Understanding how Bitcoin works can be a bit confusing at first. It seems pretty simple enough, you trade your dollars for Bitcoins and vice versa, but why would you want to try and keep your identity secret when you do that? Isn’t your identity safe anyway because Bitcoin is anonymous? Isn’t that why crooks and hackers like to use it so they can hide what they’re doing?
First of all, Bitcoin isn’t actually anonymous it’s pseudonymous. Basically what you need to know when it comes to Bitcoin is that when you do any sort of transaction with Bitcoin that information is public and can be found on the blockchain ledger. Your identity is not public, but the address that you use to make a transaction is, and so is all the other transactions that go in and out of that address.
Think of it like an email address. You know what email address is sending what amount of Bitcoin to which email address. What you don’t know publicly is who that email address belongs to. However, with a little bit of investigating work this can be found out relatively easily if you haven’t taken steps to protect your identity.
We don’t need the world to know how much money we have
Think of a lottery winner and how some of them go to great lengths to keep their identity secret. Why? Because they don’t want to deal with all the publicity and because they want to protect themselves from thieves and crooks. Unfortunately, when the bad guys know you have money they may want to come after it. My advice is to do your best to hide the fact that you have it.
You see, with Bitcoins and other cryptocurrencies you’re at a higher risk because your Bitcoins can be stolen in a very different way than money out of your bank account or cash in your house. At a bank you’d likely be able to get that money back by reversing whatever made you lose it. If they wanted to steal the cash you had hidden in your house they would actually have to physically get to your house to steal it.
With Bitcoin though, they could potentially steal hundreds of thousands, if not millions, right from their own bedroom (and stuff like this has already happened to people). If someone gets a hold of your Bitcoins then that’s that. There’s no way to reverse a Bitcoin transaction.
I know it may seem a bit weird to think of it this way, but you have to realize that Bitcoin is more like cash than a bank account. You wouldn’t want your neighbor to know if you had $25,000 in cash sitting in your safe at home would you? However, you’d probably be a bit more comfortable letting them know that you’ve saved $25K in your retirement account or your bank savings account. Think of Bitcoin like it’s cash and you’re on your way to better security.
What exactly is public info when it comes to Bitcoins?
There’s a few things that are public info. They include:
1- Your Bitcoin address (although you can make as many as you want)
2- Info on how many Bitcoins you have or had in any particular address
3- It tells you exactly when you got those Bitcoins
4- It tells you which address sent you those Bitcoins
5- Also to which address you send Bitcoins to
Knowing all of this it might seem impossible to hide your true identity from someone that really wanted to find out who you are. It’s not completely impossible. You’re going to have to decide how anonymous you need to be and then choose to do as much as you think you need to do in order to remain anonymous.
Some people just don’t care if someone knows they have X amount of money in Bitcoins while others want to be sure to keep that private. Others may be heavily invested in cryptos and want to steer the hackers in the wrong direction. Whatever your case may be just understand that it takes work to remain truly anonymous with Bitcoins.
How do you remain anonymous?
There’s a bunch of ways to try to become anonymous. Some of the most extreme ones include using VPNs, Tor, Tails, public Wifi, exchanges that don’t require your identity or LocalBitcoins. Do a little research and you’ll find a lot of paranoid Bitcoiners.
Another way to go about it is using “mixer” services where you put your Bitcoins into a pool with other people and then you get your Bitcoins back after it has been mixed thoroughly, minus a fee of course.
Some people may even mix them with such services and then mix them into altcoins that have more privacy, like Monero. So what you would do is mix your Bitcoins, then trade them for Monero, then trade them back into Bitcoins with a completely new and anonymous Bitcoin Address that you haven’t used anywhere or associated with anything.