How To Use Monero To Anonymize Your Bitcoin

How to Use Monero To Anonymize Your Bitcoin 

Bitcoin is not completely anonymous as many early adopters believed. All bitcoin transactions are recorded forever in the bitcoin blockchain for anyone to analyse. If you bought bitcoin from an exchange those bitcoin will almost certainly be linked to your identity due to KYC/AML laws. 

One problem that has been reported lately on reddit is that Coinbase is closing accounts when bitcoin bought from them or sent to them was used at a gambling website. While most consider internet gambling a harmless pass time it is against the Coinbase terms of service. 

Not only gambling, but you cannot use bitcoin bought from Coinbase to buy cigarettes or use at an online pharmacy. In states where medical cannabis is legal and a dispensary accepts bitcoin a sure way to get your Coinbase account closed would be to buy legal cannabis with bitcoin you purchased at Coinbase.

Coinbase is very good at what they do and while not much has been revealed about automatic screening systems they may have in place, it is clear that Coinbase is aware of the bitcoin wallet addresses of services on their prohibited list. 

So How Do I Use Bitcoin Anonymously?

I do not recommend you use the methods discussed here to evade Coinbase terms of service. You can always buy bitcoin in person using LocalBitcoins. I do however believe that people have a right to know how to use bitcoin anonymously. 

In order to do so you will have to learn how to break the transaction trail in the bitcoin blockchain so that any bitcoin you use can not be traced back to an address associated with your identity.

Bitcoin mixing services like bitmixer.io have become popular and are one way to anonymize your bitcoin. While I have not heard of bitmixer.io stealing bitcoin from anyone you do have to take that chance when you use a mixing service and trust they will return bitcoin to you.

Using exchanges to trade your bitcoin for an altcoin and back has also been recommended as a way to anonymize your bitcoin. I would like to outline another method that is simple and does not require you to open accounts at several bitcoin exchanges.

Monero To The Rescue

Monero is a popular altcoin based on the cryptonote protocol that is recognized as the most anonymous cryptocoin available at present. The method I am outlining involves selling your bitcoin for Monero, then selling Monero to receive bitcoin back that has no connection at all to the original bitcoin. Here are the steps:

1) Create a new local bitcoin wallet on your laptop using a good wallet like Electrum or Multibit HD. It is important to remember that you should only ever deposit bitcoin to this wallet that has gone through the anonymizing procedure.

2) You will have to set up a Monero wallet on your laptop. LightWallet2 is a good choice.

3) Download the Tor browser from the Tor Project. You will use Tor in the following steps.

4) Open Tor browser and navigate to shapeshift.io. You will have to click the NoScript icon at the top left of the browser, go to NoScript options and add both shapeshift.io and xmr.to to your whitelist so those sites can execute scripts. Otherwise they will not work while you are on Tor. 

5) While at shapeshift.io follow the instructions to swap Bitcoin for Monero. You will have to have your local Lightwallet2 open in order to copy and paste the Monero deposit address into shapeshift. Shapeshift will prompt you with instructions to send bitcoin to their receiving address and will return Monero to your Lightwallet2 receiving address. The process only takes a few minutes but you cannot send your newly received Monero out from Lightwallet2 for about 18 confirmations or 10 to 20 minutes. 

6) Once your Monero has been confirmed you are ready to swap back to bitcoin. We are going to use a different service to do this step to ensure the bitcoin you get back has no connection with bitcoin you started the process with.

7) Now open xmr.to in Tor browser (remember to whitelist the site in NoScript.) You will also have to open your local bitcoin wallet to get a receiving address. If you want to stay completely on Tor you can use Electrum connected to an .onion server. Just follow the instructions at xmr.to and send Monero from your Lightwallet2 to their receiving address. Paste in the bitcoin address you want your anonymous bitcoin sent to, in this example we are using Electrum running on Tor. Again the process only takes a few minutes.

If you want to avoid price fluctuations in Monero you will have to perform the entire process within an hour. You will receive back bitcoin that are impossible to link to the bitcoin you started with. You can use the taint analysis tool at blockchain.info to verify there is no relationship (taint) between the starting and ending bitcoin. 

Remember never to send bitcoin that has not gone through this process to the Electrum or Multibit wallet where you keep your anonymous bitcoin. If you send bitcoin that can be linked to you to your anonymous wallet those bitcoin will taint the bitcoin and negate your effort. Keep a separate bitcoin wallet that you only use for anonymous bitcoin.