Whenever commentators speak about cryptocurrencies and blockchain, a recurring theme is privacy. This feature is becoming more and more growing population wish their information to be available onto a public ledger that accessible by governments, regulators or even close-knit associates like family and friends.
Bitcoin’s Relationship with Privacy (or Lack Thereof)
Initially, when Bitcoin came to existence, it was a pseudonymous coin that offered enough privacy to convince users of the difficulty in connecting a Bitcoin hash address to a real-life individual or businesses. However, as the ledger of the cryptocurrency was public, it came to light that it was very much possible to track specific addresses based on their usage patterns and their transactions.
Also, specific nodes did accidentally give out details of IP addresses when a transaction was broadcasted. The first instance when it became clear that Bitcoin operations were not as private as some thought was in 2013 when Sarah Meiklejohn, along with her colleagues, published a paper named “A Fistful of Bitcoins: Characterizing Payments Among Men with No Names” which identified clusters that belonged to sure online wallets, e-commerce websites, and other service providers.
Once it was established that Bitcoin transactions could be traced, company’s such as Chainalysis and Elliptic came into existence. Among others, these two firms quickly began uncovering transactions on the public ledger to provide information on the detection of money laundry, fraud, and compliance violations.
The traceability “flaw” of Bitcoin gave rise to many services such as CoinJoin and others that provided sought of privacy to the users. Despite their best efforts, these offers still had their set of flaws and continued to leave an opportunity for others to launch a privacy-based solution.