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I get too many guard overload fails and tried increasing NumEntryGuards and NumDirectoryGuards both to 3.

Would this decrease my anonymity?

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Here are the entries from the manual.

NumEntryGuards NUM

If UseEntryGuards is set to 1, we will try to pick a total of NUM routers as long-term entries for our circuits. If NUM is 0, we try to learn the number from the guard-n-primary-guards-to-use consensus parameter, and default to 1 if the consensus parameter isn’t set. (Default: 0)

NumDirectoryGuards NUM

If UseEntryGuards is set to 1, we try to make sure we have at least NUM routers to use as directory guards. If this option is set to 0, use the value from the guard-n-primary-dir-guards-to-use consensus parameter, and default to 3 if the consensus parameter isn’t set. (Default: 0)

Neither will directly affect your anonymity though it is certainly not be a bad thing. Please see the FAQ about this:

Suppose the attacker controls, or can observe, C relays. Suppose there are N relays total. If you select new entry and exit relays each time you use the network, the attacker will be able to correlate all traffic you send with probability around (c/n)2. But profiling is, for most users, as bad as being traced all the time: they want to do something often without an attacker noticing, and the attacker noticing once is as bad as the attacker noticing more often. Thus, choosing many random entries and exits gives the user no chance of escaping profiling by this kind of attacker.

The solution is "entry guards": each Tor client selects a few relays at random to use as entry points, and uses only those relays for her first hop. If those relays are not controlled or observed, the attacker can't win, ever, and the user is secure. If those relays are observed or controlled by the attacker, the attacker sees a larger fraction of the user's traffic — but still the user is no more profiled than before. Thus, the user has some chance (on the order of (n-c)/n) of avoiding profiling, whereas she had none before.

How many is "a few"? I don't know. It doesn't say. If you are not seeing 3 now and you raise it to 3, then it's not going to hurt anything. If you are seeing more than that, then it lowering it to 3 could make problems per the FAQ.

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