Bitcoin is neither completely transparent nor completely anonymous. Confidentiality in both the old and new models of finance forces us to think about identities online and how to control this information. By choosing Bitcoin, we can be completely transparent by placing an encrypted signature on our assets. Transparency of our identities and transactions. Or we can hide our assets by pseudonyms so that no one can know what we are doing.
Creating a nickname on the Bitcoin system is easy. But making and accepting transactions without disclosing enough information about the nickname is not easy. There are many ways that can jeopardize our nickname. Bitcoins can be tracked on the blockchain. Your name may be linked to a bitcoin address or your ip may be linked to a transaction. You may even be tracked by visiting Blockchain.info and searching for transactions and inventory.
A complete encryption approach is needed to remain anonymous and to protect your identity. This can be done by hiding the identity through the VPN service or most importantly Tor. Tor can communicate by messaging standards such as OTR and PGP. So when a third party has access to your wallet files, not even your public key will be exposed.
The hardest part about hiding Bitcoin is when you have access to it or exchange it for another currency. Since banking systems require an ID, buying bitcoin from a person or ATM can help, but this is not always possible.
An alternative is to trade with multiple identities and make the exchanges between the two wallets complex and ambiguous. This can be costly and difficult, but there are many options that can help us do just that. However, some of them are not easy to work with and some require a lot of trust from you.
