Most people focus on on-chain privacy — CoinJoin, fresh addresses, coin control. But there's another layer of surveillance that's often completely ignored: your IP address.
Every time you broadcast a Bitcoin transaction from your wallet, your IP address is exposed to the Bitcoin network — and potentially to anyone monitoring it.
Tor fixes this. Here's how it works and how to set it up.
The IP Address Problem
When you send a transaction, your wallet connects to the Bitcoin peer-to-peer network and broadcasts it. The nodes your wallet connects to can see your IP address. Some of those nodes are run by analytics firms specifically to collect this data.
By correlating IP addresses with transaction broadcasts, surveillance nodes can link your real-world identity (your internet connection) to specific Bitcoin addresses — even if the on-chain transaction is otherwise clean.
What Tor Does
Tor (The Onion Router) routes your internet traffic through a series of encrypted relays around the world. By the time your transaction reaches the Bitcoin network, it appears to come from a Tor exit node — not from your home IP address.
Combined with good on-chain hygiene, Tor makes it significantly harder to link your real identity to your Bitcoin activity.
Tor with Sparrow Wallet
Download and run Tor Browser or Tor daemon
Install Tor Browser (easiest) or the Tor standalone daemon. Tor Browser runs a SOCKS5 proxy on port 9150 by default; the daemon runs on port 9050.
Open Sparrow → Preferences → Server
In Sparrow Wallet, go to File → Preferences → Server. Choose your server type (Public Server, Bitcoin Core, or Private Electrum).
Enable Tor proxy
Check "Use Proxy" and set the proxy to SOCKS5, host 127.0.0.1, port 9150 (Tor Browser) or 9050 (Tor daemon). Click Test Connection to verify.
Connect to an Onion server (optional, best privacy)
For maximum privacy, connect to a Bitcoin Electrum server via its .onion address. This means your connection never leaves the Tor network at all — no exit node exposure.
Tor with Electrum
Electrum has built-in proxy support. Go to Tools → Network → Proxy. Enable SOCKS5 proxy, set host to 127.0.0.1 and port to 9050 (or 9150 for Tor Browser). Electrum also supports connecting to .onion Electrum servers directly for full onion routing.
Tor with Wasabi Wallet
Wasabi Wallet routes all traffic through Tor by default — no configuration required. Every connection to the coordinator, every transaction broadcast and all block filter downloads go through Tor automatically. This is one of Wasabi's key privacy advantages out of the box.
Important Limitations
- Tor does not fix on-chain problems — if your addresses are already linked via CIOH clustering, Tor won't undo that
- Tor is slower — transactions and syncing will take longer, especially over .onion connections
- Exit node attacks — if you connect to a clearnet server via Tor, a malicious exit node could potentially monitor traffic. Use .onion servers to avoid this.
- Tor is not a VPN — a VPN moves trust to a single provider. Tor distributes it across multiple relays. For Bitcoin privacy, Tor is strongly preferred over VPN.