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Increasing the Anonymity of Bitcoin with a VPN

By on November 29, 2016

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Many of us that use Bitcoin do so because as online transactions go, Bitcoin is both safer and considerably more anonymous. Transactions can’t be followed back to a central bank or to a person that is publicly named and there are no taxes on Bitcoin purchases.

That being said, Bitcoin isn’t entirely foolproof. Every transaction made with Bitcoins is recorded on the blockchain, a publicly accessible tracker that records the transference of Bitcoins from one wallet to the next. To the general public, this information is pretty hard to utilize, but specialists can follow patterns.

In addition, most Bitcoin purchases are still made via websites. Websites can identify their visitors by their IP address and once a purchase is made, can then link the wallet ID with the specific IP address.

The answer to that issue is a Virtual Private Network (VPN). Users unfamiliar with the basics of a VPN are encouraged to check out the guide written by Secure Thoughts on the best current VPNs available.

Anonymity With a VPN

The simplest and most effective way to ensure your location remains anonymous to the public and prying eyes is to subscribe to a VPN service. Doing so comes with several benefits, the first and most relevant one being the ability to alter how your IP address appears to the rest of the internet.

The way it works is by having your device first connect to one of the VPN’s remote servers before accessing the rest of the internet. Doing so assigns you the IP address of the server, which other users will also be using to connect. It becomes impossible to link any specific person to that IP address just because there are too many parties connected.

In addition to altering your IP address, a VPN also provides measures of security in the form of encryption that prevents hackers and more advanced users from positively identifying you. An encrypted connection is immune from data theft related to unsecured connections (public WiFi,, for instance) which might compromise you or your device.

Encryption, as you may already know, puts a lock on your information that can only be opened with the right key. But the lock is so complicated that, to date, no one has been able to crack it. It’s something we won’t likely need to concern ourselves with until quantum computing becomes a reality.

Other Tips

Besides using a VPN to increase your anonymity, there are a few other things you can do to supplement the process. One simple place to start is with your Bitcoin wallet.

Many users store and send their Bitcoins from the same wallet continuously. While this may be convenient, it also establishes a pattern with that particular wallet ID. Creating and using new wallets regularly can help disassociate financial transactions with one particular source.

It’s also important to realize that every Bitcoin has a history in the blockchain. Depending on where you go to purchase Bitcoins, you could easily end up with tainted coins that have been used for illicit trade.

One solution to clear out tainted Bitcoins and to help bolster anonymity is to use a mixing service. These services will allow you to exchange your Bitcoins for others at a low fee to keep specific addresses from being associated with your transactions. It can be a good way to essentially hit the “reset” button on your currency.

The downside is, of course, finding a reputable mixer. It’s recommended that you read reviews and if possible, contact other users before selecting a mixing service. Multiple scams exist and the worst possible outcome is the complete loss of your coins, so be cautious.

Feel anonymous yet? If you have any questions or suggestions, please post them in the comments section so we can get back to you.

About the Author: Faith is an internet security specialist and online privacy advocate. She blogs about a variety of current topics, covering everything from major data breaches to strategies for personal internet security.