GUIDE

Buying Bitcoins to pay for VPN anonymously, a step by step guide. Part 4, Bitcoin mixers (optional)

To jump to Part 1 of this step by step guide to buying Bitcoins to pay for VPN anonymously, please click here.

So far in this series we have looked at how to buy Bitcoins as anonymously as possible, and we now have Bitcoins that should in no way be connected with us personally (and we have further obfuscated our trail by moving them from one wallet to another).

This next step is therefore entirely optional, simply increasing the anonymity of your Bitcoins. We are, of course, going to use our Bitcoins for perfectly legal purposes, so this stage may be considered overkill, but we do feel that Bitcoins should be mixed on principle, as for them to work as an anonymous currency, maximum obfuscation is desirable.

What is a Bitcoin mixer?

A Bitcoin mixer, also known as a Bitcoin laundry or Bitcoin tumbler, is a service that breaks the link between you and your Bitcoins, mixing your funds with others so the trail back to you is confused.

Depending on the exact method used, while Bitcoin mixing may not guarantee 100 percent anonymity in the face of a highly determined and powerful adversary (such as the NSA), it does provide a very high level of anonymity, and it would be a very arduous task for anybody (including the NSA) to link you with properly mixed coins.

Choosing a mixing method

There are a number of well known mixing services, with Blockchain.info’s ‘Send Shared‘service being by far the largest and most well known, although Bitcoin Laundry and The Bitcoin Laundry are also popular. These services are easy to use and are highly effective, but fact that they have been used shows up clearly in a coins’ blockchain. In addition to this, because these services are well known, they are almost certainly being monitored, and possibly backdoored by the likes of the NSA or GHCQ.

Mixing coins more than once, especially using different mixing services, will go a long towards addressing these problems, but if you are truly paranoid they should be avoided altogether. The flipside however, is that the larger a mixer service (i.e. the more users it has to exchange Bitcoins with), the more effective it is. In general though, using lesser known mixer services will almost certainly improve anonymity, but there is no guarantee they will not simply run away with your money.

Other options include using a service such as LocalBitcoins.com to arrange an in-person meetup, where you exchange coins face-to-face, or simply opening a wallet with a large Bitcoin company not particularly known for Bitcoin mixing (i.e. not Blockchain.info), or for its draconian identity check and Bitcoin analysis practices (i.e. not Mt. Gox), moving your money there, and letting it rest for a couple of hours before transferring it to another wallet. An important point to remember with this last method is to take out less than you put it in, so metadata analysis will not be able to correlate to the amount withdrawn and amount deposited to follow your tracks.

For the purposes of this guide we will simply use Blockchain.info’s Send Shared service. It is easy to use, highly anonymous (with the provisos outlined above), we are pretty sure Blockchain.info won’t simply disappear with our money, and at the end of the day we are buying a VPN subscription, not drugs, guns or a hit man.

Blockchain.info’s Shared Send

Shared Send matches up your coins with another user. When a match is found, your coins are swapped, thus breaking the transaction chain from your wallet, and coins are swapped multiple times to make the chain even harder to follow. As a US company it is almost certain that Blockhain.info is being monitored, but since your wallet cannot be traced back to you as an individual, and nor can most of those you are swapping coins with, a very high level of anonymity will still be achieved.

1. We created a new wallet using the Android app Bitcoin Wallet.

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2. Then simply go to the Send Shared webpage, and enter the address you want to send your mixed Bitcoins to (in our case the Bitcoin Wallet address we just created).

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3. A temporary Bitcoin address is created for you to send your coins to. Once mixed, these will then forwarded to address provided above.  Note that there is a minimum transaction amount of 0.2 BTC, and a maximum of 250 BTC.

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In step 3 of this guide we didn’t buy enough coins for this stage, so we nipped back to LocalBitcoins.com to buy some more

4. So in our Blockchain.info wallet we send the money to temporary address specified.

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We’ll just send all our Bitcoins, but if you want avoid potential metadata analysis correlation then you should break up your transactions into smaller, randomly determined amounts

5. And about 2 minutes later the mixed money (minus the transaction fee) turns up in our Bitcoin Wallet!

 2013-10-22 10.39.35

Verifying the Bitcoins have been mixed properly

Blockchain.info allows to you verify how well mixed coins are with its Taint Analysis Tool. Note that this can be used to analyse any Bitcoin, not just those mixed using Send Shared.

1. On the main Blockchain.info page enter the destination address into the search box

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2. Click on ‘Taint Analysis’.

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3. You can now analyse the ‘taint’ i.e. the relationship between the input (sending) address and the destination address.

ta3
For the first few transactions the taint remains high…

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…but by the end of the transaction chain the taint should have completely gone

At no point should you see the input address (you can check by using your browser’s page search function).

If you send the coins to a Blockchain.info wallet then additional tools (such as a Chord diagram for a visual display of the results) are available, but we are happy with the extra anonymity afforded by moving our funds away from Blockchain.info.

Conclusion

We now have some highly anonymous Bitcoin funds, ready for the spending! Mixing them is not necessary, but given how easy it is to do using Send Shared send, it seems criminal not to. Other methods of mixing may be even more anonymous, but are generally less convenient, take longer for the transaction to clear, and may carry a greater risk of losing your funds. You pays your money…

Check out the rest of this Guide:

Part 1: An introduction

Part 2: Choosing and setting up a Bitcoin  wallet

Part 3: Buying 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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9 responses to “Buying Bitcoins to pay for VPN anonymously, a step by step guide. Part 4, Bitcoin mixers (optional)

  1. I can’t see any trader at LocalBitCoins prepared to deal in small amounts (eg a month’s subscription to a vpn etc). The only one who was, is now out of coins or no longer trading.

    1. Hi BR,

      Well, I have bought $30 of Bitcoins through LocalBitcoins without any issue, and you can always save money by buying longer VPN subscriptions anyway (or use any spare Bitcoins for something else, or save them for your next VPN purchase)…

    1. Hi Dirk,
      ‘Shared send’ can be used with any Bitcoin wallet (it just needs a Bitcoin address to send the money to). As I note in Part 2 of this guide (http://bit.ly/1Bf0jYI), Blockchain.info does have an iOS app but functionality is limited, and it is not FOSS. ‘The reason that iOS support is so limited is because Apple has refused to permit Bitcoin wallet functionality in its Store.’ I’m afraid that your best option is to use a desktop client such as MultiBit (again see Part 2 of this guide).

      TBO, if you are really concerned about online privacy, you should use Android rather than iOS (it is a very long way from perfect, but its openness does allow users to take some measures to protect their privacy.) This is a subject I discuss in quite some detail in our upcoming ‘Beginners Guide to Internet Privacy’.

  2. I count not understand how splitting the sum into random components enforces the Laundry. Cannot tracers just look at the sums entering the mixer and exiting it? If they can trace individual summands why they cannot trace them, once split into subsummands?

    1. Hi valentin,

      ‘Shared Coin is based on the CoinJoin concept which acts as a meeting point for multiple people to join together in a single transaction. Having multiple people in a transaction improves privacy by making transactions more difficult to analyse… Shared Coin can never completely sever the link between the input and destination address, there will always be a connection between them, it is just more difficult to analyse.’ (Blockchain.info’s ‘Send Shared‘service) blurb.

      Basically, Bitcoin mixing confuses the issue from anyone trying to trace the coins, and randomises who owns randomized parts of a Bitcoin. As the article points out, if someone is able to trace individual bitcoins as they come in and out of the mixer they may be able to establish the connection, but services such Blockchain.info process high volumes of exchanges (which take while to complete), making it very difficult to know from the outside which coins going in are associated which what is going out. Of course, if an adversary has ‘inside’ access, all bets are off…

      ‘The server does not need to keep any logs and transactions are only kept in memory for a short time. However if the server was compromised or under subpoena it could be force to keep logs. If this were to happen although you haven’t gained any privacy you haven’t lost any either.’

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