Bitcoin is a pseudonymous cryptocurrency. Many users ignore this fact and don't exercise extra caution when making transactions.
They reuse wallet addresses or simply use KYL/AML (Know Your Customer/Anti-money Laundering) verified coins purchased on centralized markets to buy "illegal" stuff on the Darknet.
In the times of oppressive governments spying on their citizens, it has huge implications for one's privacy and eventually (a loss of) freedom.
Regardless of your motives, you should always make sure your Bitcoin transactions remain private if you can't afford to purchase bitcoins anonymously.
Your past privacy leaks can't be undone because of the nature of the blockchain. However, you may protect your future transactions.
In this tutorial, we will use Monero as an intermediary to "unlink" your past Bitcoin history from the future one.
Monero is a fully private cryptocurrency that uses proven crypto techniques to hide your financial life. It uses features such as Ring CT (confidential transactions) and stealth addresses to make impossible for anyone to trace your transactions on the blockchain.
Using Monero to "clear" Bitcoin history may be a difference between the freedom and the life in prison.
Let's consider the following scenario to understand the implications of financial privacy:
For years, you've been transacting carelessly, exposing your Bitcoin addresses to the public, possibly linking it to your real identity.
One day the government decides that certain transactions you've made are "sketchy" and they will use Taint analysis to track down all your financial history.
Let's say you bought marijuana from a local dealer spending one of the tainted outputs. Proving that you indeed did buy it will be very easy once they force you to give up your private keys under the threat of violence.
Using the private keys, they can sign those "sketchy" transactions and with some other evidence prove that you indeed are who they think you are.
Now imagine that before buying the marijuana you'd "erase" your Bitcoin history using Monero and then buy entirely new bitcoins not linked in any way to your real identity.
In a likely case of the government forcing you to give up your new private keys, its corresponding outputs wouldn't match the tainted ones. Thus making it impossible for them to know about the transaction with the dealer.
I hope you understand the importance of online privacy now?
Let's move on to the tutorial itself.
For the purpose of this post, we will use Monero GUI and Electrum. You may however use other software.
Before we start with the process, let's hide our identity first.
I use a paid VPN called NordVPN.
Secure and private access to the Internet. Now with 3 months for FREE!
It offers a needed privacy and broad range of IP addresses across numerous countries.
In case you don't feel like paying for a VPN just connect via Tor.
Sell bitcoins, Buy monero
For the first part of the process we'll use SideShift as our exchange market of choice.
There's no need to create an account and they don't do any KYC either.
Shift between BTC, ETH, BCH, XMR, XAI and 75+ other cryptocurrencies. The best exchange rates, no account required.
Go to the site and choose YOU SEND and YOU RECEIVE assets - in our case Bitcoin and Monero.
Open your Monero wallet, select Receive tab from the sidebar and copy Primary address (or feel free to create a new one).
Go back to the site and paste it to RECEIVING ADDRESS field and click SHIFT.
Make a bitcoin payment to the provided deposit address.
You can either scan the QR code with your mobile wallet or copy & paste the address to your PC/hardware wallet. The amount needs to be within the provided limits.
Wait for the network confirmation which usually takes around 10 minutes.
After your transaction has confirmed, SideShift will send you XMR according to the current exchange rate displayed at the top.
Monero confirmation time is 2 minutes, but because of privacy reasons, your new coins can't be spent before 10 confirmations pass (around 20 minutes).
After this time the coins are visible in Unlocked balance and are available for spending.
Sell monero, Buy back bitcoins
SideShift sent monero coins to our wallet using Ring CT. It means that no amounts and inputs/outputs are visible on the "public" blockchain.
In other words, this transaction is untraceable.
Only SideShift knows this transaction happened, but they can't tell where the money ends up in the future. Unless of course, we send it right back to them.
Knowing this, we'll choose a different exchange service to break this link.
In case you're connected via VPN, select a different country to get a new IP address. It isn't necessary, but it certainly adds little more security through obscurity.
Visit XMR.TO and create a new order.
Visit Godex and create a new order with your desired amount.
Example: if you transacted 1 BTC on SideShift, you'd wanna send back 0.8BTC in one transaction and the rest (at least a few hours) later.
Godex.io is one of the fastest exchange services on the market. No registration. No KYC!
Choose XMR on one side and BTC on the other. Type the amount and click Exchange to proceed to the next step.
Paste an unused Bitcoin address and go to the next step. Re-using existing Bitcoin address is bad for your privacy!
Time to send XMR to provided address.
Either scan the QR code with your mobile wallet or copy and paste it into a computer wallet, send the requested amount and go back to the site.
Godex needs 1 network confirmation (approximately 2 minutes) to confirm your Monero transaction.
Once confirmed, it's Godex's turn to send you BTC to the address you provided earlier.
Aaaand it's completed. As you can see it took Godex around a minute to send you your bitcoin. Not bad for no registration and no KYC, right?
Using this simple trick between 2 exchanges gets you entirely new bitcoins unrelated to your past transaction history. It means more privacy for any future Bitcoin transactions.
I believe voluntary transactions between two parties should be free from any government interference. Politicians ignore this notion and demand access to everyone's financial life under threat of violence.
Monero as a truly anonymous cryptocurrency solves this issue and allows people to transact freely without fear of persecution.
We can also take advantage of these privacy features with Bitcoin and "unlink" past transaction history from our real identity. This makes Monero a powerful privacy toolway beyond its intended use.
P.S. I'm thinking of creating an app that would automate all of the above tasks. Let me know what you think about this idea.