Topic: What is the best way to spend BTC from an Electrum wallet with privacy? (Read 304 times)

Yeah, you have to do a lot of work to keep any reasonable privacy, and if you try to sell your coins in a KYC exchange for fiat it will be hell to explain where the funds came from. Just to exercise any reasonable amount of privacy (as in, the same privacy one would have when you are sending a regular bank transfer, that is, sending money without revealing your funds in the process) you get labeled a suspicious individual. This is why I don't see any way to cash out Bitcoin unless you mined it and send it directly to the exchange, or bought it from a KYC exchange and has a ticket. Anything else starts becoming too convoluted.

This also showcases how BTC will never be used at a mainstream level, at least until one can achieve similar level of privacy of a bank transfer (again, not potentially revealing your funds with a transaction) by just clicking a send button. Im not familiar with LN and have no idea how it works but nobody uses it that I know, when someone lists an item or service they usually just have regular bc1 addresses.

   Electrum is a single coin wallet that approves only Bitcoin,lots one to promote platforms which send and receives Bitcoin for it's fast and easy setup processes ,it is resulting from careful thought an anonymous wallet with privacy features.  It's HD features make people easily restore and backup their wallet ,since a light node ,Electrum ask information from full nodes confirmation which verifies that your transaction are included in the blockchain.

  For you to spend Bitcoin from an Electrum, you have to select the send menu,and copy down the address of your receiver below and write down the description, and put In the amount to be sent and set the fee that will affect how early the receiver will receive his Bitcoin.

I know this is the Bitcoin Discussion Board but I feel like writing my input.

Speaking out of personal experience.  If you have multiple people you often send Bitcoin to, after only a few Transactions it becomes really hard to keep track of what is going on.  This is why I use Monero.  It sometimes costs me a lot more than just tracking my Bitcoin Transactions and UTXOs, but after making a few costly mistakes you realize it is worth the cost.

My personal advice for any body willing to maximize their Privacy is use Monero in parallel with Bitcoin.  I use my main Bitcoin Seed for Bitcoin only I know about and I use Monero as an intermediary to avoid linking my personal Bitcoin to the Bitcoin I have to spend.

If I link the two smallest Outputs, 0.0039 plus 0.0019 which is in total 0.0058 but only spend 0.005 out of it to pay OP, I now have an UTXO of 0.0008 labeled 'takuma sato' in my Electrum.  Then I spend 0.02 out of my 0.0301 on drinks and have an UTXO labeled 'liquor store' containing 0.0101 Bitcoin.  Then I decide to finally link my 0.0408 with my 0.0233 to spend 0.06 Bitcoin on a phone.  I now have three UTXOs.

0.0008 Bitcoin 'takuma sato'
0.0101 Bitcoin 'liquor store'
0.0041 Bitcoin 'phone store'

Now I have two options.  First is easiest.  I link the second and third UTXO because I do not care if two stores know I bought something off them.  But that is a Privacy concern to me and I would not want takuma sato to know I purchased any thing from the liquor store or the phone store either.  So what do I do?

First option is I continue to use my UTXOs separately.  I have 0.0149 Bitcoin left but I can not purchase something worth the entire Balance without compromising my Privacy.  If I want to purchase another phone worth 0.01 Bitcoin, I can not without linking UTXOs from the two stores.  Unless I get more Bitcoin and have an unused UTXO that I can use in combination with the UTXO labeled 'phone store'.

So here comes my second option.  Finding a way to remove my identity off the UTXOs I own.  The best way to do it is using Monero as an intermediary.  Exchange UTXOs from Bitcoin to Monero in chunks of each label category at random times in random separate days.  From 0.0149 Bitcoin you exchanged into X Monero.  Now return to Bitcoin and split it into multiple Addresses.  Say three.

Now you own three anonymized UTXOs of approximately 0.005 Bitcoin.  No more labels, no more worries.  Costs a little bit more, but it is the cost of Privacy unfortunately.  For someone as paranoid as me, it is worth the costs.

Don't do that.  Simply refuse to do business with anyone that violates your privacy in such a way. If they can't respect you enough to protect your privacy, why would you want to help them with anything.


I would refuse to engage in transactions with someone that was so lazy that they were willing to put my privacy at risk in that way.


I specifically said: "If you're only trying to maintain privacy from one particular entity, and you don't mind another entity knowing about your larger single UTXO".


If that's what you prefer.


They can be. It depends on the particular situation. Your question was phrased in a way that implied that you were looking for generalized advice for all that might want to know how to better maintain privacy.  If, instead, you have a very specific set of circumstances that are requiring a very specific solution, then you'd need to provide a lot more details to get individualized advice.


For a small payment, I'd consider using Lightning network. I don't recall though how much the recipient knows about the sender's channel. Maybe I'll look into that this weekend.

If it's a small payment for a used item on a webpage, and it's the seller that you are trying to keep the information from, then why would Coinbase KYC matter?

I use XChange over Tor, 1% fee and works quick every time:

http://xmxmrjvjw3drvegm7m5gpqp3bsgp3x3bgc2x7jc76cacr74jhdwop7id.onion

For the people that mention Tor with Electrum, I understand that. I mentioned Electrum, because I think it can be used on mobile phone. Privacy wallets can't. So the idea was to coinjoin funds I want to spend, then spend them with Electrum through a phone so I can pay without having to carry a laptop around which is insanely annoying. I need to get the funds first in a phone ready to spend.


Requesting a different address is not always an option. For instance, in the example of anyone here recieving payments in exchange of advertising a website through signatures. The managers of these signature campaigns I assume wouldn't want to deal with a different address per payment, so they ask you to keep the same address for the duration of the campaign.

You mentioned Coinbase, not an option since that requires KYC. So a non-kyc exchange or casino that allows for Tor usage would do. But which ones do? This is definitely a better idea than using a mixer tho. Like I said before, you mix your stuff, send it to someone, this someone puts it on an exchange and you may or not have a problem. It should be perfectly legal to use a mixer to not disclose your funds everytime you pay someone, but this is the world we live in now.
If instead, you send the funds you want to use to an exchange that isn't KYC and get them back, you can now use them without putting in trouble the person that you are paying if this person deposits these funds into a KYC exchange.

Intermediaries are not an option.

The payment is a small payment, so im not too worried about things, and it is not some government thing. It's just that if you buy an used item from someone that sells it on a webpage in exchange of BTC for instance, you don't want to tell this person that you own 0.1 BTC, so im looking for the most efficient way to go about things. Perhaps I should have asked this on the other subforum.

Why should you pay him in bitcoin when you can pay him with other alternative altcoins? After all, you don't want other people to know your total bitcoin balance in the wallet address to be used, which can be seen in the blockchain explorer.

It's impossible that you don't know that bitcoin is not the only cryptocurrency that can be paid to other people. I can understand you if Bitcoin is the only crypto in this industry. That's why there are many options like Ethereum, BnB, Matic, USDT, and others that can be paid online.

I don't want to use any mixing services anymore. What if this happens:

1) You mix the coins
2) You get the coins back
3) You pay this person/company for some good/service
4) This person/company puts the coins into an exchange and Chainalysis or something gets triggered
5) This person/company now has a problem, and will point to you as the source of this transaction
6) Suddenly you have a problem when all you wanted to do is to get some reasonable privacy during a payment

Yo yeah, not using any mixers, at least for payments that would identify me in any way. For instance, to pay for some online service like a VPN it's reasonable since you aren't doxed, but why risk it when you are paying IRL?

This is why perhaps these coinjoin wallets are worth looking into if they deliver any information

The non KYC exchange may be a solution tho. Do you know which ones are worth using?

The thing is, you are just wasting a lot of money along the way with transactions.

First of all, you should always use a new address for EVERY transaction you receive.

So, if that 0.1 BTC was received as 5 separate payments of:

• 0.0301 BTC
• 0.0039 BTC
• 0.0408 BTC
• 0.0019 BTC
• 0.0233 BTC

Then you can just use the two smallest outputs (0.0301 BTC + 0.0019 BTC = 0.0058 BTC) to fund your transaction. In this way, the entity will see no link at all to the three larger outputs under your control.

Or, if you prefer, you could use just the 0.0233 BTC output to fund the transaction, significantly reducing the visibility from the full 0.1 BTC to just 23% of your balance.

Now, if you have only ever received a single transaction, and the amount of that single transaction was 0.1 BTC, then maintaining privacy of that balance will be more difficult.

If you're willing to pay repeated transaction fees over many days/weeks/months/years to gain some privacy, one thing you could do to increase your privacy a bit would be to generate a random time and then after waiting that amount of time from receiving your initial transaction create a new transaction to split your balance by a random percentage and send each portion to a new addresses in your wallet. Then after another random time, chose one of the two outputs randomly, and split that to 2 new addresses. Then after another random amount of time, chose one of the three outputs in your wallet and split that to 2 new addresses, and so on until you have several random sized outputs all created at random different times from random earlier outputs.  This will make it much more difficult for the entity to distinguish between outputs that you still control.

If you're only trying to maintain privacy from one particular entity, and you don't mind another entity knowing about your larger single UTXO, you could briefly send your 0.1 BTC to a popular entity that pools the bitcoins they receive (such as an exchange or a gambling website). As an example, let's assume you use Coinbase. Then you could withdraw random percentages of the 0.1 BTC, each to a separate address in your wallet. It would become extremely difficult for the entity you are trying to maintain privacy from to determine which of the many, many outputs Coinbase sent were sent to addresses of yours vs. addresses of other people.

Another option might be to use an intermediary (friend?, family?, etc) that you aren't concerned about knowing how much BTC you have in the transaction you received.  You could make an arrangement for the intermediary to make the payment on your behalf, and then later you could send a payment amount to the intermediary at a new address compensating them for helping you.

There are probably more options, but those are the few that come immediately to mind.

Note: if the entity you are trying to maintain privacy from is a government entity, it's possible that some of these processes to hide the source of funds might be considered "money laundering" by some governments. This may be illegal in somme jurisdictions, and you may need to talk to a lawyer to make sure that you're not doing anything that could be charged as a crime.

I think the OP's dilemma is not about Electrum being used with Tor.

From what I understand, it's how someone, it the given, the restaurant can follow his Bitcoin address that has 1 BTC in his example,- 200 USD or equivalent in Bitcoin. So Electrum is not the best wallet to do that since it doesn't have conjoin capability.

So I'm just thinking that he can used a 3rd services that washes everything (and we all know what it is, and currently ban from our forum),  but might be costly to him, before he pays for the services.

HD wallet is not enough to secure your privacy. You need more than a wallet to secure your privacy.

Coin Join, Tor connection and good practice with your inputs, outputs and don't reuse your address.
Some advice for privacy from Blockchair.com

Privacy

Well if we are talking about privacy here I will say the best choice is an HD wallet.
In my opinion if I was the one in such situation I would simply use a mobile wallet like mycelium since I would be spending that $200 mycelium can easily mask your wallet balance since it would generate another wallet using your master key.

Use Electrum wallet with Tor to enhance Privacy.

Using Electrum through Tor
Tutorial: How to use Electrum wallet (for advanced users)

It's better to ask similar questions on Development & Technical Discussion board, you'll get better answers there.
Let's touch our topic. First of all, keep in mind that for protecting your privacy, you should connect your Electrum to Tor before you make/broadcast a transaction because, when you use a lightweight version of Electrum or any other wallet, you are connected to other nodes and for security and privacy reasons, you should assume that they log your IP when you make a transaction, i.e. they know that there was a transaction made via you via certain Bitcoin address.
This is the basic step for your privacy when you use Electrum but as I see, the privacy that you want to achieve, is beyond Electrum's capabilities. For that, you should use Mixers or CoinJoin wallets but you still depend on how trustworthy mixer or coinjoin wallet developer is. Also, keep in mind that project being simply open-source doesn't mean it's 100% trustable, you should check the code or if you can't check the code, you have to rely on what other developers say.

Overall, Monero is a currency that you need if you want to save on fees, don't rely on 3rd parties and to achieve a maximum privacy.

Electrum wallet was not designed to enhance privacy, so if you want to enhance it, you must connect via Tor only or use Electrum-Server^[1]  to ensure that no third party collects information about your addresses.
After that, use the coinControl feature to ensure that sending is from specific addresses and mix your currencies either in centralized ways, such as transferring them to Monero, using a mixer, coinJoin, or using a P2P crypto DEX like BISQ.

[1] https://electrumx.readthedocs.io/

Split the coins into multiple wallets when you Coinjoin or mix your coins, so in case they want to track the coins, they can only see the multiple addresses, but they can't really assume if you're the one who control all the addresses.

To add more privacy you shouldn't tell your real names to the cashier and wear different outfit.

The problem when you're doing this is you need to spend more for fees, I don't think you really need to protect your privacy when it comes to offline trades because when spending $200 is normal in your country, you're just same like the others.

Do you only want to spend from your electrum down to the service provider wallet ? If yes then you need to do all the privacy stuff before you get to the place you want to buy your goods or you want to exchange your bitcoin for any service.

Just as few others have suggested I will add to it by saying you will need to move some of those your bitcoin with extra fee to a non KYC exchange address where you can withdraw from this exchange to a different address were you can use later at any place were you will send directly to the place wallet.

Or better still just use a mixing service and get the coin detach from your original wallet where only you and the mixer will know the new wallet and were the holdings are originally from.

I have changed the example of a restaurant and just said good or service. Obviously Binance Pay or whatever isn't the case here. And about sending the funds to another address, it wouldn't work.

Address A has 1 BTC
Address B is your own address that you generate and you send 200 USD worth to it to spend on the good/service upon arrival
The owner of the address that is selling this good/service is able to see that you had 200 USD and now it has 0, but can see that it received said 200 USD from an address that has 1 BTC. Of course, plausible deniability applies and cannot be proven you own 1 BTC, but if you go again to the same good/service provider in the future with a new address, they will see again that all these funds come from Address A. This doesn't look that great privacy wise.

Binance wallet ID, Binance Pay ID don't protect your privacy. This feature is for internal transfer and only can help you to save withdrawal fee from Binance.

It has nothing in protection on your privacy and you can not expect to gain privacy protection when you are using a centralized exchange and even KYCed there with your account. Both accounts of you and the restaurant are KYCed by Binance and the third company used by Binance for KYC processing. If government wants, they can ask your identity from Binance.

And there will be data breaches from Binance or the third party company, so your privacy is not protected.

One thing I can tell you is convenience and privacy does not go together, you must choose one to follow. If you want privacy using Bitcoin as payment in a restaurant wouldn't work as expected because you have a lot of work to do before you can make a safe payment that can't be looked up. E.g Using mixers etc. and after mixing you will not have to move your coins back to the main wallet or the origin but a brand new wallet that will still require more expenses. So I will suggest you use other payment method for convenience than Bitcoin for $200 worth of food.

Privacy is expensive and takes alot of carefulness and time to get maximum privacy so you have to choose between privacy and convenience.