Bitcoin Privacy: Pseudonymity, Address Hygiene, CoinJoin, and Lightning
Summary
The document explains why Bitcoin is pseudonymous rather than anonymous: transaction addresses, amounts, and timing are public, and a link between an address and a real identity can expose its history. It identifies exchange identity checks as one way such a link may arise, though it gives little detail on other privacy leaks.
Suggested practices include generating a fresh receiving address for each payment and using wallets with privacy features. It also describes CoinJoin, which combines multiple users’ activity in one transaction to obscure which inputs correspond to which outputs, and Lightning, whose individual channel payments are not recorded on Bitcoin’s public chain. Taproot is mentioned as making some transaction types look more alike. These are explanations rather than measured comparisons: the guide provides no tests or quantified privacy guarantees. CoinJoin does not make tracing impossible, and Lightning’s public channel openings and closings remain visible. The document also notes that a VPN can conceal an IP address but does not hide on-chain transactions, and that legal and tax obligations still apply.
Key ideas
- Bitcoin transactions are publicly visible, so pseudonymous addresses can become linked to real identities.
- Using a new receiving address for each transaction can make it harder to associate payments.
- CoinJoin combines users’ transactions to make links between senders and recipients less clear.
- Lightning payments are private to channel participants, while channel openings and closings remain public.
- A VPN can hide an IP address but does not conceal activity on Bitcoin’s public ledger.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.