This article is featured in Bitcoin Magazine’s “The Privacy Issue”. Subscribe to receive your copy.
Privacy is a fundamental issue in using a public blockchain system like Bitcoin. Numerous projects and proposals have been made over the years to either build privacy-preserving tools on top of Bitcoin or fundamentally add privacy at the protocol layer itself. Satoshi himself discussed briefly the idea of zero-knowledge proofs as a mechanism to enable greater privacy before he left.
This is all the original whitepaper had to say on the topic of privacy:
10. Privacy
The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The need to publicly announce all transactions precludes this method, but privacy can still be maintained by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone.
10. Privacy
The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The need to publicly announce all transactions precludes this method, but privacy can still be maintained by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone.
The whitepaper also mentioned that the risk lies in the use of multi-input transactions, which may reveal that the inputs were owned by the same owner, creating transparent ownership links on the blockchain. It emphasized the importance of not reusing addresses to maintain privacy.
Over the years, several protocols have been designed to address privacy concerns in the Bitcoin ecosystem. These include Coinjoins, Coinswap, Chaumian Ecash Mints, Confidential Transactions, and Zerocoin. While some are application layer proposals, others require fundamental upgrades to the Bitcoin protocol itself.
Many tools have been built to enhance privacy in Bitcoin transactions, but their adoption depends on users’ choices. Without user participation, these tools remain ineffective. Achieving privacy in a public system like Bitcoin requires a collective effort, and the valuation of privacy by individuals is crucial for its preservation.
The article concludes by emphasizing the importance of privacy, fungibility, and censorship resistance in Bitcoin. It highlights the need for privacy as a fundamental right, essential for protecting individuals’ safety and autonomy. The battle for privacy in Bitcoin is seen as a critical decision that will shape the future of the cryptocurrency.
