How to Protect Your Privacy When Using Bitcoin - dummies

How to Protect Your Privacy When Using Bitcoin

By Prypto

A certain level of anonymity is tied to using bitcoin and digital currency in general. Whether you can label that as “anonymous enough” is a personal opinion. There are ways to protect your privacy when using bitcoin to move funds around, but these require some effort and planning:

  • You can generate a new address for every individual transaction.
  • You can avoid posting your public bitcoin wallet address in a public place.

Generate a new wallet

When receiving funds from another user, you can opt to give them a brand new, freshly generated wallet address, which cannot be directly linked to any existing addresses you already own. This type of throwaway address lets users isolate transactions from one another, which is the primary precaution you can take to protect your privacy.

However, depending on how you store your funds — which type of bitcoin client you are using and which operating system you’re using it on — you may also be able to generate change addresses. For example, if you install the Bitcoin Core client on your computer or laptop, you can create a new change address every time you send funds to someone else.

A change address occurs whenever you have a certain amount of bitcoin in your wallet balance and are sending less than that total amount to another user. Let’s say you have 3 bitcoin and need to spend 0.25 bitcoin. You need to receive the “change” — 2.75 bitcoin in this case — in your wallet. The Bitcoin Core client (as well as a few other desktop clients) allows you to have this “change” sent to a newly generated address. In doing so, there is no direct link between your original address and the new address, even though you can trace back the steps by looking at the blockchain itself.

Keep your wallet address secret

Another way to protect your privacy — to a certain extent — is by not posting your public bitcoin wallet address in a public place. Using the address on your website, blog, social media, or on a forum is not a good idea if you want privacy. If someone stumbles across your wallet address and can somehow tie it to you personally, there is no way to restore privacy other than by using one of the aforementioned methods.