Friday, November 26

“Privacy in Bitcoin is a knock-on effect that affects us all”

Key facts:
  • Taproot is the great challenge that the Bitcoin ecosystem has today.

  • For more private payments, Lightning has its strengths, but also its weaknesses.

“In Bitcoin, your privacy does not belong to you, it is rather a chain effect that affects many and if you give your data ‘you de-anonymize’ everyone who interacts with you.” The statement belongs to the developer Giacomo Zucco, during the third and last day of the LaBitConf event, which this year was held in El Salvador.

Zucco was part of the panel who shared impressions on “the challenging path to privacy in Bitcoin,” which also featured American cypherpunk Jameson Lopp, fellow developer Tadge Dryja, as well as podcaster Stephen Livera. All under the moderation of Lunaticoin, creator of content focused on the first of the cryptocurrencies.

During their presentation, the speakers pointed out that privacy is one of the weak links that Bitcoin has and its transparent chain of blocks in which the transactions and the information linked to it are permanently visible. It means that on your public blockchain everything can be traced and seen.

There are no applications, nor have tools been invented where privacy is predetermined, therefore, data protection is a personal decision of each user. But what if at least one of the users does not value privacy or considers it none of their business because they have nothing to hide? “Then something like a strange tragedy happens,” said Zucco and to explain it better Stephen Livera used an example:

It would be something like that you do not use Facebook because you do not want to reveal any information about you, but your friends and family permanently publish photos in which you appear on their social networks, with your name and your information. So the same thing happens on the Bitcoin blockchain, where you realize that privacy only goes as far as the cooperation of peers in society.

Stephen Livera, presenter of the Stephan Livera podcast.

The great adoption of Taproot: the great challenge

During their speech, the panelists also referred to Taproot, the Bitcoin update that was activated in the protocol on November 14.

As detailed in the Cryptopedia, Taproot uses Schnorr and a data structure known as the Merkelized Alternative Script Tree (MAST), to avoid knowing all the information that could make up a Bitcoin transaction.

In the eyes of specialists, precisely Taproot is the great challenge facing the Bitcoin ecosystem todayIt is because most exchanges, payment processors and applications have not yet updated their software to make it compatible to operate between Bitcoin addresses that have support for Taproot.

Stephan Livera, Jameson Lopp, Giacomo Zucco and Tadge Dryja, along with Lunaticoin on the third day of Labitcoinf 2021. Source: Capture YouTube.

Taproot can lead to other practical developments and services for the Bitcoin user and “eventually we will have a phase in which there will be more privacy, but above all the most important thing is to understand that privacy in Bitcoin will not improve only for a transaction, but that it will do so when every transaction made on the network is carried out with the same level of care and security, “added Giacomo Zucco.

Taproot is something that has us excited in perspective, but not something that we should expect immediately because in the short term nothing will change. What we need to do in the short term is ask our portfolio providers when they will offer support for Taproot. We must because we know from experience that some of them can take up to five years to implement new technologies.

Tadge Dryja, Bitcoin developer and researcher.

Lightning Network light in the way of the most private payments?

Jameson Loop highlighted that Bitcoin Lightning Network’s payment channel network, offers greater privacy Because transactions flow off the main chain, they are not transmitted to all nodes on the network, and they are not stored forever in a public record.

The developer added that the Lightning protocol uses onion routing to improve privacy, preventing intermediate nodes from knowing what other nodes have processed along a payment path. However, consider that not everything is rosy.

In Lightning, users are less exposed to attacks on privacy or surveillance, but it still has a negative side for the management of the liquidity of the payment channels. That still needs to be balanced better. That is why I believe that privacy in Bitcoin is a game of cat and mouse, comparable to privacy with security that are endless battles.

Jameson Lopp, software engineer and columnist.

The panelists subsequently concluded that, ultimately, it will take a long time for privacy to be a default value in Bitcoin. Meanwhile, they recommend not using platforms that require KYC or know your customer. “If you do this, you will be in a relatively good position and if you additionally use Coinjoin or other privacy techniques, such as installing your own node, then you will find yourself in a more decent position,” said Giacomo Zucco.

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