- Achieve true anonymity in cryptocurrency transactions by using stealth addresses, which are one-time wallet addresses that cannot be traced back to you.
- Ring signatures, unique to Monero, make it difficult to determine which individual signed a transaction, providing a solid layer of anonymity.
- Use a VPN to boost privacy and achieve anonymity in crypto transactions by masking your online activity and IP address. Reputable paid providers like ExpressVPN and CyberGhost are recommended.
While cryptocurrency is more private than traditional money by design, it often does not provide total anonymity to users. To achieve this, you’ll need to use certain methods or assets to keep your identity completely concealed.
To make truly anonymous cryptocurrency payments, there are a few avenues you can take.
1. Stealth Addresses
Typical cryptocurrency addresses provide some level of privacy for users, but this is pseudonymity rather than anonymity. While only your crypto address is displayed on the blockchain, more experienced individuals can use this to uncover your identity.
To achieve true anonymity, try using a stealth address. These are one-time wallet addresses used in transactions instead of your real wallet address. A stealth address isn’t tied to any user, making it impossible to trace it back to you.
The Monero and Zcash cryptocurrencies both offer stealth addresses, as does Bitcoin. However, not all cryptos support this protocol, including Ethereum. While Ethereum’s founder, Vitalik Buterin, has discussed implementing stealth addresses, this hasn’t yet been implemented on the blockchain.
2. Ring Signatures
Ring signatures are a feature unique to Monero, the most popular privacy coin. Ring signatures require multiple users to participate in a single transaction, with just one of these users signing it. Because there are multiple people associated with the transaction, it’s very hard to determine which individual signed it. Therefore, it’s tricky to trace which address the funds are being sent to or from.
The wallet addresses of multiple users are included in a ring transaction, with one of the addresses being the true sender or recipient. Even the savviest of criminals or snoopers would have a hard time cracking this privacy protocol so that it can provide you with a solid layer of anonymity.
VPNs aren’t native to the crypto industry. Anyone can use this technology to stay anonymous when surfing the web. But when making a crypto transaction, a VPN can help you boost your privacy and achieve anonymity.
VPNs mask not only your online activity but also your IP address. If a nosy or malicious user tries to find out who you are, they may target your IP address. This is because it is possible to trace a crypto transaction back to the device from which it was conducted. With a VPN on your side, using an IP address for identification becomes very difficult for whoever is trying to find you.
There are plenty of free VPNs, but note that some come with risky drawbacks, such as data logging and poor encryption. If you want the best VPN service possible, opt for reputable paid providers, such as ExpressVPN and CyberGhost.
4. Bitcoin ATMs
Bitcoin ATMs allow you to send or receive crypto entirely anonymously. These machines take the paper cash you input and use it to buy crypto funds. Alternatively, you can sell your funds and receive cash from the ATM.
If you provide the Bitcoin ATM with your Bitcoin address when it is requested, your transaction will not be completely anonymous. But if you state that you do not have a Bitcoin address, the machine will produce a paper wallet address. You can use this repeatedly, but to remain anonymous, only use it on a one-time basis. That way, the address cannot be traced to you and your crypto activity.
The limitation is that you need physical access to a Bitcoin ATM to use one. Bitcoin ATMs are nowhere near as widespread as typical ATMs, so you might have difficulty finding one near you. There are also Ethereum, Bitcoin Cash, Dash, and Litecoin ATMs, but these are even scarcer.
To find a crypto ATM close to you, try using Coin ATM Radar’s worldwide map of available machines.
5. Bitcoin Mixers
A Bitcoin mixer (also known as a Bitcoin tumbler) obscures the connection a transaction has to the wallet addresses involved. A mixer takes the funds you sent in a transaction and mixes them with the funds associated with multiple other users’ transactions. In the transaction process, the funds are placed into a pool and tumbled in with each other. When they come out on the other side, there’s no way of knowing which user sent which batch of coins.
Moreover, the mixer software will stand as the recipient address for those receiving Bitcoin funds, which also protects the recipient from being traced. So, the origin and the destination of the Bitcoin are indecipherable.
Bitcoin mixers come in two main forms: centralized and decentralized. While a dedicated company runs the former, the latter is designed to operate peer-to-peer, with no one entity having power over the network. You’ll need faith in a centralized mixer tool to keep your Bitcoin safe and ensure your address is concealed. You’ll also need to research the centralized mixer you’re considering to make sure it’s well-reviewed and safe.
On the other hand, a decentralized mixer conducts the mixing process automatically, without any direct human input. No one ever has custody of your Bitcoin funds. However, it is the users of the service that are required for the Bitcoin mixing, as they provide the funds instead of a centralized service, which can provide some of the funds itself.
6. Avoid KYC Exchanges
You’ll likely need to use an exchange to access most crypto trading features. Most crypto exchanges use the Know Your Customer (KYC) standard to verify the identity of their users.
KYC is a financial regulation that requires customers of financial services to prove their identity before use. To complete the KYC process successfully, the user must provide a fair amount of information, including their name, address, contact details, and a valid form of ID (such as a passport or driving license). As you’ve likely guessed, remaining anonymous on an exchange that uses KYC is pretty much impossible.
Not all crypto exchanges use KYC, so if you want to remain totally anonymous, try opting for an exchange that fits this description. PrimeXBT, Bybit, CoinEx, and Bisq are examples of non-KYC exchanges. All the biggest crypto exchanges, such as Binance, Coinbase, and Kraken, require KYC verification. However, if you choose to use a lesser-known exchange, ensure you’ve researched whether it is safe and legitimate.
To take things a step further, you can also use peer-to-peer-only exchanges with no KYC. On such a platform, you’re dealing with another user directly, not the exchange itself. A buyer or seller will usually list which payment options they accept, so make sure you’re not opting for a user who needs your name, email, and so on.
Anonymous Crypto Transactions Are Possible
Though much of the crypto industry operates on pseudonymity, you can ensure that you remain anonymous when conducting transactions using one or more of the methods above. If you’re concerned about your privacy when trading crypto, it may be wise to implement one of these methods into your day-to-day trading habits to ensure your identity and activity aren’t being tracked.