Although transactions within the Bitcoin network can be traced, your identity is always hidden behind a pseudonym in the for of a public address. It is difficult to know that any given public address belongs to you, but once you exchange your Bitcoin to fiat currency, you are exposed.
A public address will be inevitably linked to that transaction.
By now it should be clear to everyone involved in crypto, that Bitcoin is not anonymous. Nevertheless, it does provide a few layers of protection that help Bitcoin holders to hide their identity. Since Satoshi intended people to mine their own coins, these layers of protection can be removed through the buying process.
Therefore, it is important to understand how to buy Bitcoin anonymously to protect your identity and stay safe.
The Fiat Bridge
This is also true when you buy Bitcoin, given that:
- Most people buy and sell cryptocurrencies through an exchange which has KYC mechanisms in place.
- Transactions to buy and sell are always linked to a bank account, credit card, debit card or any other payment method that is linked directly to your identity.
- In some cases, even a fiat purchase can be traced if the public Bitcoin address – or cryptocurrency address – can be directly link to your IP address.
How can you Buy Bitcoin Anonymously?
Therefore, using fiat is essential if you want to buy Bitcoin and remain anonymous. But you must also use either a strong VPN service or a Tor browser when you transact.
Buying Bitcoin and sending it to a wallet on your phone may also expose your identity even if you are using VPN. There are other ways to link your Bitcoin to your identity by proxy through:
- The kind of wallet that you use.
- In case you bought a hardware wallet, how you purchased it and where it was delivered to.
- Cameras at Bitcoin ATMs coupled with the time of your purchase.
Protecting Your Identity from Sophisticated Actors
To circumvent all of these potential pitfalls that can reveal your identity when you buy Bitcoin, you should:
- Purchase your hardware wallet using Bitcoin and send it to a PO box instead of an address.
- Make sure you wear polarized sunglasses when using a Bitcoin ATM and even a hat or a cap.
- Avoid using phone wallets and always use cash or prepaid cards to buy Bitcoin, even if it is not at the ATM.