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Bitcoin Best Practices

  • 11-06-2017 2:29pm
    #1
    nate.drake
    Registered Users, Registered Users 2 Posts: 46 ✭


    Just been having an interesting conversation on the investment thread about CGT on Bitcoin Profits. Some posters were asking how easy this is to enforce given the anonymous nature of Bitcoin payments.

    While here at Information Security we encourage everyone to pay their taxes lawfully, the discussion did cover the fact that it's still difficult to buy/sell Bitcoins anonymously. As such I thought I'd cover a few best practices on buying, selling and holding coins.. I hope you'll all agree these are sensible and add your own thoughts.

    Avoid insecure software wallets

    Software wallets such as Electrum connect to a server, meaning your IP address could technically be linked to a particular Bitcoin Address. This is a particular concern with BIP148 on the horizon too as there's a danger of the blockchain splitting in two.

    You can use full node wallets such as Bitcoin Core to reduce the risk of this as they fully validate all transactions and blocks. The only downside to this is that the amount of space required is very large (around 125GB and growing).

    Other options include using a paper wallet, or hardware wallet.

    Buy/Sell Bitcoins in exchange for goods/services

    Using Bitcoin exchanges are problematic in that anyone with access to your bank records can see the transfer of fund. Websites such as LocalBitcoins list people who are willing to buy/sell BTC for cash. You may also have goods you can sell via Reddit's BitMarket or Bitify. If you choose to buy goods instead of cashing out Bitcoins for filthy lucre, you may still be liable for CGT, so make sure to check with your Accountant if you're unsure.

    Use Bitcoin Tumblers

    When cashing out Bitcoin, use a service such as Bitcoin Fog to swap your coins for new ones. This makes them much harder to trace along the blockchain. Ideally access Bitcoin Fog via its darknet address.


    All other constructive ideas are very welcome.


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