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In-depth explanation of Tor

Explanation of Tor

Bitcoin operates without a central authority. However, this means that Bitcoin clients must connect to each other directly. Bitcoin transactions can probably be traced to a sending or recieving IP address, especially for a government agency. To actually make Bitcoin anonymous, using it over Tor is a good idea.

From Tor's website: Instead of taking a direct route from source to destination, data packets on the Tor network take a random pathway through several relays that cover your tracks so no observer at any single point can tell where the data came from or where it's going. To create a private network pathway with Tor, the user's software or client incrementally builds a circuit of encrypted connections through relays on the network. The circuit is extended one hop at a time, and each relay along the way knows only which relay gave it data and which relay it is giving data to. No individual relay ever knows the complete path that a data packet has taken. The client negotiates a separate set of encryption keys for each hop along the circuit to ensure that each hop can't trace these connections as they pass through.

In a nutshell, using Tor is like using a series of secure proxies distributed across the world and randomly changing them every ten minutes.

Bincoin, mIRC, and Firefox over Tor

Get a copy of Tor

The fastest way to use Tor on Windows is to get one of the Bundles. All are available at [1] The Browser Bundle contains a copy of Firefox already configured to use Tor. The .exe's are self-extracting archives. You can install wherever you want.

Configure Bitcoin

Configuring Bitcoin is straightforward. Open the Settings menu and click Options. Check the box labeled Connect though socks4 proxy. The default proxy IP and port are the correct settings for using Tor.

Configure mIRC

In mIRC, go to Tools > Options > Firewall Change firewall support to "both," and the protocol to Socks5. Change the Hostname to or "localhost" and change the port to 9050.

Start Tor

In the Tor Browser folder that you installed Tor in earlier, there should be a file called Start Tor Browser.exe Run it. The Vidalia Control Panel will open, displaying the status of the Tor connection. It will connect to Tor. When it's done, it will launch its copy of Firefox Important: If you exit the copy of Firefox that it launches, Vidalia will automatically shut down.

Restart Bitcoin and mIRC

To ensure that these programs are actually connecting via Tor, close and reopen them.


Guide to using tor with freenode: Tor exit nodes are banned from connecting to Freenode directly, so Freenode's Tor hidden service address must be used: irc://p4fsi4ockecnea7l.onion/