CoinSwap and Ongoing Efforts to Make Bitcoin’s Privacy ‘Invisible’ | Zoom Fintech

A developer recognized for his commitment to improving Bitcoin’s privacy has set his sights on a whole new challenge that he hopes will “dramatically improve” the way we maintain our personal transactions.

Chris Belcher, who also created the technical privacy marketplace JoinMarket, is currently engaged in reviewing CoinSwap, a concept first proposed by legendary Bitcoin developer Greg Maxwell in 2013. Belcher specialized in CoinSwap rather than JoinMarket in as long as because he believes it will give customers more privacy, he told Fintech Zoom.

Belcher got not so long ago not one, but two subsidies for his efforts, simply showing how excited Bitcoiners are about the potential of the challenge.

Although the Bitcoin community was born out of a privacy-conscious movement, its privacy is certainly quite meager. Just check out any block explorer to get a taste of how easy it is to drag any transaction that has ever happened in Bitcoin’s historical past – in addition to the historical past related to the transaction.

Find out more: Human Rights Basis funds Bitcoin privacy instruments regardless of the stigma allowed by “coin mixing”

“At the moment, Bitcoin’s privacy is not very good at all. Anyone in the world can scan the blockchain and then find all kinds of information about users – their balance, their history, who they are with. trade and for what amounts, when – everything they spend, ”Belcher told Fintech Zoom in an interview.

Belcher argues that this is, in some ways, worse than the monetary privacy we have today in legacy programs. “The banking system, they know your transactions, but not the general public. With Bitcoin, it’s the general public – it’s anyone who can see exactly what the user is doing, ”Belcher added.

He added that it is important for most people that such information is not disclosed to the whole world.

“Financial confidentiality is good for human dignity, [for example], if you don’t want your neighbors to know which charities you’re donating to or that sort of thing, or if you get paid in bitcoin, you don’t want your employers to know which charities you’re donating to or what kind of thing. what other activities you’re involved with, ”Belcher added.

CoinJoins: in today’s Bitcoin privacy

“CoinJoins” (unlike “CoinSwaps,” which Belcher reviews) are the most popular privacy transactions on Bitcoin today. CoinJoins offer customers good privacy and are growing in popularity. So far, they have been adopted within the Wasabi, Samourai Pockets and JoinMarket pockets.

A CoinJoin takes all the input from a number of transactions by completely different customers and mixes them into one massive collaborative transaction. This massive transaction then sends the mixed bitcoins from completely different addresses to completely different addresses. Since no one can tell where the bitcoin spent comes from, the smell of the path is obscured and CoinJoin members gain more privacy.

Find out more: What a Small Increase in “Coinjoins” Says About Bitcoin’s Value Proposition

However, this is not great. There are, however, methods that allow people analyzing the Bitcoin blockchain (especially blockchain valuation companies) to detect when and where bitcoins are mixed.

On the one hand, the size of mixed cash transactions is much larger than regular transactions, because they include so many alternative inputs.

Also telling is the fact that they have outputs which are all the same dimension. “Equal exit CoinJoins are very obvious. If someone sees them on the blockchain, they can see that this kind of privacy protocol is happening, ”Belcher said.

Why are the outputs the same size? If Bob sends 0.8 BTC into the CoinJoin transaction and Alice sends 0.187 BTC and Mary sends 1.2222 BTC, and the resulting outputs are exactly 0.88 BTC, 0.187 BTC, and 1.222 BTC respectively, this coincidence is pretty obvious to anyone.

In order to protect privacy, a CoinJoin transaction often divides the amount of bitcoin distributed into equal pieces, say 0.1 bitcoin. So if Alice puts in 0.3 bitcoin, she will get three 0.1 items shipped to a few separate addresses that she controls.

Most trades don’t have a bunch of equal outputs like this. That’s why CoinJoins are easy to spot.

Granted, there have only been a few instances of cryptocurrency exchanges banning customers who have obviously shipped their bitcoin through such privacy providers.

“They will be suspicious. If there is someone who analyzes the blockchain, they will see that it is a CoinJoin, so they know that person has done it. And if they see another transaction, [by comparison] they can see it’s not a CoinJoin, ”Belcher said.

CoinSwap: an invisibility cloak for transactions

“CoinJoin” and “CoinSwap” have related names and therefore they each help protect privacy, so it’s easy to get confused. However, they are completely different, and Belcher argues that CoinSwaps “fixes a lot of issues with certain types of CoinJoins” and “is the next step for on-chain bitcoin privacy.”

CoinSwaps could be made invisible, Belcher said. If completed accurately, a CoinSwap transaction can look the same as a vanilla bitcoin transaction.

In a CoinSwap, it looks like two separate people are sending entirely separate transactions. But under the hood, something else is happening completely.

Two events, say Alice and Bob, perform such an exchange. In short, Alice sends bitcoins to a CoinSwap deal. Bob sends the same amount of bitcoin to another CoinSwap agreement.

If each sends the specific amount of cash, the cash is “exchanged”. The money Alice sent to the CoinSwap agreement is sent to a new agreement owned by Bob, and the money that Bob sent to his personal CoinSwap agreement is sent to a new agreement owned by Alice.

“Teleporting” money

Under the hood, the CoinSwap deal, which pays for this exchange, is far more sophisticated than a standard bitcoin transaction. This is a multi-signature transaction, which means that two people need to log out before the transaction can be dispatched. Normally, these type of transactions stand out on the blockchain because they look completely different from regular bitcoin transactions. However, thanks to ECDSA-2P cryptography, these multi-signature transactions could be made identical to regular bitcoin transactions. It really is Belcher’s plan.

With ECDSA-2P in place, “Alice sends Bob a CoinSwap and it looks like a normal transaction. But in fact, the parts ended up completely elsewhere, ”Belcher said.

This element is necessary. While all of these transactions look the same, people who don’t even use CoinSwaps get additional privacy as well. There is no option to notify if a transaction is a CoinSwap transaction or a standard transaction, thus reversing the bitcoin chain valuation.

Find out more: “Financial monitoring” or “Blockchain analysis”? Human Rights Basis Debates Elliptical

The related know-how will also expand to the Lightning community, so blockchain watchers can’t tell if a single transaction is a CoinSwap, a Lightning Community transaction, or just a regular bitcoin transaction.

“You could argue that CoinSwap allows bitcoins to teleport undetectably anywhere else on the blockchain,” as a know-how overview on the Bitcoin Wiki points out. For further clarification, try this submission from JoinMarket developer Adam Gibson.

That’s not to say CoinSwap is ideal, however. The problem with CoinSwap is that it is a bit more difficult process to implement than CoinJoin.

“As decentralized as it is potential”

In his mountain of submission, Belcher describes how to turn the idea of ​​CoinSwap into reality.

One of the main reasons CoinSwaps haven’t taken off since Maxwell described them seven years ago is that they aren’t as simple as CoinJoins. So, Belcher reduced his work for him by implementing complexity for the first time.

His first step was just excited about one of the easiest ways to do it, describing a number of completely different design issues in the article making up his assault plan. On the one hand, he plans to use the Rust programming language, as it is probably more secure than other languages.

“I want to make it as decentralized as possible, so that there is no central point of failure that can be turned off or censored,” Belcher said. To achieve this goal, it needs “the whole thing” to crush the Tor privacy community, which helps defend IP addresses, which are much like a mail piece for a computer exposing its whereabouts.

“I think it’s quite necessary for privacy,” he said.

Find out more: BTCPay appears to anonymize Bitcoin transactions with PayJoin integration

Belcher describes this and various different concerns in his proposal, resembling routing and using PayJoin, another bitcoin privacy know-how, by his side. Now that its concepts are known to the public, people can comment and make recommendations.

The next step is definitely its implementation. Belcher has informed Fintech Zoom that he hopes to launch a minimal viable product within the next six months.

Image: “BallesStrob-4” by MathGoulet is licensed under CC BY-ND 2.0.


A leader in blockchain information, Fintech Zoom is a medium that strives to meet the best journalistic requirements and adhere to a strict set of editorial insurance policies. Fintech Zoom is an impartial working subsidiary of Digital Foreign Money Group, which invests in cryptocurrencies and blockchain startups.

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About Dawn Valle

Dawn Valle

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