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I bought a VPN subscription using Tor and Bitcoins. The commercial VPN service provider does not know who I am.

Below are my questions:

  1. Could someone tell me whether sending Bitcoins through Tor provides more anonymity than sending them through my VPN service?

  2. Is it true that sending Bitcoins through Tor is awfully slow?

  3. What are the other advantages of sending Bitcoins via Tor?

5

Well, if you are interested being as anonymous as possible, Tor is far more interesting. The VPN provider may not know who you are but it does know your IP address and the website you are visiting, which is almost the same if it comes in the hands of those you probably want to avoid knowing it.

With Tor on the other hand, node know each other's IP address. As you make a network request with Tor, it will pass through a number of nodes, usually 5 I thought. Of these 5 nodes, only the first one knows your IP address and only the last one can see the request you send. Supposing you use SSL as much as possible, the last node only knows the IP address your request is send to.

All intermediate nodes know nothing about you. So you are in fact the most vulnerable for the first node, because he knows your IP address. But he has no clue what website you are visiting, so no single computer in the Tor network will be able to see what you are doing.

Besides, sending a transaction with Tor does not have to be slow. That's just a small packet. You probably mean that syncing with the network and downloading all blocks is slow. Well, there is not much of a point for doing that via Tor. None of your addresses are sent along with block requests, so you can safely sync blocks over VPN or regular internet. The most information the outside world will get to know is that you are downloading Bitcoin data. But using a VPN that accepts Bitcoin, I doubt if they would be eager to share that information with others.

  • 1
    Thanks for the detailed explanation. Could you elaborate what you mean by "None of your addresses are sent along with block requests"? By "addresses" do you mean IP addresses? – user5556 Jun 16 '13 at 21:07
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    No Bitcoin addresses. I wanted to make clear that downloading blocks does not reveal anything about your personal record in Bitcoin. Other nodes will not know your Bitcoin address or transaction information. – Steven Roose Jun 16 '13 at 21:59
  • "So you are in fact the most vulnerable for the first node, because he knows your IP address." True, but on the other hand this node doesn't know if you are the originator of the traffic or if you are just forwarding it on behalf of someone else. – cdhowie Dec 9 '13 at 21:42
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VPNs are not absolutely untraceable like Tor (save in the case of rare targeted attacks and security breaches) so Tor >> VPN always and there's a good explanation for that on torproject.org . That being said, everything you do on Tor is really slow so it really depends on how important you think your anonymity is in regard to this transaction.

  • That being said, everything you do on Tor is really slow I agree with you on this. – user5556 Jun 22 '13 at 14:38
0
  1. You don't have to choose between Tor or your VPN, use Tor over VPN to maximize your privacy.

  2. A transaction is very small. So sending transactions over Tor is fine. (Downloading the entire blockchain is completely different matter, see below.)

  3. Transactions over Tor are good for Bitcoin's fungibility.

Bonus: run your own full node, configure it to mainly use Tor and only use wallets that connect to your own full node.

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