Topic: Bitcoin Privacy Protocols (Read 551 times)

I think that Satoshi's intention wasn't to create an electronic payment method that would offer you superb privacy, as I understand from his posts, he didn't have enough knowledge to create a coin similar to Monero. Satoshi's priority was to create a purely P2P version of electronic cash. He wanted to accomplish things without a trusted party. In order to achieve that, transactions must be publicly announced, that's why the bitcoin blockchain, a public book of transactions exist. There is a detailed talk about this on the second page of Bitcoin Whitepaper.
I think, the first and 2nd page of Bitcoin Whitepaper answers your questions but I still suggest you to have a look at this thread and all the posts that are written here: Not a suggestion.

He made statements that were basically centered around that idea:

I'm not familiar with that quote, do you know where I can find it?

At the moment, no, they can't come up with new theories and proofs. But, they're quite good at analyzing and producing conclusions based on current knowledge (at least the good ones). They're already capable of solving math tests with ten out of ten, and we reached that point in quite small time span. It wouldn't surprise me if they were capable of the former as well within this or the next decade.

Bitcoin's primary principle is to facilitate peer to peer transaction, and the priority is not privacy. This can be seen in the whitepaper where the mention of privacy is a small section without going through it in depth. That aside, I don't believe Satoshi should have attempted to improve the privacy of Bitcoin, like Monero or other similar cryptos. Reason being, I don't think he could've done it efficiently and implementing it in the protocol as a feature would have tons of repercussion should the features not work as expected.

Bitcoin has a convenient feature of being pseudonymous, and that is how privacy is enhanced from the on-start. I don't think Bitcoin requires privacy enhancing tool, unless we are absolutely sure that it is infallible and bulletproof. The side effect of features like these would be having complacent users which over-relies on whatever Bitcoin can provide. I don't see a problem having it out of the protocol, having it included with the protocol could potentially introduce problems down the road.

Well obviously privacy leakage mostly happens due to human error. The tools you have mentioned are great, but they aren't built-in in Bitcoin. They were developed to provide higher privacy and of course, they are welcome. But my point is, Satoshi himself mentioned that "bitcoin should be used using Tor". So, doesn't Bitcoin "kind of" need these tools (add-ons) to help people with their privacy?

Likely not, and not for anywhere in the foreseeable future. GPTs are good at making up stuff with prompts but they aren't good at math. If they were to come up with mathematical theory and proofs, then I would be convinced but I don't think we are anywhere near that yet.
Bitcoin provided sufficient privacy while keeping it simple and easy to understand. If used correctly with the appropriate tools (mixers, coinjoins, etc), then it would provide very good privacy where adversary would have a hard time trying to prove any plausible link.

The issue with privacy doesn't actually lie within Bitcoin, but it is mainly about the user's behaviors. Most privacy leakage are caused by the user's privacy habits that doesn't lie with Bitcoin.

A public ledger can also cause public harm. Consider when governments go rogue--they will use public ledgers to track and punish enemies and dissidents.

Another scenario is medical and financial information that is required by law to have protection from public view.

There are many legitimate reasons to have transaction privacy.

This opens up entire conversations that can't be compressed in just a post, but I'd say that as AI models become more sophisticated, they can be utilized for identifying vulnerabilities in cryptographic domains. I'm not entirely sure about the considerations that need to be taken, but I know that we can't rely exclusively on a creation that holds no responsibility for what it produces. (That under the hypothesis that we can't blame the AI developers for an AI false output)

Even if true, you can't forbid it by invading their privacy preemptively. Everyone is not guilty until proven innocent.

Oh yeah, we are very much on the same page on this now.

I don’t fully understand what is been said here but, my closest deduction is that, models to traceability happens to have changed over the years and one hardly finds a need to wish eliminate traces in fiat or banknotes except when it’s sure to be subject to questioning, laundered money and it’s related means to handling money that raises an eyelid.

Fiat uses protocols that uses less publicity to ensure privacy although, the transaction is widely open between parties (senders, third party processing the transaction and receivers).
Modern day Bitcoin adopt a model that dissociates the person from the address but publicizes the transaction for verification and adoption into nodes to ensure privacy.
Now, the trick here is that, your privacy depends on how you use an address as it could be linked to you if you frequently use the address or have by some means linked it to a persona on some platform that seeks KYC. Know that this might be exploited.
This method ensures that elicit usage of the system could have some traces should there have been any loophole in the way you managed your privacy or associate address.

This is where mixers came into play and with the talked about XMR trying to adopt models that resembles that of mixers to ensure privacy, it’s sure to be attacked and having any center clearing makes it vulnerable unlike Bitcoin.

AI continues to be the order of the day and the sophistication of technology in our time brings to question if this or that could stand in the Bitcoin models but my studies so far gives me no reason to doubt Bitcoins continued existence and growth with regards to sophistication. Given that by the absence of no coin issuers, it’s adopted system to persist by popular votes where each IP stands for a single vote and works in a chain, having nodes for verification and storage of data.
This remains a free to join and should you leave at some point, your always welcomed to rejoin and accept all valid transaction while you were absent to continue the chain and maintain integrity of the system.
This doesn’t give much time for any exploitation as, any delayed step increases the gaps between a node for which an attacker could hope to exploit and the exponential difference decreases the level of success of an attacker.

In terms of privacy, maybe Satoshi Nakamoto did.
Been a privacy specialist, the pioneer had to study other coins that exited before that time, the issues they had and how they were vulnerable to the government, dissociated from the invention from been a hotspot to the invention, adopted models that works and bringing in a model that would ensure the sustainability of this new invention. Some of those is by not making privacy absolute.

https://youtu.be/Tr3t1uZNbKo?si=iAjJszpixt5FumJc

I have been thinking about this as well and I am all for never say never here. There have been examples for backdoors that went undetected for decades.

But I find one idea quite compelling to think about, do you think that publicly available artificial intelligence will come to a point where it can be asked for vulnerabilities in the most secure (or rather most pervasively used) algorithms or could it intentionally be fed an information a la garbage-in-garbage-out such that it always provides an answer pleasing the public? If AI becomes more intelligent at an exponential rate while an algorithm is a static mathematical construct, would the chance be that those developing AI would/could be the ones to know first?

What I also wonder is whether a backdoor could in any case be detected as having been introduced deliberately by someone? I am sure there are cases where it could be, but there are probably cases where someone could say it was just a mistake in the code.

Satoshi wanted to implement XMR features on BTC, long before XMR was born:

https://bitcointalksearch.org/topic/m.9074

Maybe he didn't have enough time, maybe not enough programming expertise, who knows... it's endless speculation at this point.

Also, few people seem to realize that banknotes actually have limited tracing via serial numbers.

Have you tried to deposit stolen banknotes (from a robbery/abduction) in a bank?

I wouldn't recommend it...

It's like depositing tainted BTC in a CEX with KYC/AML. They will be confiscated immediately.

But sure, nobody cares about serial numbers in hand-to-hand transactions. It's the same with BTC and p2p transactions.

I hope that clears up some misconceptions.

Last but not least, bankers still have some ace up their sleeves:

https://www.fleur-de-coin.com/eurocoins/banknote-rfid
https://www.eetimes.com/euro-bank-notes-to-embed-rfid-chips-by-2005/

I bet most people thought this wasn't possible, right?

They can invalidate old euro banknotes let's say by the end of this year and after that only RFID banknotes will be considered legal tender.

Considering the fact that banknotes ALWAYS originate from the banking system, this would make tracing far more ubiquitous than it is today with serial numbers.

Really?

Prove it: https://www.interactivecrypto.com/irs-625-000-bounty-for-breaking-monero-and-lightning

Lightning already exists and according to IRS, it's a PITA.

Believing that it doesn't have an NSA backdoor is reasonable. However, you can't throw it around the board as a fact. We don't have evidence of it being free of backdoor. We simply know that it's open for public scrutiny years now, and that a backdoor in such an examined algorithm would be likely discovered by now. That doesn't nullify the doubt.

Cash has existed for centuries, in much larger scale, and is equally or even less traceable than Monero. Yet, no user was subjected to using its banknotes for "mixing". Everyone accepted it.

Satoshi Nakamoto, as a cypherpunk, knew how important privacy is. I am not saying that Satoshi Nakamoto implemented Bitcoin alone, nor that he never interacted with other people. In fact, there are multiple emails where Satoshi Nakamoto exchanged ideas and thoughts with a lot of people. They also had an account in this forum, where he interacted with a lot of users. But, what I am saying is, nobody knew who they were in real life.

If I had a guess, I would speculate that Satoshi Nakamoto and other cypherpunks cooperated in Bitcoin's development. The result (Bitcoin) isn't perfect, but it feels like the creator has thought every single detail. My experience with programming so far has tought me that 2 pairs of eyes is always better than a single pair. Having said that, my guess would be that Satoshi Nakamoto is just one of the people who worked in Bitcoin.

Could that really be true, that the founder worked with no one else in this life long invention? That we’ve not had anyone come up to point to us whom the persona is doesn’t mean the truth behind the 8th wonder of the world in the Satoshi Nakamoto isn’t known by some one or some group. It’s just that, the persona have been on top of his/her/their game and had a deep understanding of what they did intend to archive. That’s how I would like to imagine it.

Meanwhile, a privacy protocol that doesn’t give room to traces is something that could be exploited in the worst way possible by governments. It’s some unique quality but in one instance, you serve as mixers and coin offerers all in one. It’s might seem huge but, it as well brings the fight to you as government is known for going after what has gotten a name and they can’t express.

Allowing decentralization and privacy at a level of extra work and service to attain complete privacy was a good step for the founder and that is being proved with the way these non trace/absolute eluding privacy projects is been hit by.

To be honest, it doesn't take a government employee to know that the sec-2 curves did not have NIST's oversight on them like the P-123456 labeled curves. The NIST is known to just sit there and not challenge the NSA when it meddles with the algorithms, like this one. So naturally there is more distrust for those elliptic curves than the sec-2 curves.

That being said, it is reasonable to believe that no sec-2 curve has an NSA backdoor. Although that doesn't necessarily mean that they are mathematically hardened, as the safecurves website demonstrates.

And yet there is a desperate and growing need for it as international forces grow stronger in their global reach, and more malevolent in their long-term goals.

Yes, no technical solution is perfect, but the right to private transactions should be legally enshrined so that even if technology falls short in some way, an authority of the people and by the people steps in and protects money rights as an unalienable right, like freedom of speech.

The technical solution and legislation complement each other. We need both.

You mean the secp256k1 elliptic curve? How do you know it doesn't have a backdoor?

It's possible but I don't think Bitcoin would be banned if there was privacy layer from the start.
There is one theory that he (or they) worked for three letter agency because he picked one encryption used in bitcoin that doesn't have a backdoor.
Satoshi was either very lucky or he had classified government information.

There is no absolute transaction privacy with any transactions, even with monero.
I am sure that for Bitcoin we are going to use some interesting second layer solution that will help as achieve much higher level of privacy.
Statechains is one of this options I like very much.

Actually, now that you mentioned it, I don't think key blinding can be done on secp256k1 unless someone finds a deterministic pattern whereby the user can generate multiple public keys that hash into the same address.

But in the process of doing so, SHA256 will probably be broken in the process since patterns would have to be found in a hash function. But it would make the DER signatures virtually indistinguishable from normal signatures as the lowest such public key can be used for them as a sort of standardness rule.

I just don't get how you've reached to this conclusion. There is no message of him discouraging the use of absolute privacy tools. To me it rather seems as he saw it as "private enough".


He even talked about key blinding and group signatures long before Monero and other privacy protocols were introduced in concept:

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In my experience, the simple answers are usually the correct ones. Satoshi simply lacked the competence to do that. It wouldn't be surprising. The very first Bitcoin version was quite simple in concept, and if you read the source code, you could tell it was just above the average. He did some mistakes, like the value overflow or reorganizing based on block height instead of chainwork. Maybe he ignored privacy enhancing techniques on purpose, but that's because it would be more difficult to explain to the public. Another guess: Maybe he didn't ignore them on purpose, but simply because it was too late to introduce them at the date he revealed interest about them.

I believe Satoshi is a privacy expert.
He created an online persona and there is literally nobody else on this planet that knows this persona is linked with the real person behind Satoshi.

Now, let's speculate, just for fun.

1. Intentional choice:
Perhaps Satoshi wanted to increase our need for self-privacy. Perhaps Satoshi knew that privacy can be achieved with Bitcoin, but that it requires a little more effort.

2. Coincidence:
On April 23, 2011, Satoshi said "I have moved on to other things".


Perhaps Satoshi decided to add Ring Signatures and Stealth Addresses to Bitcoin when it was already too late. And perhaps Satoshi Nakamoto became Nicolas van Saberhagen and developed CryptoNote which is the base layer of Monero.

Conclusion:
Unfortunately we can only speculate. But, in my opinion, Satoshi knew about Ring Signatures and Stealth Addresses and the reason he didn't add them to Bitcoin was because he knew that people would speculate that Bitcoin is only built to support illicit activities. Some people still believe it today. The reason I am saying that, is that there is a message from Satoshi to Gavin Andresen that says:


It is obvious that Satoshi Nakamoto wanted to develop a transparent way to transact P2P and that would become widely adopted. Perhaps he intentionally added pseudonymity and not untreacability, so that people wouldn't think Bitcoin was only used for illegal activities. But...

I think he was a strong advocate for privacy. He reportedly used the IP-masking browser, Tor, for all his public interactions, which is why his public IP address could never be traced back to him.

He introduced password protection to Bitcoin’s JSON-RPC interface, which was crucial for safeguarding user funds, preserving privacy, and ensuring the stable operation of the Bitcoin node. But when it came to incorporating zero-knowledge proofs (ZK-proofs), a privacy protocol, into Bitcoin, Nakamoto expressed difficulty in figuring out how to apply them.

https://cointelegraph.com/magazine/satoshi-nakamoto-zk-proofs-bitcoin
https://news.bitcoin.com/unraveling-the-online-legacy-of-satoshi-nakamoto-bitcoins-mysterious-creator

So, he may have faced technical challenges in implementing certain privacy protocols in Bitcoin.

The absence of certain privacy protocols in Bitcoin does not necessarily mean he deliberately avoided them to evade regulatory scrutiny. It could be due to technical challenges or a different interpretation of what constitutes sound money. However, this is mostly speculation as Nakamoto himself has not publicly stated his reasons.

Well I wouldn't say mostly used for illicit activities it is surely used by the entire world basically and is very convenient but in the event that it is used for an illicit purpose it is indeed completely untracable. Bitcoin they can definitely have a much better chance of tracing the owner.In  Cyber insurance policies they also ban the use of XMR the policies will not pay out in any crypto except for Bitcoin. 

That was so nice of Satoshi Nakamoto. If bitcoin is like monero, it might also not be widely used as it is today. Nearly all countries do not ban bitcoin and the discovery mechanism would be one of the reasons many countries do not ban the coin.

Exactly. But it is worth knowing that fiat is mostly used for illicit activities today. It is mostly used for money laundry, terrorism financing, ransom and bandits funding etc. So far something is of value and can be easily transfer from one person to another as a money, some people will want to use such thing for illicit activities.

I'm not so sure if there's solid proof that Satoshi left out privacy stuff in Bitcoin only to steer clear of regulations.  In 2009, crypto and what it could lead to was pretty much uncharted territory.  Rules from government might not have been a main thing on his mind and  seems he cared more about creating a decentralized and immutable digital currency that didn't rely on centralized entity and couldn't be manipulated or faked.  Maybe those goals took priority over making payments impossible to trace.

Bitcoin still has its privacy feature but it isn't as strong as it was before centralized bodies had arrived. Before now, there has always been other ways to increase privacy like use of coinjoins which was introduced in 2013.
Satoshi understood a lot about privacy and its negative impact. He somehow knew that if Bitcoin's privacy was as completely strong as that of coin like the monero's, it would lead to more illicit activities using Bitcoin.

Exchanges must follow government rules and avoid trouble, so they might have to remove coins that offer completely untraceable transactions.

My take on it is that he understood that absolute privacy of transactions - be it BTC, fiat, or whatever - naturally opens the doors to a myriad of illicit uses. Only an immutable and public ledger gives a way to track those uses and yes, if need be, prosecute the folks involved. By being a public ledger he (thought he) removed the ability to use BTC for things that are against 'The Public Good'.

Now, the sticking point is that yes, transactions can be followed through the blockchain BUT who/what has ownership of coins cannot be discovered until they are exchanged into fiat or some type of physical goods which can be linked to people & organizations. He wanted to make sure that BTC had that discovery mechanism.

Of course ones definition of 'illicit activities' and  'The Public Good' largely depends on the individual and their governments...

With Binance delisting of XMR, there seems to be a growing trend that coins with privacy protocols are increasingly becoming a target of governments.

Is there any evidence that Satoshi Nakamoto deliberately avoided adding privacy-related protocols and functionality into Bitcoin in order to avoid the ban-hammer?

If so, how did he justify this decision when the very concept of sound money cannot be implemented in an environment where there is no guarantee of absolute transaction privacy?