Before we ask “is it possible” we should ask “if we should”. It’s certainly no secret that Bitcoin is one of the few ways for people to transact “off the grid”, something that used to be possible only with cash. So is it possible to buy Bitcoin anonymously? Let’s dive in and find out.
Bitcoin was originally created as a decentralized peer-to-peer currency, a system of finance that would be out of the reach of banks, destroy the walls preventing global finance, and circumvent the established order of currency controls.
It provided the method with which an entire financial system could be built outside of the central banking, government-controlled currency system, and monetary policies that came along with that.
How Is Bitcoin “Anonymous”?
Throughout the ten years of Bitcoin’s existence, this promise has expanded to include various capabilities beyond what Bitcoin originally offered. The accountless nature of Bitcoin meant that users could technically use it anonymously, as no personal identification was required to be attached to a Bitcoin wallet during its creation.
If you wanted to purchase Bitcoin from somebody else without involving regulators and banks, you could theoretically do so.
However, this anonymous veil has slowly been taken apart. During the early years of Bitcoin, the anonymous nature of the currency meant that criminals would often turn to it as a means of transporting funds cross-borders or for money laundering on the darknet.
The most prolific being the success of the online black market known as Silk Road, which was shut down by the FBI in 2013 for facilitating illegal drug trades. The Bitcoin seized in the closure and raid of the website (144,332 Bitcoins) was sold for a hefty $48 million, but would be worth over $1.7 billion dollars today.
Traceability Of The Blockchain
However, the anonymity of Bitcoin and cryptocurrencies is actually not entirely true. Every Bitcoin movement can be traced backwards to its original day of being mined; this extends to even fractional amounts of it.
The traceability means that transactions can be traced back to a lead or source showing from where the Bitcoin would have originated from; this could be a known transaction between two known individuals in real life. Subsequently, digital forensics would be able to determine the movement of the Bitcoin.
In order for full anonymity, cryptocurrencies would need to implement privacy-centric features, as in specific cryptocurrencies built for full anonymity.
The most well known would be Monero, which uses ring signatures and stealth addresses to hide the identities of the sender and the receiver, making it nearly impossible to trace transactions back to their source.
Most Legitimate Bitcoin Sources Will Require Your Identity
Regardless of whether you are looking to use Bitcoin anonymously, the most accessible way to purchase Bitcoin requires you to register and purchase it through an exchange.
Exchanges are typically regulated service providers that operate in jurisdictions requiring them to perform “Know Your Customer” processes. This process helps them to identify and stop money laundering, terrorist financing and fraud, and is the primary deterrent against criminal activity on the blockchain.
If you are intending to purchase Bitcoin, chances are, the safest and best way for you to do so would be to go through one of these exchanges, as they often come with safeguards and protections in place.
Are There Ways To Purchase Bitcoin Outside Of Exchanges, Anonymously?
Bitcoin purchased outside of exchanges through peer to peer methods is definitely an option; however, there are risks involved and plenty of things to note.
The Bitcoin you are purchasing may be “dirty”
When Bitcoin is stolen in high-profile hacks, often the associated Bitcoin that comes out of these incidents are “blacklisted” and traced by vigilante organizations. Transactions associated with the originator wallets and the subsequent recipients are painted with a tainted light as well. Purchasing Bitcoin in a peer to peer transaction especially in large volumes may leave the buyer at risk of being left holding some of these incriminating Bitcoins.
The transaction may be fraudulent
Bitcoin that is purchased in a peer to peer transaction has no safeguards in place; if you are cheated of your money through whatever means, there will be no one to help you get back your money.
It is still not truly anonymous
No matter how you try to mask your identity, Bitcoin can be digitally traced, as it was never intended to be fully anonymous in nature.
Ways You Can Buy Bitcoin Without Directly Revealing Your Identity
We hope you’re not reading this article because you’re looking to do bad things! Although Bitcoin cannot be truly and totally anonymous, sometimes people just like to have the pseudo-anonymity associated with it, as they may not want others to see or know that they are purchasing Bitcoin (for instance, if you’re a famous person purchasing Bitcoin, people might associate it as support for cryptocurrency and it may affect your stock price unintentionally).
We’re more than happy to share some of the potential ways you can purchase Bitcoin without having to give up your identity:
Purchasing in small amounts
On many exchanges you can buy a fraction of a Bitcoin, or small amounts, without having to go through a KYC process. The amount varies from exchange to exchange, but is typically up to a thousand dollars. Check the FAQs of the exchange you are buying to find out more.
Using Bitcoin ATMs
Although most Bitcoin ATMs are no longer fully anonymous (they may require you to submit some form of identification, such as phone number and a picture). There are still ATM services out there that support purchasing and transacting Bitcoin without needing to know your identity. Check ATM maps such as Coin ATM Radar to see if there are any near you!
Use a coin tumbler
If you’re using a throwaway wallet and want to mask the wallet your coins go to, you can put your cryptocurrency in a “tumbler”, which mixes cryptocurrency tokens to obscure their origin. The drawback with tumblers is that they are often associated with illegal activity, and could actually result in the received Bitcoins or coins being “blacklisted” in the process of tumbling.
Learn More About Bitcoin And Cryptocurrencies With Oobit
Oobit is a financial service that makes buying and selling digital currency easy, simple and lets you use crypto with the same ease as traditional money. We connect and introduce what would be an endless maze of information surrounding blockchains, and build tools that enhance the crypto user experience.
So, is it possible to buy Bitcoin anonymously? Possibly, but it’s always a better option to go through a reputable exchange. Oobit believes the digital currency world should be user-friendly, simple to operate and instant for anyone. Find out more at oobit.com and buy your first Bitcoin today!