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This thread is a translated version of a topic that I created in a local board Bahasa Indonesia: [Edukasi] Privasi dan Anonimitas Bitcoin
Privacy and Anonymity
Privacy is a big problem in the Bitcoin system. Although Bitcoin offers pseudonymous, several techniques have developed to open relationships between Bitcoin addresses, transaction patterns, and the original identity of the owner of the Bitcoin address.
Table of contents:
1. Privacy Issues
2. KYC and AML principles
3. Taint
4. Greenlist
5. Geolocation
6. CoinJoin
7. CoinSwap
8. MixCoin
9. Merge Avoidance
10. Mixing Service
11. Schnorr Signature
12. MAST (Merklized Abstract Syntax Tree)
13. Taproot by DroomieChikito
14. Bitcoin Anonymity Analysis
15. Coin Control by DroomieChikito
Reference
1. Privacy Issues
back to table of contents
Bitcoin designed with a privacy model where transactions made and addresses owned by a user do not have a direct relationship with the real identity of the owner. The Bitcoin privacy model and its comparison with the traditional privacy model can describe as follows:
Bitcoin Privacy Model 1
Anyone can join the Bitcoin system without having to register first because there is no centralized control organization in the bitcoin system that controls users or transactions that occur within the system.
Although everyone can see these transactions, the identity associated with the purchase remains hidden.
However, this privacy model does not mean that the user's identity remains hidden. Many rules are set and also the characteristics of Bitcoin that can use to analyze the relationship between bitcoin transactions and the user's real identity. They are what then causes the Bitcoin community to tend to refer to Bitcoin as pseudo-anonym.
2. KYC and AML principles
back to table of contents
Governments in the world are starting to become aware of money laundering schemes that can implement using digital currencies such as Liberty Reserve, which then forces financial institutions to apply the principles of Know Your Customer (KYC) and Anti Money Laundering (AML). By using the KYC principle, no one can create a bank account without an identity card. The same law imposed on financial institutions related to the Bitcoin system, such as the Bitcoin trading company that allows users to sell or buy Bitcoin and convert local currencies into Bitcoin or vice versa.3
In Indonesia, one of the exchangers for exchanging Bitcoin / Cryptocurrency with Rupiah, namely Indodax, adopted the same mechanism by requiring its users to submit copies of their identities to be validated manually by the company.
It means that Bitcoin trading services have a connection record between the Bitcoin address and the user's real identity.
Because anyone can see every transaction in the Bitcoin system, Bitcoin purchased from the Bitcoin Exchanger can be tracked easily. Therefore, if the transaction is suspected to be related to illegal activities, the identity of the user involved can be identified if the user transacts directly from the exchanger.
3. Taint
back to table of contents
Taint is a transaction trace that can use to measure connectivity between a Bitcoin address and another Bitcoin address that connected to transactions between these addresses.5
Addresses that transact with each other tend to have something related, for example, owned by the same user, or have a seller-buyer relationship in the transaction scheme of buying and selling goods or services.
There used to be a Taint Analysis tool on Blockchain.info (https://www.blockchain.com/)
but at this time, the feature is removed6. (CMIIW)
Another Taint Analysis Tools references:7
https://bitcointalk.org/index.php?topic=1746836.0
4. Greenlist
back to table of contents
Greenlist8 is a scheme that records the real identity information of the owner of a Bitcoin address. This concept first proposed by the CoinValidation company, which holds the data. With the Greenlist scheme, the company will verify ownership of Bitcoin addresses. As such, this information can be used by law enforcement to track those who buy prohibited items using bitcoin9.
This Greenlist idea rejected by the bitcoin community, e.g., on the bitcointalk.org forum and the Reddit forum11.
This greenlist scheme will create different bitcoin valuations depending on whether the bitcoin comes from an integrated address.
Greenlist policies can be a starting point for government agents who have database access to track the identity of anyone who transacts with a specific bitcoin address8.
5. Geolocation
back to table of contents
Geolocation analysis can understand as a method for mapping Bitcoin users based on their location on the surface of the earth. The report can do by mapping the locations of vendors who accept bitcoin as a means of payment.
Every time a user makes a payment in the form of bitcoin, it can estimate that the user is in the same location as the vendor, of course assuming that the vendor sells goods offline in the physical stores they have. Thus, analysts can track transaction details, including if necessary, checking CCTV cameras when searching for the user's presence.
Heatmap usage of Bitcoin.12
By combining geolocation techniques and taint analysis techniques, every bitcoin user who shops at a vendor's shop can be tracked. Therefore, without further security, the identity of Bitcoin users can be known.
Reference:
back to table of contents
- https://en.bitcoin.it/wiki/Privacy
1. Satoshi, Bitcoin: A Peer-to-Peer Electronic Cash System
2. Dimaz A.W. & Oscar D., Blockchain dari Bitcoin untuk Dunia, pages 100-104, 2017: Jasakom
dimaz@kryptologi.com ; @kriptologi
3. M. Moser, R. Bohme, and D. Breuker, "An inquiry into money laundering tools in the Bitcoin ecosystem,"
in eCrime Researchers Summit (eCRS), 2013, pp. 1-14.
4. Kaisa, Menata Legalitas Cryptocurrency di Indonesia
5. What is Taint?
6. Was Blockchain.info taint analysis function removed?
7. Any Other Taint Analysis Tools (other than blockchain.info's)?
8. Vitalik Buterin, Why The Bitcoin Greenlist is Structurally Dangerous to the Bitcoin Ecosystem
9. Kashmir Hill, Sanitizing Bitcoin: This Company Wants To Track 'Clean' Bitcoin Accounts
10. adam3us, Coin Validation misunderstands fungibility and could destroy bitcoin
11. https://www.reddit.com/r/Bitcoin/comments/1qj7sw/sanitizing_bitcoin_this_company_wants_to_track/
12. http://bitcoinnewsindo.com/coinmap-menunjukkan-tempat-mana-saja-yang-menerima-bitcoin/
I am not a native speaker of English and please correct if there is incorrect grammar.
Privacy and Anonymity
Privacy is a big problem in the Bitcoin system. Although Bitcoin offers pseudonymous, several techniques have developed to open relationships between Bitcoin addresses, transaction patterns, and the original identity of the owner of the Bitcoin address.
Table of contents:
1. Privacy Issues
2. KYC and AML principles
3. Taint
4. Greenlist
5. Geolocation
6. CoinJoin
7. CoinSwap
8. MixCoin
9. Merge Avoidance
10. Mixing Service
11. Schnorr Signature
12. MAST (Merklized Abstract Syntax Tree)
13. Taproot by DroomieChikito
14. Bitcoin Anonymity Analysis
15. Coin Control by DroomieChikito
Reference
1. Privacy Issues
back to table of contents
Bitcoin designed with a privacy model where transactions made and addresses owned by a user do not have a direct relationship with the real identity of the owner. The Bitcoin privacy model and its comparison with the traditional privacy model can describe as follows:
Bitcoin Privacy Model 1
Anyone can join the Bitcoin system without having to register first because there is no centralized control organization in the bitcoin system that controls users or transactions that occur within the system.
Although everyone can see these transactions, the identity associated with the purchase remains hidden.
However, this privacy model does not mean that the user's identity remains hidden. Many rules are set and also the characteristics of Bitcoin that can use to analyze the relationship between bitcoin transactions and the user's real identity. They are what then causes the Bitcoin community to tend to refer to Bitcoin as pseudo-anonym.
2. KYC and AML principles
back to table of contents
Governments in the world are starting to become aware of money laundering schemes that can implement using digital currencies such as Liberty Reserve, which then forces financial institutions to apply the principles of Know Your Customer (KYC) and Anti Money Laundering (AML). By using the KYC principle, no one can create a bank account without an identity card. The same law imposed on financial institutions related to the Bitcoin system, such as the Bitcoin trading company that allows users to sell or buy Bitcoin and convert local currencies into Bitcoin or vice versa.3
In Indonesia, one of the exchangers for exchanging Bitcoin / Cryptocurrency with Rupiah, namely Indodax, adopted the same mechanism by requiring its users to submit copies of their identities to be validated manually by the company.
It means that Bitcoin trading services have a connection record between the Bitcoin address and the user's real identity.
Because anyone can see every transaction in the Bitcoin system, Bitcoin purchased from the Bitcoin Exchanger can be tracked easily. Therefore, if the transaction is suspected to be related to illegal activities, the identity of the user involved can be identified if the user transacts directly from the exchanger.
3. Taint
back to table of contents
Taint is a transaction trace that can use to measure connectivity between a Bitcoin address and another Bitcoin address that connected to transactions between these addresses.5
This is the best I could explain the taint analysis you see on blockchain.info but i'm not sure it is very clear: (fictional example for address 1MtPYAjqohLH5gMq3PH5xKVFWWDxrRQEbh)
All addresses which have received a payment are "tainted" and it in no way effects the value of the coins.
All addresses which have received a payment are "tainted" and it in no way effects the value of the coins.
Addresses that transact with each other tend to have something related, for example, owned by the same user, or have a seller-buyer relationship in the transaction scheme of buying and selling goods or services.
There used to be a Taint Analysis tool on Blockchain.info (https://www.blockchain.com/)
but at this time, the feature is removed6. (CMIIW)
Quote
the highlighted red rectangle shows the Taint Analysis function available among the Tools:
The same page today is pretty different, in that the Taint Analysis function is clearly missing form the Tools section:
The same page today is pretty different, in that the Taint Analysis function is clearly missing form the Tools section:
Another Taint Analysis Tools references:7
https://bitcointalk.org/index.php?topic=1746836.0
4. Greenlist
back to table of contents
Greenlist8 is a scheme that records the real identity information of the owner of a Bitcoin address. This concept first proposed by the CoinValidation company, which holds the data. With the Greenlist scheme, the company will verify ownership of Bitcoin addresses. As such, this information can be used by law enforcement to track those who buy prohibited items using bitcoin9.
This Greenlist idea rejected by the bitcoin community, e.g., on the bitcointalk.org forum and the Reddit forum11.
-snip-
I am also incensed frankly that someone would step into the market with such a muddle-headed thinking, and attempt to sabotage or destroy the core bitcoin feature that gives its value, where the value has been created by Satoshi and a cast of millions of man-hours of contributions of the community and technical wizards developing it mostly on volunteer time. I am not someone prone to swearing, but this is astonishingly stupid and dangerous. Please stop now. In the article it is claimed they sought advice from the Winklevoss twins, if the twins value their estimated $30million bitcoin holding they should advise them to stop: if fungibility is destroyed bitcoins value as a transaction currency is impacted.
-snip-
Greenlist will eliminate the concept of functionality, which is a concept where any bitcoin with the same amount should have equal value regardless of where the bitcoin originated.I am also incensed frankly that someone would step into the market with such a muddle-headed thinking, and attempt to sabotage or destroy the core bitcoin feature that gives its value, where the value has been created by Satoshi and a cast of millions of man-hours of contributions of the community and technical wizards developing it mostly on volunteer time. I am not someone prone to swearing, but this is astonishingly stupid and dangerous. Please stop now. In the article it is claimed they sought advice from the Winklevoss twins, if the twins value their estimated $30million bitcoin holding they should advise them to stop: if fungibility is destroyed bitcoins value as a transaction currency is impacted.
-snip-
This greenlist scheme will create different bitcoin valuations depending on whether the bitcoin comes from an integrated address.
Greenlist policies can be a starting point for government agents who have database access to track the identity of anyone who transacts with a specific bitcoin address8.
5. Geolocation
back to table of contents
Geolocation analysis can understand as a method for mapping Bitcoin users based on their location on the surface of the earth. The report can do by mapping the locations of vendors who accept bitcoin as a means of payment.
Every time a user makes a payment in the form of bitcoin, it can estimate that the user is in the same location as the vendor, of course assuming that the vendor sells goods offline in the physical stores they have. Thus, analysts can track transaction details, including if necessary, checking CCTV cameras when searching for the user's presence.
Heatmap usage of Bitcoin.12
By combining geolocation techniques and taint analysis techniques, every bitcoin user who shops at a vendor's shop can be tracked. Therefore, without further security, the identity of Bitcoin users can be known.
Reference:
back to table of contents
- https://en.bitcoin.it/wiki/Privacy
1. Satoshi, Bitcoin: A Peer-to-Peer Electronic Cash System
2. Dimaz A.W. & Oscar D., Blockchain dari Bitcoin untuk Dunia, pages 100-104, 2017: Jasakom
dimaz@kryptologi.com ; @kriptologi
3. M. Moser, R. Bohme, and D. Breuker, "An inquiry into money laundering tools in the Bitcoin ecosystem,"
in eCrime Researchers Summit (eCRS), 2013, pp. 1-14.
4. Kaisa, Menata Legalitas Cryptocurrency di Indonesia
5. What is Taint?
6. Was Blockchain.info taint analysis function removed?
7. Any Other Taint Analysis Tools (other than blockchain.info's)?
8. Vitalik Buterin, Why The Bitcoin Greenlist is Structurally Dangerous to the Bitcoin Ecosystem
9. Kashmir Hill, Sanitizing Bitcoin: This Company Wants To Track 'Clean' Bitcoin Accounts
10. adam3us, Coin Validation misunderstands fungibility and could destroy bitcoin
11. https://www.reddit.com/r/Bitcoin/comments/1qj7sw/sanitizing_bitcoin_this_company_wants_to_track/
12. http://bitcoinnewsindo.com/coinmap-menunjukkan-tempat-mana-saja-yang-menerima-bitcoin/
I am not a native speaker of English and please correct if there is incorrect grammar.