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For example if I am using a free VPN(I know vpn and proxy not the same) and it looses the connection, for this short period of time my real IP is exposed, before connecting back to VPN again.

Does this occur if I am using proxy server setup in Windows 10 settings?

Settings -> Network & Internet -> Proxy

OR

Internetoptions -> “Connections” -> “LAN-Settings”->“Extended Options”

If yes, can I somehow prevent it from doing so.

If you have the habit of using a VPN and are worried about being disconnected,
then there are VPN products that will start with Windows and that will
not allow any Internet connection that is not via the VPN.

Search in the VPN product you are using for such a setting, or change to another
product.

This gizmo article might help:
Best VPN Services for 2019.

No. The proxy settings are 1) completely optional, 2) not applicable to most non-HTTP-based protocols. (For example, protocols built on top of UDP are outright incompatible with HTTP proxies.)

Other people have discussed the network side, so I will point out a different issue: Applications.

Even if you could set up an airtight network setup where your public IP is never exposed, that doesnt guarantee that an application you are running doesnt expose it. Even a program from a developer you trust can accidentally expose your information. An application might have a security flaw, a bug, the user misconfigured it, or even by design, which exposes the public IP of the user. Here is one example of this.

Unless you can sniff the unexcrypted packets being sent by an application, its really hard to tell what information they are sending.

Does this occur if I am using proxy server setup in Windows 10 settings?

Yes.

If yes, can I somehow prevent it from doing so.

No.

There are several reasons for this:

The way a proxy works, is that instead of connecting to the server directly, you connect to the proxy and the proxy connects to the server. In order to do this, the proxy needs to understand the protocol you are using to connect to the server.

The particular settings you are talking about, are for web proxies, i.e. proxies that implement proxying for typical web protocols such as HTTP, HTTPS, FTP, FTPS, WS, WSS, and Gopher.

So, that should already tell you the first limitation: it only works for a limited set of protocols, i.e. for web protocols, IOW it only works for web browsing and related things, and not, for example, for Email, or Skype, or Teamspeak, or multiplayer games, or a myriad of other protocols.

Also, in order for the proxy to be used, an application has to actually, well, use the proxy. Internet Explorer and Edge, for example, they read those settings you talked about, but not every browser does. Some browsers have their own, browser-specific proxy settings.

Lastly, the protocol itself could contain the original IP address (or other identifying data) in encrypted form, and there is nothing the proxy can do about that. For example, the WhatsApp Messenger uses end-to-end encryption, so the proxy can not look inside the protocol. And the protocol is proprietary, so nobody knows what it actually sends. It is entirely possible that it might send the original IP address, or the telephone number.

So, in short:

1. The use of the proxy is completely voluntary. Only applications which read those settings and want to use the proxy will use it.


2. The proxy generally only works for web protocols.


3. Applications may still send the IP address as part of the application protocol.