New System Can Complicate Tracking of Bitcoin Transactions

New System Can Complicate Tracking of Bitcoin Transactions

Researchers from North Carolina state university, Boston University and George Mason University have created a Bitcoin-compatible system that would make it harder for observers to recognize or track the parties concerned in any given Bitcoin transaction. Bitcoin was conceived as a way for people to trade money anonymously. However, then it was discovered that everybody could track all Bitcoin transactions and frequently discover the parties involved.

Bitcoin operates by giving each person a unique public key, which is a string of numbers. Customers can transmit money in the form of bitcoins from one public key to some other. That is made possible by a system that guarantees a consumer has enough bitcoins in his or her account to make the transaction. The usage of the public keys gave customers a sense of anonymity, despite the fact that all the transactions had been visible on the public blockchain, which lists all transactions. However, professionals and personal organizations have developed quite effective techniques of de-anonymizing those public keys.


Now researchers have created a system known as TumbleBit, which is a computer protocol that runs on top of Bitcoin. TumbleBit takes benefit of a current concept known as mixing service. The concept works like this, instead of party A paying party B at once, many special parties A pay an intermediary tumbler, which then can pay the parties B. The more parties are concerned, the more difficult it is to determine which party A paid which party B.

Alessandra Scafuro, co-writer of a paper describing TumbleBit, said:

“However, this nevertheless has a security flaw. Specifically, if an outside observer can compromise the tumbler, it could figure out who was paying whom.”

To cope with this, TumbleBit takes a three-phased approach. in the first stage, known as escrow, the parties A notify the tumbler that they would really like to make a transaction with Bitcoin, and the parties B notify the tumbler that they would like to be paid. This is all done on the public blockchain. For the second one, the researchers have put cryptographic equipment into area that permit the tumbler to pay the right parties without really understanding which parties are concerned. Stage 2 does not appear on the blockchain.

In the 3 phase, known as cash out, all the transactions are performed concurrently, making it harder to identify which parties are involved in any particular transaction. Stage 3 does appear within the public blockchain.


Alessandra Scafuro said:

“We examined TumbleBit with 800 Bitcoin customers, and observed that the second stage just took seconds to complete. One restriction of TumbleBit is that, nowadays now, the system is designed to work with a fixed denomination, so paying quantities larger than that denomination require making multiple payments. This is something we are operating on.”

The paper known as An Untrusted Bitcoin-compatible nameless payment Hub, can be offered at the network and distributed system security Symposium, being held February 26 to March 1 in San Diego. Lead author of the paper is Ethan Heilman of Boston University. Leen AlShenibr and Sharon Goldberg, of Boston University, and Foteini Baldimtsi of George Mason University authored the paper.

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