When bitcoin was introduced and gained popularity users often assumed it to be an anonymous digital currency. In truth bitcoin is not anonymous by default but can be … with a little effort on your part.

First realize that all bitcoin transactions are recorded forever in the blockchain and can be traced quite easily. Most users buy bitcoin from a service or brokerage that has their name and address on record. When those bitcoin are used for a transaction, and then another all owners can be traced back to the first purchaser whose identity is linked. An analyst can even trace the history further, back to the origin of the coin when first mined and added to the blockchain.

So what is one to do if truly anonymous bitcoins are wanted? You could mine them yourself using a home miner or purchase in person using cash. The other option is to use a mixing service to substitute bitcoin owned by someone else for yours, breaking the transaction trail left in the blockchain. Once bitcoin are properly mixed and verifed your identity will no longer be attached to the coin.

How to find a mixing service? Most services will add their address to the Bitcoin Wiki but as anyone can edit the wiki you should search out user reviews before choosing a mixing service to trust. Mixing services are anonymous and a rogue service could easily steal your bitcoin.

A good mixing service will always operate on the Tor network, so you will need to download and install the Tor Browser from the Tor Project. You can always recognize a Tor address by the distinctive .onion ending.

Once you have installed Tor Browser you can anonymously surf the internet including the darknet. What you need to do is look for popular user forums on Tor to judge the reliability of a mixing service. The Tor Project maintains a page dedicated to helping new users find websites on Tor, and a popular forum on Tor to start your search could be The Hub at thehub7gqe43miyc.onion

Browsing The Hub helped us to locate the following mixing services with good reviews (Tor Browser needed to view links.)

Expect to pay a fee of 1% to 3% to the mixing service. If you decide to use a mixing service start with a small transaction until you are comfortable. It is also good practice to keep your mixed coins in a separate wallet on your computer only used for that purpose. Don’t publicly disclose any address in your bitcoin wallet, or associate any address with your true identity. If you deposit your anonymous coins to a wallet with coins that have been linked to your identity the change addresses will “taint” your clean mixed bitcoin.

Taint is a measure of how likely it is that two addresses are owned by the same person. You can measure taint using the tool athttps://blockchain.info/taint/1dice6GV5Rz2iaifPvX7RMjfhaNPC8SXH (replace the default bitcoin address at the end of the link with the local wallet address where your mixed coins are stored.) Inspect the results and look for the original sending address of the bitcoin you sent to the mixing service. A proper mixing service should return bitcoins to you with zero percent taint.

Another option that has gained in popularity is to convert your bitcoin into an altcoin like Litecoin at an exchange like BTC-e which permits anonymous registration, transfer to a different exchange like Cryptsy then convert back to bitcoin and withdraw.

For readers who are most interested in bitcoin anonymity please see my book review of Anonymous Bitcoin by Kristov Atlas.