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Friday, September 30, 2022

How to Get More Privacy on Bitcoin Transactions

What are some of the steps one should take to maintain anonymity while using bitcoin — from simple to advanced? Well, Vegeta, anonymity or privacy is not a one bullet solution. There’s no silver bullet for this. You have to layer your defences, like any aspect of information security, and privacy is a fundamental component of information security.

You have to use layered defences, which means you do several things and you hope that at least some of those things work. And in conjunction, they give you a degree of privacy now and in the short and medium-term future. There are a number of things you can do. The first one has a lot to do with how you source your bitcoin in the first place.

So in terms of least private to most private, least private is probably buying bitcoin from an exchange because they require KYC and ID and all kinds of other things. That not only erodes your privacy because that bitcoin is going to be tracked and associated with that identity, but it also exposes you to identity theft because in many cases you’re dealing with small startups that cannot do information security.

And it’s impossible to do that perfectly, so someone can steal those identifiers. The second best is to buy bitcoin from some kind of bitcoin ATM. But of course bitcoin ATMs also sometimes require ID. Or they require a smartphone a cell phone number to verify you. Or they’re in places where there are closed-circuit tv cameras all around you or other people who may see who you are.

And you don’t really want to go into a mall, where there’s a bitcoin ATM with a low low hat over your head and a hoodie over you and kind of look around suspiciously, then you’re the cartoon villain. The next one would be to acquire bitcoin in a person-to-person transaction by exchanging cash for bitcoin in a public setting with someone who has bitcoin.

And of course, you know that’s going to have its own risks and potential for exposure. Then it would be to earn bitcoin by providing your labour services, products, or whatever, from a third party and that’s a very clean way because you can do that without in-person interaction.

And, you know, theoretically, at least, only the person who says you know who you are, if that. They might not. Once you’ve sourced your bitcoin, of course, how you use it really makes a huge difference. If you reuse bitcoin addresses, you violate your own privacy. So a very important rule of thumb, in any cryptocurrency really, is to avoid as much as possible address reuse.

And of course, you know there’s only so much you can do as a user. Because a lot of that depends on how your wallet constructs transactions, how it constructs the change in those transactions, how it sequences outputs, what fingerprints it leaves, et cetera, et cetera.

The third one is network opsec, overall operational security on your network connections.If you’re in a public hotspot, in a cafe, using unencrypted network connectivity to a non-SSL TLS encrypted website, where you’re plugging in your name and address to have bitcoin socks delivered to your home.

And then you’re sending that transaction from your one address — well I mean you’re working against yourself. And then finally there are all kinds of other things you can do that involve various forms of privacy improving tools, known as mixers or coin join, coin swap, and things like that.

Including trading cryptocurrencies of one kind for another kind in decentralized markets. Now those may or may not be legal depending on your jurisdiction. In some jurisdictions, they’re legal, in other jurisdictions they’re not.

It may also depend on what you’re doing with that crypto. Of course, if you’re doing something illegal then the process of trying to hide that is in itself illegal in almost every jurisdiction that I can think of — and I’m not going to give you legal advice.

These are real steps. And you can think of privacy very similarly to the construct we’ve used in the past to discuss financial independence and sovereignty, we say, you know. Not your keys, not your coins are one of the steps.

But you can start by buying some crypto, that’s some degree of financial independence. Then moving that away from an exchange, that’s another degree of independence. Then using a hardware wallet, that’s another degree of independence. And we talk about that as the staircase of sovereignty — a term invented by Stephanie Murphy.

I really love that visual of climbing up the staircase to achieve greater and greater financial sovereignty. Well, the same thing applies to privacy, right? You can start at the bottom step and the very fact that you’re not using Venmo or some other crap like that — that broadcasting your financial transactions to the entire world and every intelligence agency that listening — is already one step.

I mean, even if you use bitcoin badly, you’re already doing better than Venmo or many of the other things. So opting out is step one. Opting out of the system of surveillance, traditional finances step one. And then you can start climbing up the ladder. Every step is worthwhile. There is no step at which you’re not a true bitcoiner, you don’t take privacy seriously, we’re going to [judge you]. No! Applause!

You managed to take one step. Good for you, you’re already doing something different from the majority of people out there who don’t care enough about their financial privacy. And if you make it three or four steps staircase, you’re really making a difference in the world! So keep it up.

Hi. Thanks for watching the video. I’m Andreas Antonopoulos. I’m the author of MasteringBitcoin, Mastering Ethereum, and The Internet of Money series. If you’d like to support my mission of bringing education, about bitcoin and open blockchains, to as many people as possible under open free creative commons licenses, please consider subscribing to my channel and supporting me on patreon.com/aantonop Thank you!.

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