It is possible to run Bitcoin as a Tor hidden service, and connect to such services.
The following directions assume you have a Tor proxy running on port 9050. Many distributions default to having a SOCKS proxy listening on port 9050, but others may not. In particular, the Tor Browser Bundle defaults to listening on a random port. See Tor Project FAQ:TBBSocksPort for how to properly configure Tor.
The first step is running Bitcoin behind a Tor proxy. This will already make all outgoing connections be anonymized, but more is possible.
-proxy=ip:port Set the proxy server. If SOCKS5 is selected (default), this proxy server will be used to try to reach .onion addresses as well. -onion=ip:port Set the proxy server to use for tor hidden services. You do not need to set this if it's the same as -proxy. You can use -noonion to explicitly disable access to hidden service. -listen When using -proxy, listening is disabled by default. If you want to run a hidden service (see next section), you'll need to enable it explicitly. -connect=X When behind a Tor proxy, you can specify .onion addresses instead -addnode=X of IP addresses or hostnames in these parameters. It requires -seednode=X SOCKS5. In Tor mode, such addresses can also be exchanged with other P2P nodes.
In a typical situation, this suffices to run behind a Tor proxy:
If you configure your Tor system accordingly, it is possible to make your node also reachable from the Tor network. Add these lines to your /etc/tor/torrc (or equivalent config file):
HiddenServiceDir /var/lib/tor/bitcoin-service/ HiddenServicePort 8333 127.0.0.1:8333 HiddenServicePort 18333 127.0.0.1:18333
The directory can be different of course, but (both) port numbers should be equal to your bitcoind’s P2P listen port (8333 by default).
-externalip=X You can tell bitcoin about its publicly reachable address using this option, and this can be a .onion address. Given the above configuration, you can find your onion address in /var/lib/tor/bitcoin-service/hostname. Onion addresses are given preference for your node to advertize itself with, for connections coming from unroutable addresses (such as 127.0.0.1, where the Tor proxy typically runs). -listen You'll need to enable listening for incoming connections, as this is off by default behind a proxy. -discover When -externalip is specified, no attempt is made to discover local IPv4 or IPv6 addresses. If you want to run a dual stack, reachable from both Tor and IPv4 (or IPv6), you'll need to either pass your other addresses using -externalip, or explicitly enable -discover. Note that both addresses of a dual-stack system may be easily linkable using traffic analysis.
In a typical situation, where you’re only reachable via Tor, this should suffice:
./bitcoind -proxy=127.0.0.1:9050 -externalip=57qr3yd1nyntf5k.onion -listen
(obviously, replace the Onion address with your own). If you don’t care too much about hiding your node, and want to be reachable on IPv4 as well, additionally specify:
./bitcoind ... -discover
and open port 8333 on your firewall (or use -upnp).
If you only want to use Tor to reach onion addresses, but not use it as a proxy for normal IPv4/IPv6 communication, use:
./bitcoin -onion=127.0.0.1:9050 -externalip=57qr3yd1nyntf5k.onion -discover