“Aren’t cryptocurrencies anonymous by default?” I’m sorry to be the one telling this to you, but Bitcoin is not anonymous. At least, not by default. Bitcoin is known as an immutable ledger, a leger that is publicly available and keeps a record of every single transaction that happens on the network. It’s true that anybody can transact Bitcoin, but it’s also true that anyone can see all of those Bitcoin transactions.
You could say that there’s no way for Bitcoin to be anonymous if this is the case. Well, transactions are broadcasted via a Bitcoin address, and while the addresses are publicly available when a transaction takes place, you need to link the person to its address first in order to know its financial history.
Today I’m going to explain how you can make sure that your identity won’t be tied to your address while purchasing Bitcoin (or any other cryptocurrency).
To be clear, this guide won’t tell you how to pursue any criminal or illicit activities. I’m trying to help those who value their privacy, are concerned about hacks, or don’t want anyone to know they are purchasing cryptocurrencies.
Getting a Bitcoin address is easy. You just need to choose a Bitcoin wallet out of the available choices, set it up on your computer or mobile device, then you’re ready to go. You’ll get a unique address where you can receive any amount of BTC.
However, acquiring BTC anonymously is the bigger issue. Most online solutions that are offering this service (i.e. cryptocurrency exchanges) will require you to identify yourself first due to the KYC (Know Your Customer) and AML (Anti-Money Laundering) legislation. This is industry terminology enforced on companies dealing with finance and money to make sure that illicit funds aren’t transformed into cryptocurrency.
You’ll have to give up your ID, name, address, etc. before buying Bitcoin for the company you are buying from to link your personal information to the address where you are receiving your BTC. Which is exactly what you’re trying to avoid!
That being said, cryptocurrency exchanges and other services that will appear on a quick Google search are not an option if you’re trying to buy Bitcoin anonymously.
Regardless of where you choose to purchase Bitcoins, you’ll need a Bitcoin wallet to store your coins, and if this wallet doesn’t include privacy features all the hustle of acquiring BTC anonymously could be for nothing. Finding the best wallet doubles your research time. Unless you can exchange coins directly into your private wallet.
Incognito is a cryptocurrency wallet where you can directly access DeFi platforms like Kyber and swap coins across blockchains. It all happens within the wallet, without losing custody of your coins. Imagine exchanging Bitcoin to Monero with the click of a button.
Storing your funds in Incognito assures you that your coins are safe at all times, before, during, and after the exchange as the trade happens in a decentralized way. But the most important question is: how do you maintain your anonymity while transacting your newly acquired coins?
Incognito offers privacy in transactions for all the supported currencies: Bitcoin (as this is our main focus here) as well as Ethereum, USDT, BNB, and any ERC20 tokens, such as YFI, SWAP, or COMP. You never lose the ownership of your own keys and you sign your transactions locally like other non-custodial wallets. Now let’s understand how the privacy features work.
At the user level, sending an anonymized transaction is no different from a simple transaction. It’s how Incognito handles this transaction that makes the magic happen. The wallet uses zero-knowledge proof technology to obfuscate your transactions as well as your financial history. It’s the same technology used by Zcash and other privacy-oriented coins. Incognito took the best part of it, optimized it for mobile devices, and combined it with other technologies such as ring signatures and stealth addresses also used by Monero in order to achieve full privacy. As of today, there are no proven ways to track transactions coming from this wallet.
If you already have a cryptocurrency wallet and don’t want to make the switch, you can deal with a DEX (decentralized exchange) by yourself. A DEX lets you connect your wallet and trade directly with another user’s wallet using smart contracts as an intermediary.
In addition, Bisq is a peer-to-peer marketplace where you can trade Bitcoin and other coins anonymously. There are many other similar platforms but Bisq has the biggest trading volume out of them due to its popularity among cryptocurrency traders.
Most of BIsq’s users are traders trying to make a profit out of price swings. Anyway, this doesn’t affect you in your goal of buying bitcoins in a private way. Actually, the presence of traders adds liquidity to the platform. While on other marketplaces you might have to wait hours or even days for a buy order to execute, on Bisq the most popular markets solve orders in minutes or even seconds.
Bisq is an open-source platform, which makes it trustworthy. There’s no registration required; you only need to have a cryptocurrency wallet set up on your device. The platform doesn’t hold fiat currency or cryptocurrency at any time, the funds are being transferred directly from one wallet to another. There are many payment methods available right now (Zelle, MoneyGram, ChasePay etc.), and depending on the chosen method your trading peer will be the only one who will have access to your personal information.
The peer-to-peer method comes with its own risks. The best way to mitigate your risks is to make good use of the in-app tools, such as invoking a mediator or an arbitrator to assist you in the transaction. It’s also worth mentioning that, as a new user you will be limited to buying only small amounts of currency until a vetted peer will sign you as a trusted trader.
If you don’t mind limits and you are looking to buy only small amounts of Bitcoin, there are plenty of platforms where you can buy cryptocurrency using a gift card or send an SMS. Depending on your country of residence you can choose one of the following options.
For UK residents, there are Instacoins where you can buy a maximum of £50 per day without providing an ID.
Coinmama allows buyers to pay with gift cards without needing a registration process. The maximum amount you can buy is $150 worth of BTC. Coinmama is only available in a select number of regions; you can view the full list on their website.
Wall of Coins is a global peer-to-peer exchange, so the actual trading is happening directly between the users. The way it differs from Bisq is that it uses SMS text codes to facilitate purchases. In this case, it’s a good idea to use a phone number that is not linked to your identity.
Another peer-to-peer place where you can find someone who is willing to sell Bitcoins for cash or a bank deposit is Paxful. On this platform, the verification process is optional, so you can stay anonymous while still using the platform’s feature. You can buy Bitcoin up to $1,500 without providing any documentation. Anyway, by not having the ID verification badge attached to your profile you might look sketchy in the eyes of most sellers. It’s up to you to convince them that you’re not a scammer.
These kinds of platforms are good for first-timers, but if you are in cryptocurrency for the long run you might want to invest more than a couple of bucks. In which case, these limits, even if they are daily limits or as high as $1,000, could stop you from buying Bitcoin at the best possible price. Cryptocurrency traders know that buying opportunities stay open only for a couple of hours, or a day at maximum.
If you don’t want to reveal your identity while buying Bitcoin, these are plenty of platforms that come with less risk. I preferred not to mention any online places that are providing no escrow services, as those websites are no different than a forum or a Facebook group and the risk of being scammed is much higher.
Out of these platforms, however, Incognito is the most robust solution, taking on the roles of both an exchange and a wallet without imposing any limits. Bisq can be a good option if you are tech-savvy enough to handle the wallet setup on your side. It comes with some limits in the beginning but in time you can lift them off. Coinmama, Instacoins, Paxful, they are all easy to use and, if the limits are not a problem to you, they could be a good start. However, to start using any of these platforms you’ll still need to set up your own cryptocurrency wallet which brings you back to the first problem; it’s up to you to decide which option is best for you.