Actually TOR masks your IP address into multiple layers and then relays it across different servers. Now, when your encrypted data reaches the first node, the server decrypts the first layer and gets the location of the next server. Now, you should know that the first server is the only node in the whole circuit that knows of your exact device location. Don’t worry, I’ll tell you a hack to save your IP address from the first node. Okay, so after passing the second node, your data reaches the third node, and at that point, the last layer is decrypted and your data is exposed to the website’s server.
The points you need to know are:
The first server (node) knows your device location and IP address (even though it can’t be sure if you are the original sender or recipient due to Tor circuit)
The third and final server knows the website location and server address you are browsing.
Okay, now that you know how it works, here’s how to protect your IP address from being exposed at these servers: “Use a VPN”
Yes, it’s that simple. Combine a VPN with TOR and the unencrypted traffic will be encrypted and your IP address will be masked with the IP address of the VPN provider.
Source and Credits: Quora / By: Dolores Mink.