Welcome to Hard Fork Basics, a collection of tips, tricks, guides, and advice to keep you up to date in the cryptocurrency and blockchain world.
Cryptocurrency and anonymity is becoming an ever more contentious issue. As enthusiasts push for broader adoption of digital assets it pushes governments, banks, and lawmakers to implement know-your-customer (KYC) and anti-money laundering (AML) regulations.
While KYC and AML are implemented in the best interest of protecting users of cryptocurrency platforms, they add another layer of bureaucracy that further infringes our ability to stay anonymous when buying and selling cryptocurrency.
Despite many believing that cryptocurrency is anonymous by design, it is in fact pseudonymous. The level of anonymity you can achieve when using cryptocurrencies really depends on how you use it. Let’s take a look at what you can do to buy cryptocurrency anonymously.
Buy it off a street corner
Now this might sound dodgy, and it might even sound counter-intuitive to show your actual face at the point of purchase, but if you do your due diligence it doesn’t need to be as dangerous as it sounds.
In the early days of Bitcoin, this is actually how people traded it. There would be cryptocurrency meetups where holders would – like old-fashioned market traders – shout out prices and buyers would step forward. Once a price was agreed, cash would change hands and Bitcoin would be transferred directly.
You can use websites like Meetup.com, Facebook, or Localbitcoins.com to find sellers nearby who you can meet with to buy cryptocurrency for cash. Naturally, you’ll want to use Tor, a VPN, and burner profiles to stay even more anonymous when searching for, and signing up to these events.
If that all still sounds a bit dangerous, you can also…
Buy cryptocurrency with cash, online
While Localbitcoins.com allows you to arrange meetings with a Bitcoin sellers, you can can also keep the entire process online.
Much like buying Bitcoin face to face, with Localbitcoins.com you can search for sellers in your area, agree on a price, and then exchange the money; without ever meeting. In this case, Localbitcoins.com operates as an escrow service ensuring that both buyer and seller are protected. The escrow service holds the Bitcoin until the payment has cleared and then releases it to the buyer.
It should be noted that Localbitcoins.com isn’t always as anonymous as it seems. While you can create an account using burner email addresses and wallets, its terms and conditions state that it has the right to request you to upload and confirm your identity if they suspect fraudulent activity on your account.
Of course, this comes with additional risks as you might have to perform a bank transfer to purchase the cryptocurrency. Sellers tend to offer a range of payment options, some are more anonymous that others so bear that in mind. You’ll also want to use burner email addresses, fake names, Tor, and a VPN when using this website to prevent the purchase being tracked back to you.
There’s also a matter of price. The amount you pay for your Bitcoin will vary depending on the current availability, and could be higher than found on many online exchanges.
Buy it from a Bitcoin ATM
Buying Bitcoin from a dedicated cryptocurrency ATM isn’t always the best financial choice. Bitcoin ATMs often use APIs directly linked to cryptocurrency exchanges to purchase coins, and naturally, the ATM operator will add a service fee on the transaction too.
However, they are useful for buying cryptocurrency anonymously, but pick your Bitcoin ATM carefully as some require you to create an account and reveal your identity. For those that don’t, you can literally rock up, throw some cash in, and get some cryptocurrency out on a paper wallet. You can then send this Bitcoin to your wallet of choice through a mixer service to further obscure its origin and keep your identity safe.
Of course, buying Bitcoin without revealing your identity is one thing, but what you then do with it can still implicate your identity. It’s worthwhile to always be mindful about how you’re using your cryptocurrency. So here are some…
For the love of god stop talking about Bitcoin, how much you have, and how much your portfolio is worth. First of all, most people probably don’t care, and secondly, if you have any ounce of self-respect for your own privacy you should keep it hush hush. I don’t want to come over all Edward Snowden, but if people know you have a lot of Bitcoin it doesn’t take a big tip off to Inland Revenue for the tax man to come snooping. So keep your mouth shut.
Use privacy coins. Not all cryptocurrencies are created equal. There are specific cryptocurrencies like Monero and Zcash that are designed with privacy in mind and encrypt all potentially sensitive transaction data to keep it from prying eyes.
Make new addresses for every single transaction you make. Most people are lazy and when paying for something in cryptocurrency they will use the same public address as they did for the last transaction. Over time this practice will build up a list of transactions associated with one wallet. With enough forensic digging those transactions could easily be associated to a real world identity.
If you really care about obscuring where your Bitcoins have come from, use a mixer or tumbler service. It’s typically a method favored by money launderers and criminals so maybe think twice before you dive into this murky world. But mixer services are useful, you throw your Bitcoin in one end, it gets split up and sent to various addresses numerous times, before being spat out the other end into your chosen wallet from a range of addresses. These services don’t come for free though, so think about who you might be supporting in your pursuit of anonymity.
Clearly, staying anonymous with Bitcoin isn’t that simple, and it certainly doesn’t come for free. Besides the financial prices we pay for some anonymity services, we must also sacrifice huge amounts of convenience.
But even in the modern world of cryptocurrency regulation, you can still stay anonymous. It just won’t be easy.
Last updated January 28, 2019.
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