How to buy Bitcoin and other cryptocurrencies anonymously?
Whether you’re buying Bitcoin to set aside for a rainy day or to expend immediately in a fit of passion, you shouldn’t have to broadcast your intentions to the world. Here’s how to obtain Bitcoin and other cryptocurrencies without forsaking your anonymity.
Looking to buy Bitcoin anonymously? This guide covers most of the available options including basic and advanced methods to buy and use Bitcoin and other coins anonymously.
In order to remain anonymous on the Internet, you need to leave a minimum of information about yourself, especially financial information. After all, at any time an unscrupulous employee of a payment institution can sell your data, and that can be really devastating in terms of security of your funds. The saddest thing is that you will not be able to take the information back even if the guilty ones are found. Under these conditions, the use of cryptocurrencies may be a good solution.
You can buy Bitcoin, but it’s not as easy as it may seem at first glance: you need to go through different registrations, verification, KSS, AML, place orders and then look for a place where it can be safely stored. Trusting information about yourself to a third party is also not an option. Despite the existence of many well-known and time-tested centralized services, even they occasionally have data leaks. So how to buy Bitcoin and other cryptocurrencies anonymously?
The problems of anonymity
Control over cryptocurrencies has been increasing recently. On January 10, 2020 the Fifth Anti-Money Laundering Directive (5AMLD), which was adopted in the EU in May 2018, came into force. The directive contains requirements for mandatory verification of all customers of crypto platforms in accordance with the KYC and AML standards, according to which all users conducting transactions with cryptocurrencies must be verified.
There also appeared such companies as Chainalysis and Crystal (BitFury division), the purpose of which is to identify scammers. But the real victim of their work is the anonymity of crypto users. Imagine the situation, you have decided to sell your BTC for fiat, found on exchanger with the most favorable price, made a deal and already forgot about it. But then “your former” BTC went to some site with prohibited goods. Most of the Bitcoin addresses of such sites are known, so Chainalysis, cooperating with Binance and Bitstamp, starts looking for where the funds came from and eventually finds your account on Binance, where you, as a good citizen, have undergone the KYC procedure. So far you will not have any problems, but in the future they may appear.
OTC deal
The OTC transaction does not leave digital “traces”. This method allows you to find sellers of Bitcoin in your area, and you personally conduct the transaction at the meeting. In an ideal case you can buy cryptocurrency directly from miners you are familiar with, they always have a coin available and they need funds to pay for operating costs. This way you will get “clean” bitcoins. However, there are risks in this way — scammers are always active and you need to be extremely careful, always choose a trusted seller. Wait at least 1–3 times for network confirmation in a transaction and only then transfer the money, make the transaction in a safe place, etc. In general, this is not very convenient, and in the era of digital economy such deals look a little strange.
P2P exchange
Another method is P2P exchangers, most of them you can find at LocalBitcoins. You can choose an option with a suitable rate and make an exchange. This is a quick way to exchange digital money for fiat and vice versa. LocalBitcoins has merchants from more than 10 000 cities around the world, so it’s a good chance to find someone close to you. All you need to do to get started on this exchange is register by entering your email address and user name.
Be sure to review the seller’s feedback before agreeing to a deal. It is easy to deal with those who have positive reviews. People who have little or no feedback should be treated with caution. There have been cases where buyers have been trapped by authorities. This has happened in countries where cryptocurrency trading is prohibited or requires a license.
It is necessary to remember that in this case there is a possibility of cancelling the bank transfer, so there is a risk of losing your bitcoins or altcoins. Therefore, it is better to use services with escrow accounts (they hold funds until the transaction is completed).
Decentralized exchanges
You can also use decentralized exchanges (like Bisq for example), where you can make Bitcoin/fiat transactions without any third party that controls or stores information about users’ funds. To trade on Bisq, you do not even need the exchange’s website; instead, you run Bisq decentralized software.
Each Bisq client consists of two components — a P2P network, which transmits information about bids between bidders (via Tor) and Bitcoin wallet, which is connected to Tor.
When you buy cryptocurrency through Bisq, you first need to find a vendor that supports your payment method. The money is sent directly from you to the seller. However, this platform is not suitable for beginners because Bisq requires a security deposit (in bitcoins).
Regular crypto exchanges
Most cryptocurrency exchanges follow the rules of KYC procedure (Know Your Customers) — a method of collecting personal data about users. By studying the information obtained, platform representatives can pursue those who use funds for illegal activities. But no matter how important it is, people are sceptical about the prospect of disclosing their identity on the Internet. The reason is that some platforms have already used the collected data for personal benefit without the user’s consent.
Fortunately, even among large trading platforms, there are those that do not require KYC for relatively small trades, that is, you can still buy cryptocurrency anonymously with them.
Binance
Today Binance ranks first among all exchanges by trading volume. The platform was created in 2017 by CEO Changpen Zhao. Initially, the exchange was based in China, but after some time was forced to move to Malta due to pressure from the Chinese government.
Binance provides a choice of over 500 trading pairs. Traders who own the native token Binance Coin are given a fee discount. The platform does not require KYC for those who trade in relatively small amounts. Without performing the identification procedure, the withdrawal limit is set at 2 BTC per day. But in order to participate in IEOs, which take place on Binance Launchpad, you still have to download your selfies with documents.
Kucoin
One more option for those who value their privacy. Kucoin gives a choice of more than 450 trading pairs. The KYC procedure is not required to pass, if you want to just trade a small number of altcoins. For unverified accounts there is a restriction — you can withdraw only up to two bitcoins per day. After verification, the limit rises to 100 BTC for individual accounts and 500 BTC for institutional accounts.
Bitfinex
In the case of Bitfinex, the limit for those who have not yet passed the KYC is much more pleasant — in one day you can withdraw up to 10 BTC. For verified users, the available amount of cryptocurrency for the withdrawal process is significantly higher. In addition, they are given a discount on fees when performing trade deals.
BitMEX
BitMEX is one of the largest trading platforms for crypto derivatives. It is the most popular place for Bitcoin margin trading. The exchange was founded in 2014 and is registered in the Seychelles.
BitMEX has no identity verification procedure at all. If the rules of use are violated, the platform bans traders by their IP addresses.
Livecoin
This exchange has not too strict requirements for identity verification. Without KYC you can make a deposit and trade all available pairs. However, account deposits via bank transfer is only available to those who have confirmed their identity.
Mycelium
Mycelium Bitcoin Wallet has a special tab where you can find people who make cash transactions. There used to be quite a lot of activity here. Even now Mycelium has active sellers and buyers of cryptocurrency.
The best cryptocurrency for anonymous use
Bitcoin was created for anonymous use. But currently there is no one-stop solution for it to ensure complete anonymity. There are various tools and systems that can significantly improve it. However, these technologies are in constant development.
There is also one perfect project for those, who want to accumulate their capital with highest level of privacy — Monero. If you manage to buy it safely using one of the methods described above, your transactions with this altcoin will be untraceable.
This coin was made based on CryptoNote encryption protocol, focused on increased transaction confidentiality. CryptoNote protocol is based on ring signatures and stealth addresses.
A ring signature is a type of digital signature in which a group of possible “signatures” are combined together to form a clear signature that allows to authorize a transaction. Ring signatures are used to hide real transaction inputs in such a way that it is impossible to say what the history of each output of this transaction in a chain of blocks is. Ring signatures are applied to each input of any transaction. The sender randomly selects other outputs with the same amount from the blockchain and signs them with his private key. The sender does not need any confirmation from the owners of other outputs.
A Stealth address is a public address that you can give to anyone without letting the observers know anything about the history of transactions or the balance of that address. The Monero address system uses two private keys: viewkey and spendkey, which are encoded in the Stealth address.
The private key for spending works like a similar private key in Bitcoin — it is used to sign transactions. View keys are used to find incoming payments in the blockchain. Only if you have access to the view key can you know the exact output of the transaction associated with your Monero address.
But Monero has a pitfall — a human factor. If you use the Stealth address in several places, they can be linked to each other, that is, if you withdrew funds from the exchange, and then decided to accept donations to this address, the withdrawal is requested by itself. For this reason, it is recommended to use the technique of “one-time addresses” for each of the services.
Conclusion
Although it is difficult to achieve complete confidentiality when working with Bitcoin, it is worth noting that there is no other digital asset of such scale in the world that can be kept in simple digital storage and moved freely between countries without the risk of confiscation by the government. Only this kind of financial freedom is worth fighting for.
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