User avatar
BitcoinXio
Global Moderator
Global Moderator
Posts: 166
Joined: Mon Sep 21, 2015 4:12 pm
Contact: Website

Bitcoin privacy and the blockchain

Mon Nov 30, 2015 10:48 pm

If there is one thing we all know as bitcoiners, it's that the blockchain is forever; blockchain or it didn't happen. Transactions entered into the blockchain are open to the world and can be placed under a microscope for anyone to analyze as the global ledger is open to the public and anyone who is interested in looking at it.

This is both good and bad. This is good because the blockchain is immutable, where for the first time in history we have a global public ledger that cannot be changed. History cannot be rewritten. This is also potentially bad for those of us who believe in privacy. As we know, the blockchain is open so anyone can look at it. And bitcoin transactions although are not on the surface linked to our identities, they are through our transactions and our history. At some point you may have purchased bitcoins through an exchange, or made a purchase online with the bitcoins, etc. These transactions open our real identities to the world through blockchain analysis.

General
The purpose of this post is to ask the community, what are the best ways at keeping your identity private on the blockchain. This isn't about generic user privacy on the web or general security practices. I'd like this post to cover specifically transaction privacy; the best ways to accomplish this.

Bitcoin wallets
What bitcoin wallets are made best suited to protect our bitcoin privacy? There are many bitcoin wallets on the market currently, by my count there are upwards of 75+. Not all bitcoin wallets are treated equally. Some are focused on user privacy. Some stick out such as the infamous Dark Wallet, or more recently another wallet that has been making some headlines is Samourai Wallet. Another wallet provider who says they are pro-privacy is Airbitz. However at the end of the day, are "private conscious" wallets enough to keep our transactions private? Should multiple wallets be used to help keep our transactions private? For example, should you have a "business wallet", "personal wallet", etc?

Bitcoin mixers
Unfortunately, because the blockchain is such a buzzword this year and inevitably next year, there are a whole slew of new blockchain intelligence organizations coming out with one thing in mind - to mine the blockchain and get our data - and use it to fit their business model. Some companies stick out such as Coinalytics, Chainalysis, and others. These companies do not have your privacy in mind. They want your data and want to make a profit off of it. Are bitcoin mixers the answer? There are several bitcoin mixers on the market. If you aren't aware, a "mixer" or "tumbler" is simply a tool used to mix your bitcoins with other people in the attempt to obfuscate your transactions in the attempt to make them private, even to prying eyes that may be scanning the blockchain to put all the dots together. Some mixers are modeled off of the CoinJoin implementation by core dev Greg Maxwell.

Image
CoinJoin by Greg Maxwell

The problem with mixers is that we don't know if they trustworthy? Many of these mixers are products of the dark market where people wish to tumble their coins to hide their dark market transactions. Some of these mixers are only available through the dark web via Tor. As mentioned there are several, such as BitBlender, Bitcoin Fog, Helix, and more recently JoinMarket. Even Blockchain.info has it's own mixer called SharedCoin (over the clearnet). Outside of the trust factor, do these solutions actually work though? I've personally tried BitBlender and can say that the transactions going and coming back out are not linked to my identity. However, do I trust them with larger sums of bitcoins and not to steal them?

I've even seen suggestions to use services such as Shapeshift, where you can convert your bitcoin to an altcoin and back, in hopes that when you get your coins back they are not the same. Shapeshift has said it themselves this will not work, as the coins are held for a period of time and chances are you will get the same coins back. However, proponents of the altcoin Monero claim that the coin algorithm is so privacy-centric that when you convert to Monero and back, your coins you get back will always be different. Unfortunately I don't know enough about Monero to speak about it. Does anyone know how well this would work?

Conclusion
It's up to us as a community to figure out the best tools and help each other, for those of us who care about our privacy on the blockchain. I've posed a few questions here that I'm hoping people can kick around and help answer. It also could be that I'm not asking the right questions, so please chip in and ask or answer away!

User avatar
creationlayer
Site Admin
Site Admin
Posts: 132
Joined: Wed Oct 28, 2015 9:06 am
Contact: Telegram

Re: Bitcoin privacy and the blockchain

Tue Dec 01, 2015 11:21 am

Are there any commercial coin mixers. It seems like a legal and profitable service, but most are not very transparent.
We can only see a short distance ahead, but we can see plenty there that needs to be done.
-Alan Turing

User avatar
BitcoinXio
Global Moderator
Global Moderator
Posts: 166
Joined: Mon Sep 21, 2015 4:12 pm
Contact: Website

Re: Bitcoin privacy and the blockchain

Tue Dec 01, 2015 4:07 pm

Are there any commercial coin mixers. It seems like a legal and profitable service, but most are not very transparent.
Well, can you define "commercial". ;)

Some of these coin mixers are running businesses for a long time now, and they make money per transaction. BitBlender for example has been around a while and from my personal experience seems to work well but again, I've only used it for small amounts. I'm not sure if I would trust a mixer with large amounts, and they are anonymous over Tor so they could exit scam at any time.

Blockchain.info runs the SharedCoin service, which is over the clearnet and they too make money through transactions but it's voluntary. Users are prompted to "donate a % of the transaction" to help facilitate SharedCoin. It would be a good business model to take on because there aren't many in this market that do this. The issue would be doing it right, and making sure that whoever is doing it can be trusted.

User avatar
creationlayer
Site Admin
Site Admin
Posts: 132
Joined: Wed Oct 28, 2015 9:06 am
Contact: Telegram

Re: Bitcoin privacy and the blockchain

Wed Dec 02, 2015 8:11 am

Thanks I forgot about sharedcoin. In Bitcoin I know there are some trusted mixers, bitmixer.io worked for me previously. Still with all the scams, I suppose it's tough to actually ensure delivery. I guess I should rephrase my question, do you think there is a legal issue running a mixing service as a business, or one would have to hide behind various layers of anonymity.
We can only see a short distance ahead, but we can see plenty there that needs to be done.
-Alan Turing

User avatar
BitcoinXio
Global Moderator
Global Moderator
Posts: 166
Joined: Mon Sep 21, 2015 4:12 pm
Contact: Website

Re: Bitcoin privacy and the blockchain

Wed Dec 02, 2015 3:23 pm

Thanks I forgot about sharedcoin. In Bitcoin I know there are some trusted mixers, bitmixer.io worked for me previously. Still with all the scams, I suppose it's tough to actually ensure delivery. I guess I should rephrase my question, do you think there is a legal issue running a mixing service as a business, or one would have to hide behind various layers of anonymity.
I'm no lawyer so I'm just speaking from a non-legal standpoint. But taking custody of someone's money has to hold some sort of bearing. However, in general it appears wallets in the bitcoin space aren't subject to the BitLicense for example, so maybe they aren't actually "holding" people's money because of the cryptography used. If that is the case, I don't see how mixers are any different. They are just shuffling the coins in between. So long story short, to answer, I think it would be "legal" if done the right way and in a country that is favorable to bitcoin.

Return to “Development & Technical Discussion”

Who is online

Users browsing this forum: No registered users and 1 guest