Fun With Bitcoin For Beginners: Part Eight

This article will look at securing and making Bitcoin (BTC) transactions more private.  There is some built in privacy even though all BTC transactions are recorded on the Blockchain (and so some of that information is available to anyone who is interested enough to look).

This article is in the same spirit as those about gold in that everyone who can should have some assets that are not easy to grab...  Even though BTC are not "off the grid" in one important sense (that BTC is very hard to use without the Internet), it is a place to put money (value) that is properly done is secure and reasonably private.

The two topics I will examine are using a computer not easily linked to you as well as other techniques using BTC itself to better conceal your ownership.

A pair of topics I will not address here are TOR and email encryption, these are both topics beyond my scope (at least for now).  Rumors also abound that TOR is not as secure as believed (that NSA has cracked TOR for example), I am not in a position to offer an opinion on that.

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I read some months ago that buying a used laptop (at an anonymous place like a pawnshop for example) and then using the wifi at places you typically do not go is an effective tool to provide some privacy.

So, I went and bought a used laptop ($190 (included sales tax, paid cash) plus a $40 program I will use to clean up the garbage left on the hard disc).  That $190 included very little software, but I do not plan to use the laptop for my blogging nor data analysis uses...  I did not have to show any ID when I bought the laptop, nor did I get a receipt.  And of course I will not be downloading any nosy software...

What I have done with it so far is to establish another email account (only to be accessed with that laptop) as well as opening another BTC wallet.  There are two easy ways to set up BTC wallets:

1) via MultiBit (see: http://robertmixblog.blogspot.com/2013_12_01_archive.html)

2) via blockchain.info:

    a)  https://blockchain.info/
    b)  click on "wallet" (faint gray button at top): https://blockchain.info/wallet
    c)  start a new wallet (follow the easy directions: https://blockchain.info/wallet/new

Either will work fine with a "new used" laptop.  Both are easy to use.

Once you have a new wallet, NO ONE will know about it!  That's the beauty of using a laptop that no one knows about.  Then you find a way to get BTC into your wallet, preferably quietly...

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Recall that one way to get BTC to a new wallet is to send some from another wallet that you own.  If you are going to bother trying to keep your BTC transactions from easy inspections (meaning that only relatively skilled and determined opponents would be able to see what you are doing) then there are two techniques that I have identified that will shield you to a degree:

1)  Mixing services (discussed at: http://robertmixblog.blogspot.com/2014/05/fun-with-bitcoin-for-beginners-part-six.html)  <-- Note that the link has a mistake in the title, this article is indeed "Part Seven" even though the link says "-part-six.").

2)  Use a "daisy chain" of wallets that will at least slow down and hounds on the trail.

I will now write about point 2 with a look at an example of a large and somewhat lengthy and complex set of transactions.  Complexity and length are likely to be your friends here!

Here is a hash code of a recent transaction (July 7) for about $135,700:

f85f743ed49d799f440061db8894f430bcf459aeb5290e49e96098a51cf40c12

Click that hash code into the search box at blockchain.info, and you will get this, *click* on image for a better view:

Now click on the "donor wallet" (sending wallet), 15NC2synrqTNymM4gbY85PWxq6Fcj87PKK.

Then keep clicking back on each donor wallet before that, and so on.  After clicking back through some 45 wallets (!), you will see various transactions along the way, each one sending a large amount and typically see many smaller amounts sent along, here is an example "along the way back":

Note that these transactions (all +/- 45 of them) all took place in just a few days (July 5 - 7).  Note that the two above transactions were about 30 minutes apart.  To keep "clicking back", click on the "donor wallet" each time.  You will get many pages of pairs of transactions just like immediately above.

I used the above set of transactions as an example of how to obscure a trail, I have no idea who this is, but here is what you get when you keep going back in time, have a look at the interesting transactions "at the end":

and

That last wallet (wallet ID starting with "16R14EH...") is involved in over 10 pages of transactions at the end, including the one just above for over $1,000,000.

So what?  Well, I am going to guess that the owner of those BTC owns all of the wallets, but imagine the work it would take someone to work through all of that.  Yes, the BTC wallet IDs are there, but to track down the origin and trail of the BTC "seems like" would be rather hard...

Now imagine combining the above technique (perhaps even harden it further by using only any wallet only ONCE) along with the BTC mixing services described in my Part Seven.

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There are apparently other ways to "mix" your BTC.  Some of the exchanges allow you to send them BTC -- and then withdraw them at your leisure.  Once you get the BTC back they are already mixed.
  You would want to use an exchange that has no "Know Your Customer" ("KYC") regulations for BTC to BTC transactions (I have been told that there are one or more).  Note that all exchanges now operate under those KYC regulations if you want to receive or send CASH for BTC.

There are likely other techniques that I have not run into (beyond using the TOR network).  Many of the people involved in Bitcoin are are very bright and of a libertarian temperament.