Anonymity & Security
Mixing services
Mixing services are used to avoid compromising of privacy and security. Mixing services provide to periodically exchange your bitcoins for different ones which cannot be associated with the original owner.
Transactions
While using bitcoins is an excellent way to make your purchases, donations, and p2p payments, without losing money through inflated transaction fees, transactions are never truly anonymous. Buying Bitcoin you pass identification, Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. Bitcoin activities are recorded and available publicly via the blockchain, a comprehensive database which keeps a record of bitcoin transactions.
Buying/selling bitcoins
All exchanges require the user to scan ID documents, and large transactions must be reported to the proper governmental authority. When you use Bitcoin to pay for goods and services, you will of course need to provide your name and address to the seller for delivery purposes.
This means that a third party with an interest in tracking your activities can use your visible balance and ID information as a basis from which to track your future transactions or to study previous activity. In short, you have compromised your security and privacy.