Which Are the Different Bitcoin Improvement Proposals to Increase its Privacy Features?
Bitcoin is the most important virtual currency in the market. It is used by many investors, companies and individuals all over the world. But there are some issues that the famous virtual currency needs to address, including its privacy features.
Bitcoin works based on a blockchain system that registers all the information of each transaction processed by the miners. This may be great, because it is not necessary to rely on a third party to validate transactions. But it creates also a problem, everyone can check the transaction history and all the information related to specific wallets.
Of course, these virtual currencies offer important features for those users that want to have a higher privacy when transacting. But the community, in general, would like to see Bitcoin with improved features rather than using different coins.
Indeed, at the moment, there are important Bitcoin Improvement Proposals (BIPs) that aim to improve Bitcoin’s capabilities to preserve user’s privacy. But which are those changes that developers may implement?
An important proposal is related to Confidential Transactions, which has been proposed back in 2013 by Adam Back. His proposal wants to add ‘homomorphic commitments’ rather than explicit amounts in place of values in transactions. In this way, the value of the transactions will be hidden and users will enjoy higher level of privacy.
Several individuals and developers showed support for this proposal, but it was not possible to be implemented in the short term. But the bitcoin developer Gregory Maxwell decided to pay close attention to it and was able to create the ‘Confidential Transactions’ or CT for Bitcoin.
The new Bitcoin’s upgrade used a cryptographic tool known as Pedersen Commitment. This improvement allows the transaction values to be hidden.
The description of this proposal reads as follows:
“A commitment scheme lets you keep a piece of data secret but commit to it so that you cannot change it later. A simple commitment scheme can be constructed using a cryptographic hash: commitment = SHA256 (blinding_factor || data ) if you tell someone only the commitment then they cannot determine what data you are committing to (given certain assumptions about the properties of the hash), but you can later reveal both the data and the blinding factor, and they can run the has and verify that the data you committed to matches.”
It is also important to mention that this proposal uses two additional cryptographic techniques known as Elliptic Curve (EC) signatures and ring signatures. In this way, the Pedersen Commitment is able to work effectively and as it should.
An important critic made to this BIP was that the transactions were four times larger than the average ones, which would have created a slow and inefficient network.
The latest researches about this proposal have been able to reduce the size to only a third of regular transactions. Currently, there are no news since November 2017, but Maxwell said that they are in an advanced stage and the proposal could be implemented through a soft fork.
This is another important bitcoin improvement proposal that has been presented in a paper and that aims to redesign the Bitcoin Network to increase its anonymity.
The main intention is to address the Bitcoin anonymity problem by redesigning the networking stack. The main intention is to reduce re vulnerability related to the possibility to uncover identities behind Bitcoin transactions.
The Dandelion proposal is a tool that will make it more difficult to ascertain the origin of a transaction. It will be reducing the risk of eavesdroppers linking transactions to source IP. Moreover, it will be working in two phases, the first is known as the ‘stem’ phase, and the second as ‘fluff’ phase.
The Dandelion Project Explains:
“During the stem phase, each node relays the transaction to a ‘single’ peer. After a random number of hops along the stem, the transaction enters the fluff phase, which behaves just like ordinary flooding/diffusion. Even when an attacker can identify the location of the fluff phase, it is much more difficult to identify the source of the stem.”
In this way, the fluff phase is referred to the process in which the network obscures the details and the stem hase holds the user’s private data. By sharing the information with just one user, it is more difficult to track transactions. This would allow users to have a better privacy.
The Dandelion project was submitted on Github back in May 2018 a year after it was announced. If this is finally applied to the bitcoin network it will provide some important features to make it more private for its users.
Numerifides Trust Consensus Protocol
This is a proposal that has been thought by developer Tyler Hawkins and sent to analyse to the Bitcoin developers’ mailing list. This BIP details a system that allows the network to include secure, decentralized and human-readable names, including other important data. This is known as the Zooko Triangle.
The developer says that he has been working on the proposal and which he named Numerifides. In GitHub, he said about this improvement:
“Rather than deriving justice and authority from a system that’s not supposed to look but too often does, I propose a DECENTRALIZED CONSENSUS PROTOCOL that enables a system of decentralized authority on a public piece of data, on an open blockchain and any independent, skeptical user or actor operating the consensus protocol can verify any other actor’s statement of authority in a decentralized, fair and privacy-protective manner.”
This upgrade would allow users to create aliases that would let them transact on the network. In order for this proposal to work it must perform two actions. A user must lock up a certain amount of Bitcoin and provide proof of work confirmation. And it is important to mark that the longer the time-locked bitcoin and the PoW, the more secure the data.
There are three different important proposals to improve Bitcoin’s privacy features. It is now time for the community to debate about these topics and find a way to implement the best option as soon as possible.
Another important thing that developers and the community must take into account, is the fact some countries are starting to take important measures against privacy coins. For example, Japan may ban those cryptocurrencies from being exchanged in the country. What will happen with Bitcoin if some of these proposals are approved is yet to be seen.