How to stay anonymous

The first step in staying anonymous when making Bitcoin transactions is to use a new address  for every transaction.  This not only increases your chances of staying anonymous, but it does the same for everyone else in the chain.

Once you have acquired a sum of Bitcoins through whatever method, that balance, say 3.71625808 BTC is linked to you as a person. So, anyone looking through a ledger and seeing 3.71625808 BTC could make a good guess as to who you are.

A good way to stay anonymous would be to set up a new eWallet and to transfer a lump sum of coins over to that new wallet.  The number of coins in the new wallet now differs from the number originally purchased and makes it more difficult for a third party to see a connection. Your coins are now mixed with those of other users and your IP address from the original transaction has been removed, eliminating one of the clues to your identity. Any attacker must now have access to the new eWallet’s transactional log in order to be able to follow you.

To go another step, send your Bitcoins to an eWallet and then send them to yourself, before making any transactions with a third-party. To properly follow the electronic trail, someone would have to painstakingly investigate each transfer.

If you are going to go through these steps to make some of your Bitcoins effectively anonymous (i.e. untraceable back to you),  make sure you don’t undo all of your hard work by mixing them with coins which can be easily traced straight back to you.

In the very near future it may be easier to stay anonymous when making Bitcoin transactions through enhanced clients which will allow you to choose which coins to send to a third party.  Also, parts of the network are working on a set of trusted relay servers with improved privacy protocols at their heart.

It goes without saying that you must obey the law when dealing with Bitcoins. Using the above techniques, or any others, to stay anonymous when felicitating money laundering, terrorism or purchasing prohibited items is obviously illegal. Some jurisdictions go further by making anonymising Bitcoins over a certain value an illegal activity in itself.