Bitcoins have been around for a while. In that time, they have been providing a sturdy way of storing funds anonymously.
Unlike the banking system, you can set up a bitcoin account at no cost. Personal identification is not needed with a cryptocurrency account, all funds can be stored under a pseudonym. But what makes the wallet untraceable to you? Here we aim to unpack how Bitcoin maintains anonymity, it’s privacy weaknesses and how to protect yourself from being de-anonymized. Sit back, relax, and learn a few tips.
How Does Bitcoin Protect Your Anonymity?
If you have ever opened a bank account, applied for a credit card or tried to hold an account with an online payment merchant (such as PayPal), you would have noticed one thing. Even though these services make the promise of protecting your identity, they still need to know who you are. They go as far as requesting verification via 2-factor authentication or contacting the bank to make sure each account belongs to the said person.
This is not the same issue with bitcoin.
With Bitcoin, you can create as many accounts as possible without having to enter details that could be remotely connected back to you. All accounts on the bitcoin network are being run under pseudonyms. You don’t even need to verify yourself with any ID to start holding funds in an account. This kind of model gives the users freedom of operation.
Weaknesses of Bitcoin’s Protection
As anonymous as bitcoin is, all transactions made with cryptocurrency is ‘published’ on the blockchain network. The transactions, along with their ID and amount exchanged, will be out there for people to see.
These details do not include your IP or anything else that could help anyone identify you directly. However, your account activity can always be used to determine your financial status and thus, make you a target if you are doing large sum transactions.
This sort of transparency contributes to the model that makes bitcoin so highly sought-after, but this feature can be a potential downfall. It is, thus, not surprising that many will choose to use a different wallet address for multiple transactions. Furthermore, many others will prefer to use different accounts to hold their funds to minimize the effect of an attack, should it happen. If you’re considering getting Bitcoins, this would be a smart way to store and use it.
How to Protect Yourself from Being De-Anonymized
Although there are various ways that bitcoin protects your anonymity, Bitcoin accounts can and have been successfully traced before. That is not the end of the line though. You can still protect yourself by putting in some more protective measures to build yourself a digital security fort.
The first thing would be to secure your communications this instant. Be conscious of who you have mentioned your wallet details to and communications regarding your coins.
Secure your browsing too. Make sure you don’t have malicious tabs open which can snoop on your internet activity. If possible, use a VPN to encrypt all your online traffic to fend off third-parties.
Also, make sure to generate a new address for each transaction you make. It is tempting to save yourself the stress and use the same wallet ID for multiple transactions. Thinking about how that amounts to flashing multiple wads of money in a dark alley, you would surely decide against doing so.
It wouldn’t be a bad idea to keep multiple accounts with a fraction of your funds held in each one. We don’t need to tell you to safely secure each account like it was the only one.
Oh, did we mention that you could use Tor too? Being the best browser security solution on the market right now, Tor and Bitcoin go hand in hand to hide your identity.
Follow all the above and you would have a better chance against being deanonymized and ultimately, losing your funds.