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Exchanges where you buy Bitcoin hold your information, which they may share with third parties. These third parties can use technology to track all your transactions, as Bitcoin addresses can be verified on the blockchain. This includes both addresses you receive from and send to, creating a profile of usage and addresses related to that profile (https://www.blockpliance.com). Exchanges can refuse your sats transfers for any reason (like coinbase), and if they believe you are making too many transactions, they may consider you a risky individual.
For better anonymity and to make it more difficult for both the exchange and the third-party company to which they send your information, advanced Bitcoin users recommend:
Using Small Amounts via Lightning to Transfer to Onchain (see atomic swaps below), less than $300.
Running Your Own Node: With your own node, you can receive small transactions that are difficult to trace. Invoices created can be decoded but will only show information like the amount and the invoice’s timestamp. They will not reveal other important information since it is encrypted. Additionally, sats jump from node to node until they reach their final destination (your node). Most nodes are on an Onion network, which provides greater anonymity.
Example of Invoice: Lnbc2m1pnrjd6epp5xg37tadmcc479dt8c3rqk9mu4p08y8a5uvdd4repy4r8zzs40y4qdqqcqzzsxqrrs0fppqhsrcf2xszcp9nu4xgxzjwx6m3qnvlvrtsp5nft6epu8wxaxytyadq95ygyqvewuhuqh4zw6wevwvufxjr0zc0qq9qyyssqtafnv4cz4uuccg8xfw0ec2lgmr9u23rg85ac86zdnkn4mkq93krn283prlthqky5ujpv8x4cecs4634uu4gcw4f57l3haur8vg6myggp7z6erh
Using Atomic Swaps: If you want to transfer your sats from the exchange to your BTC address, which could be another wallet of our custodian (with our seed phrase, 12 or 24 words) as a Coldwallet, and you don’t want the exchange to have your final receiving address (since they can create profiles and sending addresses that can be tracked on the blockchain), you can use atomic swaps. You send sats via Lightning and receive sats via Onchain, though there is a fee for the swaps.
Recognized and Trusted Websites for These Transactions:
Comment below if you find a best practice or suggestion and remember not your keys not your coins
yes, this solving privacy but not solving KYC record and possible future tax.
lets say that in few years you will receive letter from tax office that you should provide information what you done with your coins and if there is a profit you must pay tax.
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When transferring from an exchange to lightning and then from lightning to cold storage, would you categorize those UTXOs as KYC or non-KYC in your cold storage?
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That won't work with any of the major exchsnges though, because they only let you withdraw to one specific address, no?
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Which exchanges are selling information? I can imagine Coinbase, but would Strike, Swan or Fold do this?
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I would assume everyone does. Just to be safe.
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OK, story time: osmowallet.com is an exchange app that allows you to buy, sell, receive and send Bitcoin and lightning with very low purchase and sale fees (like many other apps) they started in Guatemala and moved to El Salvador, their partners are IBEX, Strike so you can receive your remittance with them and they have currently expanded to Costa Rica, Mexico and the United States... According to Osmo, to "strengthen compliance and protect users" they made an alliance with https://www.blockpliance.com I leave the tweet (X) https://x.com/osmowallet/status/1819089931823706449 Until now we can only assume that all partners use blockpliance if they want to operate in El Salvador such as strike and ibex. It doesn't hurt to know how to send satoshis safely to our wallet.
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I would like to know this as well.
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Those are good privacy practices for maintaining a good level of privacy while using Bitcoin. (I also use Lightning to slightly obfuscate my Bitcoin transactions.) Another privacy practice I personally use is to buy XMR from an exchange, send it to a Monero address, and finally exchange it for Bitcoin through no-KYC exchanges like Hodl Hodl, Bisq, etc. The disadvantage of that method is that the XMR price fluctuates a lot, which could be beneficial but could also harm you.
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You have provided us certain algorithm that may work for all of us in the long run. This is indeed precious information. I never thought about it until now. The CEX is really a problem if you think about their goal of selling KYC related information. Thanks for the instructional.
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Ok, hopefully this helps someone. What I do is send all my Sats from various exchanges to Strike. Then over time and when I finally get a hefty amount, I send to Aqua via Lightning to convert to Liquid. When it is Liquid I send to SideSwap. Then I use SideSwap to peg-out to a cold wallet.
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That works too!
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exchange to Strike to Aqua to Sideswap to cold wallet
coinOS also has liquid, lightning and on chain similar to Aqua but coinOS is not self custody
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What are the additional privacy benifits sending from Aqua to sideswap?Why not directly peg-out?
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