Blockchain transactions are recorded on a public ledger, accessible to anyone. While addresses are pseudonymous, meaning they do not directly reveal user identities, patterns in transactions can potentially be linked back to individuals. Therefore, covering your on-chain footprints involves breaking these identifiable patterns.
N.B: Although these methods provide anonymity for good intentions, they're also an attractive option for users with malicious intentions as they might lack compliance measures to filter out illicit activity.
Avoiding KYC Exchanges
Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations mandate cryptocurrency exchanges and platforms to verify users' identities. To enhance privacy, use decentralized exchanges (DEXs) or non-KYC exchanges, although these come with their own set of risks.
Segregating Transactions
Avoid using the same wallet for multiple purposes. Segregate wallets based on usage (e.g., trading, savings, donations). This compartmentalization makes it harder to link transactions and analyze the flow of funds.
Using Stealth Addresses
Stealth addresses generate unique, one-time addresses for each transaction, making it difficult to link transactions back to a single wallet. They are a crucial feature in cryptocurrencies like Monero and are also available for Bitcoin through BIP47 (Reusable Payment Codes).
Regularly Changing Addresses
Even if not using stealth addresses, regularly change your wallet addresses to reduce traceability. Most modern wallets support automatic address rotation for receiving funds.
Coin Mixing and Tumbler Services
Mixing services, also known as tumblers, enhance privacy by mixing users' funds with those of others, making it challenging to trace the origin of transactions. Users send their coins to a mixing service, which then redistributes them among multiple addresses, breaking the link between the sender and recipient. It is important to mention that this approach is deemed as illegal in some countries, so you should check this before.
Using Privacy-Centric Cryptocurrencies
Several cryptocurrencies, such as Monero (XMR), Zcash (ZEC), and Dash (DASH), prioritize privacy and anonymity features. By transacting with these privacy-centric coins, users can obfuscate their on-chain footprints through advanced cryptographic techniques like ring signatures, zk-SNARKs, and CoinJoin.
Monero (XMR): Utilizes Ring Signatures, Stealth Addresses, and Ring Confidential Transactions (RingCT) to obscure sender, recipient, and transaction amount.
Zcash (ZEC): Offers optional privacy using zk-SNARKs, allowing users to send shielded transactions that encrypt transaction data.
Dash (DASH): Incorporates PrivateSend, which uses CoinJoin to mix coins and obscure transaction origins.
Using VPNs and Tor
Always use a Virtual Private Network (VPN) or Tor to mask your IP address when accessing blockchain networks or interacting with exchanges. This prevents linking your network activity to your physical location.
N.B: Although these methods provide anonymity for good intentions, they're also an attractive option for users with malicious intentions as they might lack compliance measures to filter out illicit activity.
Avoiding KYC Exchanges
Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations mandate cryptocurrency exchanges and platforms to verify users' identities. To enhance privacy, use decentralized exchanges (DEXs) or non-KYC exchanges, although these come with their own set of risks.
Segregating Transactions
Avoid using the same wallet for multiple purposes. Segregate wallets based on usage (e.g., trading, savings, donations). This compartmentalization makes it harder to link transactions and analyze the flow of funds.
Using Stealth Addresses
Stealth addresses generate unique, one-time addresses for each transaction, making it difficult to link transactions back to a single wallet. They are a crucial feature in cryptocurrencies like Monero and are also available for Bitcoin through BIP47 (Reusable Payment Codes).
Regularly Changing Addresses
Even if not using stealth addresses, regularly change your wallet addresses to reduce traceability. Most modern wallets support automatic address rotation for receiving funds.
Coin Mixing and Tumbler Services
Mixing services, also known as tumblers, enhance privacy by mixing users' funds with those of others, making it challenging to trace the origin of transactions. Users send their coins to a mixing service, which then redistributes them among multiple addresses, breaking the link between the sender and recipient. It is important to mention that this approach is deemed as illegal in some countries, so you should check this before.
Using Privacy-Centric Cryptocurrencies
Several cryptocurrencies, such as Monero (XMR), Zcash (ZEC), and Dash (DASH), prioritize privacy and anonymity features. By transacting with these privacy-centric coins, users can obfuscate their on-chain footprints through advanced cryptographic techniques like ring signatures, zk-SNARKs, and CoinJoin.
Monero (XMR): Utilizes Ring Signatures, Stealth Addresses, and Ring Confidential Transactions (RingCT) to obscure sender, recipient, and transaction amount.
Zcash (ZEC): Offers optional privacy using zk-SNARKs, allowing users to send shielded transactions that encrypt transaction data.
Dash (DASH): Incorporates PrivateSend, which uses CoinJoin to mix coins and obscure transaction origins.
Using VPNs and Tor
Always use a Virtual Private Network (VPN) or Tor to mask your IP address when accessing blockchain networks or interacting with exchanges. This prevents linking your network activity to your physical location.
