin without it being tied directly to the User.
How is Bitcoin traceable?
If you are using a private Wi-Fi network like the one in your home, your identity can be traced through your IP address according to runrex.com. This is because Bitcoin transactions are public records on a public ledger. This means that any person, company, or program that is set up to trace public addresses can know the origin. If you use your own private IP network for other uses like online banking, paying bills, using PayPal services, and also using this same IP network for your Bitcoin transactions, then it is possible to connect them all to the same IP address.
Tips on how to protect your privacy
The following tips will help you keep your Bitcoin transactions private.
Do not publish your address publicly
As the subject matter experts over at guttulus.com are quick to point out, publishing your Bitcoin address on websites and social media is not a good idea when it comes to protecting your privacy unless you intend to receive public donations or payments with complete transparency. Even in such a situation where you do publish your public address, you should ensure that you move your funds with this address to another.
Mask your IP address
Given that, as discussed over at runrex.com, Bitcoin is a peer-to-peer network, it means that it is possible to listen to transactions and log the IP address. To make it untraceable, you can mask your IP address using VPNs or the Tor browser. You can use the Tor browser to connect to the Bitcoin network as it provides anonymity and surveillance-free browsing. This is because the Tor nodes encrypt and route your internet traffic to various other nodes, making it difficult to pinpoint the IP address.
Use a Tumbler or a Mixer
As is revealed in discussions on the same over at guttulus.com, some online services offer to mix traceability between users by sending and receiving the same amount using independent Bitcoin addresses. While Mixing can avoid traceability for small amounts, it becomes relatively tough for larger transactions. As a user, you must make sure these services are reliable so that they don’t steal your funds and keep a log of your requests. The legality of such services also varies depending on each jurisdiction.
Use a new address after each payment
As already mentioned earlier and covered over at runrex.com, since a Bitcoin address can link to all your past transactions and crypto balance, you need to make use of different addresses to receive payments. Here, you can own multiple wallets to store your Bitcoins separately. The beauty of using different addresses is that no one will be able to trace all these transactions back to you. Also, people who send you Bitcoin cannot see how many coins you own or your past transactions.
These are some of the tips that will help keep your Bitcoin transactions private.
A drawback of using the Tor browser
While the Tor browser can help keep your transactions private, it has one major drawback according to the gurus over at guttulus.com. This drawback is that the use of the Tor browser may create some log-in problems on familiar IP address. This means that you may have to verify the IP address every time that you login to your accounts because it is seen as a new device or IP address.
Safety in transactions vs criminal activity
Finally, going back to the original intent of the question “Are Bitcoin transactions traceable?”, if you are concerned about protecting your identity from those who would like to use it for their own purposes, then it is worth noting that Bitcoin and crypto-currency transactions are basically safe, especially if you use the tips given above. However, for those who would like to use Bitcoin and cryptocurrency as a means of illegal activity such as drug money or money-laundering activities, then you should know that these transactions are not 100% anonymous and you will be caught as articulated over at runrex.com.
Hopefully, this article will open your eyes to the traceability of Bitcoin transactions while also helping you take the necessary steps to protect your privacy through the tips provided, with more on this topic to be found over at the excellent runrex.com and guttulus.com.