Bitcoin: Privacy Matters

Sam lives in a parallel universe (suppose that the Parallel Universes theory is correct), in Sam’s universe the Bitcoin has become a universe currency and payment system. Sam asked his manager to leave his job at 5:00PM, an hour before the end of the working day because his son was sick and he needed to be with him. He arrived his house at 8:00PM, his wife asked him why he was late! He told her that the traffic was heavy. She said to him:”why you do not tell me the truth. I know you was taking a beer in the Cryptocurrency bar”. The next day his manager said to him: “ why you told me that your son was sick and you went to the bar, the famous Cryptocurrency bar!”.

Everything was clear, he bought the beer in Bitcoin, this transaction was recorded in the Bitcoin public ledger and everyone who knows the public key of Sam and the public key of the bar could know this information.

Ten years ago Bitcoin was invented, new peer-to-peer payment system was born, no more need for banks and credit cards, Bitcoin is the new currency, the new payment system. After 10 years Bitcoin has achieved lot of success, int terms of its incredible price, the amount of investors and emerging a new market called cryptocurrency. But until now Bitcoin still struggles to be a payment system because of many reasons such as the privacy:

The privacy of Bitcoin users is in danger, bitcoin transactions are not anonymous when Bitcoin is used for payment. Bitcoin is transparent as every transaction is recorded in the public ledger and anyone can see it but this transparency is against the privacy as no one is willing to publish his financial data.

Bitcoin network provides any user with a wallet, and the identity of the user is hidden, more specifically it is expressed by a public and a private keys, the public key is published and anyone can know it, and the private key is a secret key, anyone knows it can control the corresponding Bitcoin wallet.

Many people think that they are safe, no one can know their real identity but that is not correct, suppose that you pay a beer at a bar (as Sam has done in his universe), so you know the public key of the bar to send the money and the bar know your public key because he receives the money, your employer knows your public key to send the salary, and many other people can know your public key and link it to you and then they can watch the public ledger and find out your salary, your balance and all transactions that you have made!

This privacy problem prevents Bitcoin to be used as a payment system. And any solution for this problem should be integrated into Bitcoin network otherwise a third-party will intervene to solve it and it will get this financial data, that means they will be the new banks which contradicts with the idea of Bitcoin which says: Bitcoin is a peer-to-peer payment system, so we might call it peer-to-thirdparty-to-peer payment system! fair enough!

In the following posts, I will try to handle some related topics: Decentralization, Regularisation, Possible Attacks and Security, Mining Pools, Etherum, Tron, Ripple.

In case you are interested, please thumbs up!