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One of the biggest myths that still gets thrown around when it comes to Bitcoin is that transactions are anonymous. Although many people automatically assume that their use on darknet marketplaces must indicate that Bitcoin can easily be used for completely private transactions, it should be remembered that every transaction is publicly displayed on the blockchain.
For proof of the current issues with Bitcoin privacy, one must only look at the many blockchain analysis startups that have been created over the past few years. Some of these companies work with exchanges and other digital currency companies on regulatory compliance, and they’re able to figure out which Bitcoin addresses may be associated with some sort of criminal or other unwanted activity.
Although there are definitely issues with Bitcoin privacy right now, Stash Co-Founder and Open Transactions Creator Chris Odom recently explained that these problems will be temporary at the Bitcoin Investor Conference in Las Vegas.
Problems with Bitcoin Addresses
There are a number of different problems with the way Bitcoin addresses work right now. Chris Odom described the clumsy process of making a Bitcoin transaction during his presentation:
“With a normal Bitcoin address, there’s no return address; you have to generate new keys every time, just so you know where the money came from. If someone’s going to send me money, I say, ‘Wait. Here, let me generate a key, give them the address, [and he] sends the money.’ With someone else, I generate another key, and he sends me the money.”
With the current setup, it is quite difficult for a user to simply track the transactions they’ve had with another party. Odom also pointed out that contact must be made with another individual or entity before money can be sent because they need to provide a Bitcoin address for the payment.
In addition to the user experience issues associated with Bitcoin payments, Odom explained there are also serious privacy concerns when it comes to using the same address for all of one’s payments:
“You also have to generate new keys for privacy reasons. Everyone knows in Bitcoin that it’s a bad, bad move to always receive transfers at the same address. It should be a new address every time, and that’s a pain.”
BIP 47, Reusable Payment Codes, and Payment Addresses
During his presentation at the Bitcoin Investor Conference, Chris Odom let it be known that Stash is currently involved in the development and deployment of BIP 47:
“Something . . . that we’re heavily involved in is BIP 47 . . . [also known as] payment codes. Remember that? I prefer to use the phrase payment address because I think they’re comparable in many ways to an email address and a Bitcoin address is not.”
A reusable payment code or payment address is a single address for payments that can be published in a public forum without the same privacy concerns that are associated with publicly displaying a Bitcoin address. Odom explained some of the benefits of this proposal during his presentation:
“A payment address is more like an email address. For example, you can use the same address every time. So, you have a single address. People can always send to that same address, and that means they don’t have to ask you first for an address to send to . . . Furthermore, whenever you receive a payment through a payment address (or payment code, BIP 47), there is a return address. Both parties can see a complete history of all the transactions that were sent between them; the critical point is no one else can.”
Blockchain Analysis Companies Will No Longer Exist
After going through his explanation of BIP 47, Odom also revealed a side effect of widespread use of reusable payment codes to the audience:
“You know what this means? This means that all those companies who are sprouting up to provide blockchain analytics on the source of funds — these companies are not going to last. They’re going to cease to exist. They are a temporary aberration. They’re building on the past instead of the future.”
Odom added that Stash and Samourai Wallet are currently working together to get reusable payment codes implemented into usable software. He concluded his spiel on BIP 47 by stating, “This stuff is coming. Coders are coding on it.”
Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.