Viewpoint: The financial privacy of most Bitcoin users is “streaking” and blockchain needs anonymity

For privacy technology and privacy, many people understand that privacy technology and privacy currency are created for crime. Only the supervised can go to the mainstream, so bitcoin does not need to be anonymous, and the blockchain does not need to be anonymous.

In this regard, the author does not agree.

Imagine what would happen if the information on Alipay's books was disclosed to all users.

When you want to know someone's situation, enter the other's mobile number, and then you can see how much money is in his account, what is the purpose of each of his funds…

If you are just out of curiosity and have no intentional purpose, it will only infringe the privacy of others, but it will not cause too much damage.

But if a malicious person sees your property information, has a very careful criminal plan for you?

For example, if your account information shows that you have 10 million assets, then these criminals can clearly force you to surrender the 10 million instead of asking for 100,000 and 200,000 extortion.

Of course, in reality, Alipay will never disclose its books, so the above concerns are unnecessary.

Then why do you want to make such an assumption? The author actually wants to convey an idea: financial privacy is extremely important to us, which involves not only property security, dignity, but also personal safety.

More importantly, financial privacy and law enforcement are not contradictory. You can keep records at any time, and provide them to law enforcement officers when ordered (or voluntarily). When you are unable to provide records, let the judges do it. determination. The real contradiction with law enforcement is actually an anonymous crime.

But in the blockchain world, the situation is very different.

The financial privacy of most Bitcoin users is in a streaking state

Everyone knows that Bitcoin and some less-popular blockchain books are publicly accessible. When you enter an address in the browser, you can see the amount information and historical transaction records contained in the address account. And the transaction record of this book is almost unchangeable.


(For example, 1a8LDh3qtCdMFAgRXzMrdvB8w1EG4h1Xi is the address of Tim Draper. By tracking, we can see that it divides the currency into many addresses, so as to avoid people's eyes and ears)

With the development of blockchain anti-anonymity technology, the incorrect use of these less-popular blockchains will result in the user's financial privacy being streaking.

For example: User A likes to reuse the same cold wallet address to save his BTC. He will vote for some bitcoin every once in a while, and then he will deposit the obtained currency into this cold wallet (assuming there are 1000 in it). BTC). This may be done through the exchange, or it may be done through OTC, and if it is through OTC, then the other party that deals with User A can know through the blockchain query that this user A is likely to have 1000 BTC. Huge money, of course, the probability that the counterparty is a malicious party may not be too high, but it is possible that he inadvertently told others that this user A has this huge sum of money. Then, a criminal who knows the news is worried about User A. After designing the crime plan and implementing it, he forces User A to surrender his 1000 BTC. Due to some characteristics of Bitcoin, through some complicated technical operations, The criminals are BTCs that can be anonymously transferred and eventually use these snatches, and the funds that are snatched away cannot be rolled back to User A through the books.

Or, a company’s salary is settled by BTC or other currency, and the company also uses batch payment technology to reduce the cost of paying to the miners, and then the staff receives their salary or bonus, then You can see the income of his colleagues. If he happens to know the address of a staff member he doesn't like, and knows that the other party's income is higher than himself, then the staff may be psychologically unbalanced and may even cause trouble.

Also, many Bitcoin transactions will have a zero-change output. If a change-based address can be found, this will be a serious privacy breach because it links the ownership of the (now exhausted) input with the new output. . When used in conjunction with other privacy breaches (such as address reuse), the change in output can result in complete exposure to financial privacy.

There are many other cases of privacy breaches.

Finally, I would like to remind you not to post your own bitcoin address online, even if there is only 1 BTC, because such behavior will lead to very serious privacy leaks.

The importance of blockchain token interchangeability

When it comes to privacy leaks, then we have a problem, that is, if the privacy of a coin is seriously leaked, then the value of a coin that is not leaked by another privacy but equal in number is not equal.

For example, if you receive 10 BTC through OTC, but in fact, this currency is related to illegal land such as the dark market, then although you are innocent, the value of these coins may be 0 (will Being frozen by the exchange), or if you later learn that these coins are problematic and want to reduce losses, then one possible method is to wash the stains that are contaminated by constantly mixing the coins, which will eventually lead to A large loss, that is, the original 10 BTC, is not equal to the normal 10 BTC in value.

This is the problem caused by insufficient privacy. Therefore, the statement that 1 BTC = 1 BTC is actually inaccurate in the current situation.

What options are available to increase the financial privacy of Bitcoin users and to improve the interchangeability of Bitcoin?

Of course, it is not that the Bitcoin blockchain is completely open and transparent. In fact, there are currently many ways to increase the financial privacy of Bitcoin users.

In summary, the options available are as follows (welcome addition):

  1. Avoid address reuse;
  2. Avoid forcing address reuse: that is, not using coins on used empty addresses (preventing phishing);
  3. Currency control, which currency is selected as the input of the output transaction, avoiding the zero output;
  4. Avoid using the blockchain browser to query your own address;
  5. Use a full-node wallet;
  6. Confidential transaction (CT) technology;
  7. Schnorr signatures, MAST, TapRoot, Graftroot, etc., make several different script types look the same to increase privacy;
  8. Centralized mixed currency service;
  9. CoinJoin;
  10. CoinSwap;
  11. Wasabi wallet, Samourai wallet;
  12. TumbleBit;
  13. Out-of-chain trading technology (such as lightning network);
  14. Liquid side chain, etc.;

It is foreseeable that most of the above techniques and techniques are not used by ordinary Bitcoin users, that is, most Bitcoin users are at risk of exposing privacy.

What are the privacy technology solutions for other blockchains?

For the current privacy weaknesses of Bitcoin, many teams have adopted various privacy technology solutions. For example, Zcash uses the zk-SNARKs zero-knowledge solution, and Monero uses ring signature + obfuscated address + ring secret. For trading + bulletproofs technology solutions, Grin uses the MimbleWimble + bulletproofs privacy protocol, or the Zether protocol tailored for smart contract platforms such as Ethereum.

In general, the purpose of these programs is to hide the address and transaction amount information of the receiver and the sender, so that the privacy of the user is guaranteed.

Which of these solutions will eventually win, the author believes that on the one hand depends on security (ie no dangerous attack surface), on the other hand, the cost of privacy transactions, that is, the lower the transaction cost, the higher the success rate.

Developing privacy technology is to protect ordinary users, not crime

Well, the above simply mentions some of the privacy schemes used by current Bitcoin and mainstream privacy coins. Here are some personal observations:

Different from the intuitive understanding of most people, the author believes that the development of blockchain privacy technology is not to promote crime, but to fight crime!

How to explain it?

  1. Criminals use bitcoin, which does not care about transaction costs, so even if the very expensive privacy technology solution can help them to be anonymous, they will try their best to adopt it. Whether privacy technology can be popularized has nothing to do with criminals. .
  2. Ordinary Bitcoin users have a lower awareness of financial privacy protection, and high-threshold privacy technology schemes will block them, making most Bitcoin users a target for criminals (with the rising price of Bitcoin, the power of criminals) It will be bigger).
  3. The low threshold of privacy technology can protect the financial privacy of ordinary users from infringement, and the fewer the criminals have the goal, thus achieving the fight against crime.

Regulatory and anti-anonymous technology

So, some people may argue that anonymity and supervision are not antagonistic? The author believes that for the regulatory authorities, the development of anti-anonymity technology is a better choice than the fight against anonymous technology and anonymous currency, because for the regulators, the target is only the criminals who wash money and drug trafficking. Not an innocent user. The technology itself is not guilty. Ordinary users will not choose crimes because they use anonymous coins, and strengthening anti-anonymity technology can effectively crack down on criminals.

Some time ago, Brian Armstrong, CEO of Coinbase, a US compliant bitcoin exchange, pointed out on Twitter:

“A scalable, sufficiently decentralized blockchain (Privacy Currency) that supports private transactions by default will be a game changer.”


Seeing this, I hope everyone can have a more rational understanding of privacy technology and privacy.


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