Computer Scientists Strengthen Bitcoin Anonymity with CoinShuffle

Journalist:
January 27, 2015

Bitcoin has many things going for it, relative to the current fiat currency system, and compared to any other digital currency on the market. Bitcoin is not perfect, though, and there are issues that many critics and users, would like to see improved before it can become a mainstream staple of global economics.

One issue that is commonly mentioned is the pseudonymous nature, in that transaction can be traced, but anyone savvy enough, back to their originators. Governments like to be able to trace everything any person does. Many owners would like more privacy to be available, as every transaction isn’t for public consumption. And who knows who can trace that information, and for what purposes that would be used against the individual in the future. Solving this can help prevent fraud and increase user confidence in the Bitcoin technology and Blockchain.

CoinShuffle to Increase Bitcoin Transaction Privacy

“Cryptographic Systems” is a group of computer scientists at Saarland University in Germany that thinks they have licked this problem, as they explain to phys.org:

“Within the research community, it is well-known that the anonymity of Bitcoin can be broken”, explains Aniket Kate of Saarland University, who leads the independent research group “Cryptographic Systems. “They are pseudonyms through which users perform and publicly record transactions. If those pseudonyms can be tracked back to the real initiators, the anonymity of Bitcoin is broken.”

Also read: Stealth Payments Create Anonymous Bitcoin Transactions

In order to increase privacy and anonymity, digital currency users have turned to altcoins like Darkcoin for improved security. Using a variant of “transaction mixing”, the origin of transactions could not be detected. The only problem is who is keeping the mixers, known as “Master nodes” in Darkcoin, from taking the same sensitive information? The solution is manual and human in nature, and not mathematical, and therefore flawed at its core. You still have to trust a 3rd party, not mathematics or an algorithm.”Cryptographic Systems” thinks they’ve figured out a way around that.

They’ve created a security protocol called Coinshuffle. In order to hide the genesis of all transactions, each user in their trials conforms to a certain pre-determined succession of actions. Each user decodes an encrypted list of recipient addresses, adds his address to it, and forwards the encrypted list to the next participant. Every user does the same thing, in succession. And this action creates an effect that removes the traces backwards, and creates a shuffling effect, similar to shuffling a deck of cards.

“The result is a list of addresses, which does not contain any indication of the initial client. To prevent abuse, everyone subsequently checks the released list” says Aniket Kate.

According to their tests within the Python programming language system, they can have 20 users complete this process in less than 20 seconds. Given the fact that a Bitcoin confirmation takes several minutes, to up to an hour, if you need multiple confirmations, time loss is not an issue with CoinShuffle.

“To the best of our knowledge, CoinShuffle is the first solution worldwide that is immediately usable and provides anonymity without an intermediary”, explains Tim Ruffing, also of Cryptographic Systems. “Currently, several developers are reprogramming our approach to incorporate it into their Bitcoin clients.”

Can this succeed where Darkcoin failed and other security based altcoins failed, and make Bitcoin even better? Share above and comment below.

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Evander Smart @EvanderSmart

Evander Smart wants to get you talking, get you thinking, get you learning about Bitcoin, "The Future of Money". He has two Bitcoin video training courses on Udemy.com called "Bitcoin for Beginners". Go to EvanderSmart.com to get the latest on Evander and the latest Bitcoin news.