Buying Bitcoins to pay for VPN anonymously, a step by step guide. Part 2, choosing and setting up a wallet

This is Part 2 of our guide to buying Bitcoins to pay for VPN anonymously; to see Part 1 please see here.

To store Bitcoins, pay for things, or receive money in Bitcoins, we need to set up a Bitcoin wallet, and as with most things Bitcoin, there is an almost overwhelming number of options available.

The first thing to do is decide whether we want a mobile, web or desktop wallet, all of which have their own advantages and disadvantages,

  • Desktop wallet – the most secure option, giving you complete control over your wallet. It also means that you are solely responsible for backing up and securing your wallet
  • Mobile wallet  – very handy, as you can carry it in your pocket and use it to pay for things in stores, and exchange money in person
  • Web wallet – certainly the most convenient type of wallet as they can be accessed from just about anywhere, these are also the most insecure, as the wallet is held on a server by a third party. This means that you have to trust the website hosting your wallet not to abscond with your money, and problems with the server, or the company suddenly closing down, may result in loss of money. Pure web wallets should therefore never be used to store large amounts of money.

We decided, given that wallets are almost always free to come by, to look at a leading contender for each type.


MultiBit (Windows, OSX and Linux) is a free and open source (FOSS) desktop wallet. Its interface is a bit basic, but it provides everything you will need and is ready to use in minutes. New wallets can be created in seconds and protected with a password, and multiple wallets can be managed easily (complete with a handy chart for tracking balances). MulitBit is designed to be easy to use and supports a huge number of languages, and is therefore ideal for beginners

MultiBit 1

Other good desktop wallets include:

  • Bitcoin-QT – the original and fully featured FOSS Bitcoin client which allows full proof of work verification. This however does mean an  Initial blockchain download of over 10gb
  • Armory – which is FOSS, and provides advanced features for power users, including offline wallet capability
  • Electrum – a third party wallet application that focuses on ease of use, using remote servers to handle all the complicated stuff

Bitcoin Wallet

Bitcoin Wallet is the only truly FOSS mobile app around, and it is available for Android and Blackberry devices. Requiring no cloud server (therefore making it very secure and ‘zero trust’), Bitcoin Wallet allows you send and receive Bitcoins using NFC, QR codes or Bitcoin URLs. Because Bitcoins are stored locally on the device, if you lose your device then you lose your coins, so it is important to back them up somewhere safe. Because of this, it is strongly advised that you use Bitcoin Wallet only for small amounts of money, such as day to day purchases. One problem with Bitcoin wallet is that there is no PIN (or other) protection on the app.

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Other good mobile wallet options include:

  • Mycellium (Android) – designed for security and speed, Mycelium keeps your private keys on the device, so you keep total control over them. Unlike Bitcoin Wallet, Mycelium allows you store multiple keys, and to protect your wallet with a PIN. Although a third party application, it is free, and the source code is available on Github for scrutiny
  • – this is a hybrid web wallet that syncs to the rest of their service (which we will look at in some detail below), and is built on the open source Bitcoin Wallet code. An iOS app is also available, but does not have full Bitcoin wallet functionality
  • Coinbase – provides an app for their traditional pure web wallet. As with all such web wallets, you should never use it to store large amounts of money.

The reason that iOS support is so limited is because Apple has refused to permit Bitcoin wallet functionality in its Store.

Although nominally a ‘web wallet’, differs from more traditional web wallets in that it stores an encrypted version of your wallet online, but the encryption and decryption is performed locally (in your browser, app or client). This means that you benefit from the convenience of a web wallet, while still maintaining full control (unlike more traditional web wallets).

Because is a third party company there is a small compromise in security, but as all wallets are protected by 256-bit AES encryption and can be backed up locally (making it very difficult for your money to be stolen or lost), and because is a very large and well established company (and therefore presumably reliable), we have chosen it as our wallet of choice for the purposes of this tutorial, and will look at it in some detail. provides optional ‘two factor authentication’, requiring one password to log in to your wallet, and another before any payment can be made out of it. It also allows you back up your wallet locally for extra security.

Setting up a ‘My Wallet’

Setting up a wallet is very easy:

1. Go to and click on ‘Create My Free Wallet’ or ‘Start a New Wallet’


2. Simply choose a password. Having the link emailed to you is very handy, but could theoretically be used to link the account to you, so is best avoided if you wish to remain anonymous (unless you use a secure disposable email address). The password must be at least 10 letters and/or digits long.


3. provides a backup solution in case you forget your password, which can be used to help recover your wallet. It consists of a string of random and nonsense words.


And we now have a Bitcoin wallet. We told you it was easy! We currently have nothing in it, which is what we aim to change in Part 3 of this tutorial!

Remember that for maximum anonymity you should create a new wallet for each transaction you make (or at the very least have separate wallets for regular payments and payments you want to keep anonymous).

The Android app

One of the appeals of is that it has an Android App which allows you to securely access your encrypted web wallet.

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Pairing the device with the wallet we created above is just a matter scanning in a QR code

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We still have no money in there though!

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At least on the Blockchain app the wallet is secured with a PIN

Other web wallets include:

More traditional web wallets are inherently less secure, because you have to trust the provider with your money, and any disruption to the servers could result in the loss of your wallet (and therefore all the money it contains!) However, they are quick and easy to set up, and are  therefore ideal for moving small amounts of money around to create more steps between you and any payments you make.

  • BIPS (Bitcoin Internet Payment System) – allows you to buy and sell Bitcoins easily from many counties using its eWallet, and includes many merchant features
  • Coinbase – a web wallet that integrates well with US bank accounts, and also has lots of merchant features. It also has an Android app.


Now that we have chosen our Bitcoin Wallet, it’s time to buy some Bitcoins! Tune in to Part 3 for our step by step guide on how we did this.

Check out the rest of this Guide:

Part 1: An introduction

Part 3: Buying Bitcoins

Part 4: Mixing your Bitcoins

Part 5: Paying for VPN with Bitcoins

Douglas Crawford I am a freelance writer, technology enthusiast, and lover of life who enjoys spinning words and sharing knowledge for a living. Find me on Google+

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10 responses to “Buying Bitcoins to pay for VPN anonymously, a step by step guide. Part 2, choosing and setting up a wallet

  1. Hiya Sorry ignore my last post Douglas I read the remainder of the article which goes through buying bitcoins anonymously on

    I wanted to ask is anonymity still the same if you bought your bitoins via a bitcoin enabled ATM with cash obviously?


  2. Hi Douglas

    Great Articles!!

    You said for “maximum anonymity to make sure to, create a new wallet for every transaction made”. Can you do this from the same email account? Or have different disposable email accounts per transaction?

    Also in reply to Suzan’s post you said “buying coins with cash should be plenty anonymous enough”. How so? cant the transaction still be traced back?


    1. Hi billy

      Well, it all depends on your threat model (again!). For maximum anonymity you want to create as much distance between your real-life identity and your Bitcoins as possible, so creating each wallet with a disposable email address (signed up to using Tor) helps to obfuscate the trail. In reality though, unless you are doing something very dodgy, such measures can probably be considered overkill.

      Buying Bitcoins anonymously with cash ensures that there is no record of who owns the Bitcoin (which will then be paid into a wallet that can also not be traced back to a real-world owner (at least in theory). The actual transfer of the Bitcoins to the new wallet will, of course, be recorded in the blockchain…

      1. Hi Douglas

        To buy bitcoins anonymously with cash, you can do this through how does that work?

        1. Hi billy,

          Please see Step 3 of this tutorial. With the process for paying with cash is exactly the same as for paying via bank transfer, except that you meetup with the seller in person (I strongly suggest for your safely doing this in a very public place). You hand over the cash, and the seller transfers the Bitcoins to your wallet (via mobile app). To find sellers willing to trade in cash, filter your search results by selecting ‘Cash’ in the ‘Payment method’ dropdown menu. Most big cities have cash sellers, but if you live somewhere smaller then you may need to travel.

  3. Hi Douglas,

    Thanks for the detailed steps and all the information. It helped me alot.
    One question though:
    Isn’t it already enough anynomous if someone bought those BitCoins with cash and used the same localbitcoins wallet (a wallet which is only for vpn) to pay for the vpn service ?
    Even if someone traces those BitCoins, they can’t find anything connected to the person, right?

    1. Hi Suzan,

      Well, it all depends on your threat model, but yes, in most cases (and certainly for just purchasing VPN) buying coins with cash should be plenty anonymous enough. The additional step of mixing the Bitcoins is only for the really paranoid, or those who bought the currency using a less anonymous method.

    1. Hi valentin,

      When researching this subject that is the advice I repeatedly ran into, and it makes perfect sense to me. I would, however, be interested in hearing why you think it is nonsense.

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