Bitcoin is far more than a mere economic asset, a store of value, or a currency. It is a promise. Not just a promise of a potential for great return on investment, though that is part of it. Bitcoin is a promise of a new kind of society, a new form of governance, and a new state model. And it all starts when we buy bitcoin anonymously.
(NOTE: If you’re only interested in the practical part of this post, feel free to skip to the corresponding subtitle.)
Bitcoin carries the potential to become ownerless money, value without the interference of not-so-hidden interests, giving us the autonomy and freedom not to submit to all sorts of abusive impositions, political persecutions or to move freely with what we have earned with so much effort. This, in turn, will transform the state as we know it. And worse, the state as it is heading towards.
Because we are heading towards a state that will control us through digital currency, and it will decide what, when, and how much we can spend our capital on. We are not too far from a future where technologically imposed spending limits on certain products or services, supposedly for our good, may become a reality.
This is not a future that appeals to me. And no, I’m not an anarchist.
“If the State falls, it will be necessary to build new political forms, not to abandon oneself to anarchy, for government is indeed eternal, and men require guidance toward virtue. (…) That’s why I consider the task of thinking about new political forms fundamental and not to abandon oneself to anarchy or individualism.”Álvaro D. María, The philosophy of bitcoin.
The objective of this post is not to delve into the overwhelming power of Bitcoin to transform our world, despite it being a fascinating topic. If you’re interested in getting started, I recommend reading The Philosophy of Bitcoin by Alvaro D. María, and The Bitcoin Standard by Saifedean Ammous.
What is the objective of this post, however, is for you to understand that a significant part of Bitcoin’s potential lies in buying, owning, and using it anonymously. Whether your motivation is to escape from abusive governments, or to support the development of a freer, less intermediated, and less surveilled society, you should buy and handle bitcoin anonymously.
“…allowing a sovereign to control money can only lead to increased control over everyone’s life and that human civilization itself depends on this integrity of money that provides a solid basis for trade and capital accumulation”Saifedean Ammous, The Bitcoin Standard.
KYC and AML Are On Your Tail: they don’t want you to buy bitcoin anonymously
Whether you’re just starting to show interest in Bitcoin or have been involved for a while, chances are that your first purchases are planned to be or already made on renowned exchanges like Binance, Kraken, Bit2Me, or Coinbase.
These platforms are all being compelled to apply KYC and AML procedures.
KYC and AML stand for Know Your Client and Anti Money Laundering, respectively. These are the set of practices that such companies are being forced to implement to verify the identity of their clients. Officially, the goal is to gather relevant information and prevent money laundering stemming from illicit activities. Unofficially, the objective is to keep you under control and ensure there isn’t a penny that they don’t monitor.
In other words, any cryptocurrency you’ve acquired on an exchange were reported to the government. This isn’t inherently an issue, but in addition to the concerns laid out earlier, no one knows how states will respond to the threat that cryptocurrencies, especially Bitcoin, pose to them. We can’t be sure that they won’t ban, persecute, seize… Perhaps later you’d prefer no one knew you had them.
Keep in mind, none of this prevents or is incompatible with paying your taxes when you sell them, just as you would with any other asset like a fund or publicly traded stocks. I’m not giving advice to elude your legal responsibilities, but stating that it is not contrary to do it in the most private way possible.
Let’s now look at how to maintain your anonymity up until the moment of selling. We have two situations:
- How to buy Bitcoin anonymously
- How to anonymize Bitcoin already purchased.
Before we move on, a small clarification is in order.
Bitcoin is not Anonymous; it’s Pseudonymous
Contrary to popular belief, Bitcoin is not anonymous. In reality, Bitcoin is pseudonymous, not anonymous. That is, all transactions identify the buyer and the seller, albeit in a cryptographical and indecipherable manner… unless we give ourselves away through our actions.
In this respect, fiat money still has a slight advantage in that it requires little effort on our part to keep others (excluding our bank and the state, of course) from knowing our financial standing.
Traditional banking services provide a certain level of privacy by default. Your in-laws don’t see that you’re buying contraceptives that deprive them of grandchildren, your employer doesn’t find out about the charities you support with your salary, and thieves don’t know your latest purchases or how much money you have to exploit and scam you. The lack of privacy in Bitcoin can be a major practical drawback for both individuals and businesses.”Source.
With Bitcoin, we still need to tread carefully if we don’t want to lose our privacy and anonymity.
Even though the identifier is a series of numbers and letters with little connection to us, it’s surprisingly easy to take actions that reveal our identity. There are also methods for analyzing transactions and logically deducing who might be behind a Bitcoin address, tracing transactions, and some companies are making millions off this.
It’s a fascinating topic that I encourage you to research, but for now, bear in mind that if you aren’t careful, you can easily reveal your identity.
Now let’s see how to…
How to Buy Bitcoin Anonymously
Fortunately, exchanges aren’t the only game in town.
In the Bitcoin network, it’s not mandatory for users to share their personal data to make transfers. Some private platforms may require such documentation due to government pressures. Nevertheless, alternative methods and platforms exist where you can buy and sell Bitcoin (BTC) without getting tangled up in KYC policies.
Two main routes exist:
- Private social network groups (Telegram, Facebook, etc). Old school barter style, you chat with someone, agree on the details, and make the transaction. In my view, this approach carries unnecessary risks.
- P2P platforms. Several exist, each with their unique characteristics. The most known include:
In my view, the second path is safer as each platform provides a degree of guarantee to minimize the odds of getting scammed, which is better than anything you can individually arrange.
Bisq works with deposits that serve as a guarantee in case something goes awry. This system discourages foul play, as the first thing to happen in such a case would be losing your deposit. This deposit requirement, however, disqualifies Bisq as a place for your first purchase, as the deposit must be made in Bitcoin.
Hodl Hodl operates an escrow system differently. The seller’s Bitcoins are held in a blockchain escrow until the buyer pays, upon which Hodl Hodl releases them.
In theory, Bisq is the most anonymous and reliable platform because it’s a pure peer-to-peer network, akin to BitTorrent. There’s no centralized entity controlling servers and, hence, the information. Hodl Hodl, on the other hand, remains a solid choice as long as it withstands pressure and isn’t forced to give in like Ledger, a fallen legend succumbing to pressure and ends up incorporating KYC on the back end.
I’m not familiar with LocalBitcoins, so I can’t provide detailed insights there.
Some tips for using P2P platforms to buy Bitcoin:
- Always use a different wallet address for each transaction. This way, you kill two birds with one stone: you minimize the chances of being identified with those addresses, and if one gets compromised, the others remain safe.
- On these platforms, you can choose the fiat payment method for your transaction. It could be a SEPA transfer, Revolut, Halcash, Bizum, in-person meetup, or anything you agree on with the other party. No method is 100% anonymous. Some require your bank details, others your phone number. However, it’s better for a random individual to have one piece of your data per transaction than every move being recorded in minute detail. Halcash seems best, with data shared via 0bin.net, ensuring no permanent record exists.
- Check the Bitcoin transaction fees at the time of purchase if you’re in a hurry. On Mempool.Space, you can see what miners are charging to record transactions and, if you want it ASAP, set a fee to ensure speedy reception. I wasn’t in a hurry, but I waited almost three weeks to receive a transaction due to the massive fee increase caused by the ordinals “mess”. I was a bit unsettled, but it eventually came through. In such a case, Hodl Hodl is a guarantee, because if the transaction had been purged, the coins would have gone back to the escrow address.
How to Anonymize Bitcoin You’ve Already Purchased with KYC
Bitcoin is often touted as a tool for privacy, but the only privacy Bitcoin offers stems from pseudonymous addresses as we’ve discussed before. These addresses are fragile and can easily be compromised through reuse, ‘taint’ analysis (tracking), payment tracking, IP address monitoring, web scraping, and many other mechanisms.
So, if you have previously failed to buy bitcoin anonymously, what can you do now?
The method for this is what’s called “Mixing”, Mixcoin, or Coinjoin.
CoinJoin is a mixing transaction method used to enhance privacy in Bitcoin transactions. CoinJoin allows multiple participants to combine their transactions into one joint transaction, making tracking more challenging and making it harder to link specific addresses with individual transactions.
Conceptually, it’s straightforward: Instead of having two parties in a transaction, many people join together to make the same transaction. So, when there are many addresses with bitcoin inputs and even more addresses with outputs (since everyone receives different amounts in different addresses – if the same amount goes in and out, it would be easier to deduce that despite the address change, it must be you because of the amount), it becomes much more difficult to know who has received what.
Coinjoin service providers take a small fee for this service. In my opinion, it’s worth it. There’s some debate about what level of anonymity is needed to be safe from being tracked, but it seems that from level 50 of Anonymity Score, on the Wasabi Wallet scale, it’s secure enough for average use. You’ll see the level on the wallet they provide.
Okay, Sergio, all clear. But how does one perform a CoinJoin? Well, it is actually very easy. Just need to use a wallet that includes this service. For instance, the following:
I’m sure there are others, but these are the ones I’m familiar with.
Its your choice to be a part of the change
In the vast universe of digital currency, bitcoin stands as an emblem of transformative potential. It invites us to envision not just a different way of managing money, but a more anonymous, less mediated, and less watched society. However, the path towards truly anonymous transactions may be filled with challenges. To buy bitcoin anonymously is the first step on that path.
But remember, it’s not just about making the anonymous purchase; it’s also about preserving that anonymity. CoinJoin is a powerful tool, allowing us to muddle the traceability of transactions. However, like all tools, it’s only as effective as our willingness to use it. The path to true privacy is not a one-time journey, but a continual practice of vigilance and adaptation. The options are out there waiting for us to step forward.
In essence, the question isn’t whether Bitcoin can transform our world, but whether we’re ready to participate fully in that transformation. It’s not only about the “what” of buying and anonymizing Bitcoin, but also about the “why” behind our actions. The potential is enormous, and the responsibility is ours to wield it. So, let’s start this journey together, not driven by fear, but by the exhilarating promise of a freer and more private world.