Bitcoin Privacy, What Undermines It, And What Improves It

Bitcoin Privacy

Bitcoin’s privacy and anonymity have long been a mystery. Since Bitcoin’s introduction, it has been assumed that anyone who chooses to use it will have total anonymity over their financial transactions including ownership, payment, and custody of the funds. But after just a few years, it has become abundantly clear that anyone who has divulged any aspect of their identity online and linked it to a wallet or crypto exchange has been exposed because of the transparency of the blockchain. Or at the very least, some part of their Bitcoin stash has been undisclosed.

Since many developers, cypherpunks, and cryptocurrency aficionados are aware of this, they have focused on improving the privacy mechanisms associated with Bitcoin. What tools are being developed and enhanced toward Bitcoins privacy, and how anonymous is Bitcoin right now?

KYC undermines privacy the most

First and foremost, it must be acknowledged that, given how the cryptocurrency market is currently evolving, privacy is not its strong feature. More and more exchanges are implementing KYC, ID, and verification systems that are entirely the opposite of any kind of privacy. As a result, it becomes far more difficult for customers to purchase Bitcoin privately since even the most popular and largest cryptocurrency exchanges have turned into KYC watchtowers.

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Fortunately, a number of tools and services are constantly being improved, which might help to give Bitcoin enthusiasts their privacy back. These coin-mixing services simply tumble bitcoins, making it impossible to trace the original source.

From Bitcoin tumblers to the Lightning Network

While central banks and governments are trying so hard to increase public surveillance, Bitcoin developers are attempting to do the opposite. They are attempting to give more anonymity to Bitcoin for anyone who wants more independence and privacy over their finances. Developers work to meet those needs using Bitcoin mixers and coin-mixing services that make Bitcoin anonymous again.

Bitcoin mixers and Bitcoin tumblers

Bitcoin mixing, also referred to as Bitcoin tumbling or Bitcoin blending, is an example of how to make your Bitcoin transactions untraceable. These coin-mixing tools or services are making every effort to obfuscate Bitcoin transactions, assisting both the sender and the recipient of the transaction to increase their financial privacy. Due to their simplicity of use and occasional inclusion in projects like Wasabi Wallet, solutions like these are perhaps among the most popular ones at present. The main goal of a crypto mixer is to protect users’ financial privacy and coin clarity.

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Wallets that prioritize privacy

This takes us to another way to enhance Bitcoin anonymity: using wallets designed with privacy in mind, like Wasabi or Samourai. These wallets make it incredibly simple for their users to enhance their privacy by including crucial tools and strategies like CoinJoin directly in their user interface. CoinJoin allows the UTXO (Unspent Transaction Outputs) of multiple users to be combined into one large transaction. This one transaction has multiple inputs and outputs, making it impossible to trace the original source of the funds.


Fedi and Fedimint are other tools that are currently being developed, but they are not finished yet. With this solution, users will have better self-custody as well as more privacy. Fedi is most likely going to be a solution that may be considered as a compromise between holding bitcoins in-house and leaving them on an exchange. Similar reasoning may be extended to privacy, where Fedi may not offer the finest privacy features, but will still be an upgrade over what any CEXs (centralized exchanges) are offering right now.

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Lightning Network

The Lightning Network is yet another tool that aids with anonymity. Although the scalability issue was the primary goal of this Layer-2 solution, which was developed on top of Layer-1, it currently has a pleasant “side-effect.” And that is privacy, as LN allows transactions to take place between two parties secretly, without ever being recorded on the blockchain. As a result, the privacy of all users can be increased.


The financial system is not in the best condition right now. There will never be an end to the increasing amount of surveillance in everyone’s daily lives. Thus, individuals will need to take control of both their personal information and their financial privacy.If Bitcoin is used in combination with the most intriguing technologies that developers who prioritize privacy have to offer, it can fulfill this need. Whir is one of those choices. The Whir service is dedicated to enhancing the privacy of everyone who makes use of this platform to send or receive bitcoins anonymously. Whir is incredibly user-friendly and affordable, which is why privacy-conscious individuals find it so appealing.

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