Are Blockchain Transactions Anonymous
A growing number of online stores are accepting the use of Bitcoin as a payment option. One of the greatest advantages of using this technology is staying anonymous. All transactions are recorded and made available to the public and are linked only using an electronic address. Thus, whatever you buy with Bitcoin can only be traced by you.
This anonymity can come in handy, but it is worth noting that the anonymity is not perfect. Most security experts refer to it as pseudonym privacy. It is similar to writing a book using a nom de plume. In this example, you can remain anonymous as long as the book is not linked to you.
However, the moment they link one book to you, all others with that name are linked back to you. In a similar manner, as soon as one of your transactions is leaked, all others can be traced. That is why we at Bit Gale have decided to share a few tips with you on how to remain anonymous when conducting a blockchain transaction.
Use Services Such as Tor and VPN
Both Tor and VPN are used to keep the user safe and can be used for absolute anonymity online. Governments, companies, researchers, and many others for safety and privacy often use this technology. Most cryptocurrency users, who have the same concerns, also often use this technology.
During virtual currency transaction requests, VPNs are the most common method used to hide the personal identity of the users. Both of these tools can be a useful way to prevent a hacker or analyst from monitoring traffic and using it to gather IP addresses and transactions.
Create a new Bitcoin address for each transaction
The blockchain is immutable as long as more than 50% of the network does not work to effect changes. In essence, every transaction can be traced from its origin, no matter how long it has been. However, if you use a different address for every transaction, it will become impossible to prove an association between the addresses.
When you use a single transaction multiple times, anyone can be able to follow all other transactions coming in and out of that address. If they know that address is associated with you, they can be able to trace all your activities and transactions online. When you use a new address for every transaction, it becomes almost impossible for any analysts to identify any patterns and thereby possibly trace where and who you are.
Utilize Mixers
Mixers are simple services that can be quite effective at helping to confuse whoever may be trying to track your transactions online. This is done by associating unrelated funds using various techniques.
If an address has been tainted, the funds can be cleaned by throwing them in the mixer. The association between the user and the address cannot be deleted, but it can be muddled. This will allow the Bitcoin to have a new life at anonymity. To achieve this, the user sends their Bitcoin to the mixer. The users then get back their funds with a new address with the deduction of a small mixing fee.
Mixers can either be centralized or decentralized. Decentralized mixers are able to obtain the same results without the need for a central authority to control the process. These mixers have played an important role in helping to keep blockchain transactions anonymous.
Using Secure Wallets
Virtual currency wallets have a private key that provides access and ownership to the funds. They generate an address and sign the transaction, which helps to prove ownership in the network. If the private key has been compromised, it is easy to trace any address generated by the key.
Users of virtual currencies are thus advised to keep their private keys safe with the help of secure wallets. These secure wallets will utilize a number of techniques to ensure that the user is always anonymous after every transaction with funds held in their wallet.
Make use of a stealth address
A stealth address allows a transaction where a person wishes to request funds from the public but keep the balance in the address a secret. He or she will thus need to publish a stealth address, which can generate a regular address. By using cryptography, the user will own all stealth addresses generated via a private key. This way, the payment address is never associated with the receiver. This way, analysts are unable to track who owns the funds.
All stealth addresses today work based on the elliptic curve Diffie-Hellman algorithm. This is the idea on which Monero is based. It is one of the features, which make it so attractive to those in the virtual currency community. However, it can still work for other digital currencies such as Bitcoin.
Summary
Just because you are conducting a blockchain transaction does not mean you are anonymous. However, if you utilize the techniques mentioned above, it can help to ensure you remain as anonymous as possible.