One of the ambitions of many users and developers within the digital currency industry has been to see the ability to make completely anonymous transactions using Bitcoin. While all digital currencies give some levels of privacy, examination of the public blockchain can allow sensitive user information to be tied to individual transactions, and so methods to combat this have long been popular with researchers. On August 15th, a transaction was made on the Bitcoin network, using the Coinshuffle tool, to provide a completely anonymous transaction, and represents the first time the technology has been used on the network itself.
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Anonymous transactions have been the goal of many in the cryptocurrency industry, both business and users, and the developers of Bitcoin privacy tool Coinshuffle has been working towards just that since its announcement in April 2014. Earlier this month, on the 15th August, the first transaction on the network using Coinshuffle took place, and represents a step forward for privacy in digital currency payments.
The technique used by the Coinshuffle tool protects the user information that may otherwise be visible through the public blockchain, and although this test was a straight transaction, the idea is to integrate the Coinshuffle tool into Mycelium, the Bitcoin wallet service who are sponsoring development of the tool, to provide access to anonymous transactions for users. The project is open source, with the hope of widespread adoption by wallet providers across the digital currency industry, giving users the tools they need to obtain the level of privacy they are looking for.
The system is based upon the CoinJoin idea, developed by researchers at Saarland University, and works by connecting the data from multiple transactions, making it difficult to separate which details apply to which transaction. What makes this initiative different from other privacy solutions that have been developed is it works without any changes to the Bitcoin protocol itself, meaning it can be rolled out much faster without the need to roll out protocol changes, and requires drastically reduced development time.
Of course, privacy remains a touchy subject and there are some criticisms of the initiative. Not just in terms of the necessity for such anonymous transactions, but the method uses by Coinshuffle. Because of the method uses, mixing transaction details together, by necessity several transactions are collected, and for some critics, this is the antithesis of the decentralized model.
Whether a truly anonymous method of transacting is needed is of course a hot debate, but regardless of which side of that you are on, it is clear that there is a demand, and for the cryptocurrency industry to keep growing, meeting demands of the user base is vital. In that context, once implemented fully, this is a somewhat unique ability that represents a genuine selling point for digital currencies, and one that we should all hope goes from strength to strength.