Bulletproofs, a technological innovations proposed by Stanford University’s Applied Cryptography Group plus several Blockstream developers, could enable bitcoin users to transact with enhanced privacy, regardless if making on-chain transactions.
Contrary to mainstream media reports, bitcoin transactions usually are not private. Although addresses are pseudonymous, all transaction facts are publicly viewable using block explorers, and developers have formulated enhanced tools which allow their users for any range of enhanced information and link addresses within their parent wallets.
The U.S. Internal Revenue Service (IRS), as an example, uses these blockchain-tracing tools to identify and prosecute taxpayers who use bitcoin like a method for tax evasion. The these tools is usually why many dark web marketplaces have adopted monero, an anonymity-centric cryptocurrency, his or her payment strategy for choice.
First presented within the paper (PDF) titled “Bulletproofs: Short Proofs for Confidential Transactions and many more,” Bulletproofs promise to give bitcoin users having the ability to make private, on-chain transactions at a more affordable rate than currently-existent methods.
Bitcoin Bulletproofs could bring privacy to Bitcoin
As explained the paper’s authors, Bulletproofs are powered by a “non-interactive zero-knowledge proof protocol with very short proofs and with out a trusted setup.”
This protocol will purportedly enhance current implementations of zero-knowledge proofs, which, with only a basic level, allow observers to make sure that the integrity of transactions while obfuscating the quality of the transaction to everyone except the sender and receiver. Although onlookers may as well see what addresses component in the transaction, senders can make so-called “false negatives” by paying zero bitcoins to several addresses, preventing observers from identifying what address received the coins.
Critics express that the problem with current implementations of zero-knowledge proofs due to the fact must either utilize a trusted setup — as zcash did through its famous “Ceremony” — or they should be “prohibitively large” in size, exacerbating what a lot of people believe are already exorbitant fees that should be paid to transact around the bitcoin network.
Bulletproofs, the paper’s authors claim, will limit the size of confidential transactions considerably by shortening the cryptographic proofs wanted to implement them. This, ultimately, will make confidential transactions??additional affordable and easy for average users without subjecting the network within the systemic hazards of employing a trusted setup.