TOR

Beyond the volunteer relay network itself, Tor is best understood through the mechanism that makes it work: onion routing. When traffic enters the network, the client wraps it in several layers of encryption, one for each relay in the path, typically an entry guard, a middle relay, and an exit node. Each relay peels away only its own layer, learning just enough to pass the data along, so no single relay ever knows both where a connection started and where it is headed.

This layered design matters for cryptocurrency users because it separates network-level identity (an IP address) from on-chain activity. A wallet or node broadcasting transactions over Tor makes it far harder for outside observers, or malicious peers, to link a transaction to the physical location of the person who created it. Bitcoin Core has built-in support for running as a Tor hidden service using ".onion" (v3) addresses, letting a full node accept inbound connections without exposing its real IP, and several privacy coin projects, including Monero, offer native or optional Tor and I2P integration for broadcasting transactions and relaying blocks.

Tor is not a silver bullet: exit nodes can see unencrypted traffic, correlation attacks by well-resourced adversaries remain possible, and simply connecting to the network can itself draw scrutiny. It is also the primary access route to the dark web, where cryptocurrency, particularly Bitcoin, has long been used for payments precisely because of this pseudonymous access layer.