How bitcoin plans on adding privacy/fungibility

in #bitcoin7 years ago (edited)

Contrary to popular belief bitcoin  is  not private. You can track every single movement on the blockchain if it is onchain transactions( Yes I am going to talk about LN).  While no privacy does not seems like a major big deal.....(My heart hurts after saying that), it lead to a bigger more major issue.  No Fungibility. Fungibility is a good or asset's interchangeability with other individual goods or assets of the same type.  As long as a coin is "traceable" it is subject to less fungibility. How? Every bitcoin is the same right? By code yes! By "history" no. A public ledger keep track of every movement.  

 Here how a bitcoin is not fungibility:
Let's say you sign up with Coinbase, You do some services and receive payment in Bitcoin. Those Bitcoins happen to be "dirty", either because the person that gave them to you used a darknet site, withdrew from a gambling site / hyip ponzi, or used a questionable mixer. You don't realize that and deposit the coins into your Coinbase wallet. 

 Subsequently your Coinbase account gets banned. If the coins were freshly mined there is no way that Coinbase would ban your account. While currently there isn't a direct difference in value between "clean" and "dirty" coins, the difference still exists. 

I talked about all possible bitcoin privacy tech. But I could not confirm which one are going to be added. 

Now I can. I have found out which tech that is going to be added well the tech that can be added voluntar or soft forks.

The Main privacy tech will be divided in 3 parts. 

On chain privacy, Offchain privacy using LN, bitcoin privacy using sidechains

Because of the large scale of the 3 parts i will break it down in 4 days. More detail at the end of the post 

Now let beginning with the basic techs/concepts that all the privacy features require/recommended to be used with:

Segwit: 

Now that something you do not think about do you. Segwit is a major scaling milestone. Not only is does it scale bitcoin by boosting the block size  , it allows for the Lightning network  to happen which also increasing/ allow  privacy to occur. 

 Segwit does increase fungibility, making zero-conf transactions secure by to fixing tx malleability. It will also increase the adoption of side chains and the lightning network, two other ways to increase fungibility.  

 Schnorr signature aggregation :

 Schnorr signatures can add a new advantage to CoinJoin/coinjoin liker services. It enables all participants in a CoinJoin transaction to not only combine their transactions, but to also combine their signatures. And doing so means the size of the transaction would actually be smaller than all individual transactions combined. 

The main benefit of schnorr is  that schnorr signatures could eventually increase total capacity 40 percent or more. Requires segwit to work.

Think of it as decentralized batching. 

Read more about schnorr here:

https://bitcoinmagazine.com/articles/the-power-of-schnorr-the-signature-algorithm-to-increase-bitcoin-s-scale-and-privacy-1460642496/

https://medium.com/@SDWouters/why-schnorr-signatures-will-help-solve-2-of-bitcoins-biggest-problems-today-9b7718e7861c
 

Coinjoin proposal explanation:

   CoinJoin, allows different users to combine all their transactions into a single transaction. That one transaction will include multiple inputs coming from different payers, which sends money to multiple outputs, belonging to different payees.(This can be compared to a group of people throwing their bills and coins together in a basket, which they use to go shopping in different stores to buy the products all of them want. Each individual will get the goods that individual paid for, but it's unlikely any individual's “own” bill paid for the product that individual bought. Source 

Coinjoin has many diff forms but there are two current forms that are going to be added: On chain version  and the LN version. The onchain version has 2 popular version however I will not talk about one of them bc it has to many flaws aka it assumes bitcoin fees are $1. Yikes. Anyway the tech is called Zerolink explaining why it assumes bitcoin fees are high. Good idea but needs bitcoin fees to be high...... There can be a fix to it but no update to it right now so....

Sidechain: 

 A sidechain is separate chain that connect with bitcoin's main chain. Thus allowing bitcoin to have a diff chain using diff tech without clogging up the main chain. Hint if you can't wait for me to write about it, it called grin

Hiding ip:

Dadellion= hiding the ip in the bitcoin network. Explanation here

 IDK bc there is no update on the tech but once i find one I will notify everyone. 

In the meantime: Bitcoin nodes can connect to Tor but not by default. Coins like Verge claim the hiding ip is good enough for privacy so.......


This post was going to be too large if i posted it all at once. 

Hence why i am going to spread it out in 4 days.

Day 1= This post :) I explaining the key concepts you need to know before the "new tech" can  be explained.

Day 2= The onchain privacy post

Day 3= The LN privacy post

Day 4= The sidechain privacy post  

Day 5= I'll combine everything in one big post.  

Hope you liked my pretty long intro on the basic before we get into the tech that will improve bitcoin privacy. Best part of these new tech is that it also going to scale bitcoin. 

Lessons on bitcoin made by me:

How segwit is actually a big block increase= https://steemit.com/bitcoin/@sames/how-segwit-is-actually-a-big-block-increase
Why big blocks are not the answer= https://steemit.com/bitcoin/@sames/why-big-blocks-are-not-the-answer
LN nodes are NOT banks or like banks= https://steemit.com/bitcoin/@sames/ln-nodes-are-not-banks-or-like-banks
What is the lightning network= https://steemit.com/bitcoin/@sames/bitcoin-s-lightning-network-simply-explained
What is Schoor signatures= https://steemit.com/bitcoin/@tipu/the-next-big-thing-in-bitcoin-network-schnorr-signatures or https://medium.com/@SDWouters/why-schnorr-signatures-will-help-solve-2-of-bitcoins-biggest-problems-today-9b7718e7861c
Bitcoin’s ethereum killer-rsk.co= https://steemit.com/bitcoin/@sames/bitcoin-s-ethereum-killer-rsk-co
Bitcoin newest scaling method adding bech32 plus others= https://steemit.com/bitcoin/@sames/bitcoin-newest-scaling-method-adding-bech32-plus-others
Batching : https://steemit.com/bitcoin/@sames/how-bitcoin-fees-will-get-cheaper-with-out-a-block-increase
Transaction speed count using the new tech coming to bitcoin=
https://steemit.com/bitcoin/@sames/segwit-bech32-batching-others-will-lead-to-bitcoin-reaching-passing-ethereum-on-chain-tps-level

 

All sources have been cited in the text. Other info came from my old post on bitcoin privacy 


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