Bitcoin continues to provide a massive breakthrough in the digital age by allowing people to transact between each other without third parties. Bitcoin Magazine covered Silent Payments over two years ago to shed light on one of Bitcoin’s shortcomings: privacy. It was a problem then and it still is today…as stated:
“…a push based payment system (no one is allowed to “pull” payments from you, you have to explicitly authorize them yourself and “push” them to other people), Bitcoin requires the sender to have the information necessary to define the destination for money they send. This requires the recipient communicating to the sender their Bitcoin address in one way or another. In the case of trying to raise money from the general public, this has massive consequences in terms of privacy or needing to maintain a constant interactive presence online. Anyone is totally capable of simply posting a single Bitcoin address somewhere online, and from that point, anyone who wishes to send money to that person can simply do so, but there is no privacy in raising money in this way. Simply take that address and look it up on the blockchain, and you cannot only see how much money that person has been sent, but you can see the footprint on the blockchain of everyone who has sent them money. Both the person attempting to raise funds and everyone who has donated to them have no privacy whatsoever; everything is completely open and correlated for the whole world to see.”
Before Silent Payments, the only alternative was to reuse addresses on a per-contact basis to protect your privacy, or to run a server that offers a new address every time someone requests to send you money. Neither of which are usable or scalable option for most users, reserving privacy for a privileged few who knew how to achieve privacy. Fortunately, the community has made massive progress since then, with the release of Silent Payments.
BIP352 (Silent Payments)
After much discussion on how to implement the feature as efficiently as possible, BIP352 is now a reality. When someone wants to receive money privately, lets say an activist organization, they can post their Silent Payments address on their site instead of a traditional Bitcoin address. Now, when a user wants to send the organization money, they use a Silent Payment address within a supporting wallet. This will automatically use the unique public key attached to the Silent Payment address, combined with the public keys of the outputs they want to send to generate a brand new, single-use address that looks like any other Bitcoin address. It sounds complicated, but all of this functions behind the scenes. All a user needs to do is paste the address and send money to it, just like any other address. There are many benefits:
1) The organization itself only has to post a single address on its site to still receive the benefit of generating new addresses for every transaction.
2) The user sending money to the organization can always reference the same static address, making it easy for them to continually send money without needing to track multiple addresses.
3) If the same user continually gives money to the same Silent Payments address, a new Bitcoin address is generated each time, so the sender doesn’t need to worry about the receiver knowing it’s the same user sending them money.
4) The receiver gains massive privacy benefits as users are not able to easily look into the funds of their wallet and see who else is sending them money.
5) The addresses that are generated to transact between both users appear like any other Bitcoin transaction, meaning use of the feature is obfuscated to outside parties.
6) No server is required. Any wallet that supports Silent Payments handles all this technology locally within the wallet.
To summarize the benefits: With Silent Payments, any person or organization can now opt to using a static Silent Payments Bitcoin address in place of their traditional static address to not only have better privacy for themselves, but it also protects people trying to send them money by ensuring not even they as receivers can snag information about senders. With Silent Payments, the sender and receiver gain a massive layer of privacy, while still largely benefiting from the power of the underlying Bitcoin protocol to give them the freedom to transact as they please.
With that said, there are drawbacks. The first is a direct result of the benefit of not needing a dedicated device online to facilitate the transactions. Users will need to scan through blockchain transactions to detect payments made to them. This scanning can take time, but it comes with massive privacy benefits for both users. Over time, performance of scanning can also be improved to make this less of an issue for users.
The second issue is one of adoptability, since Silent Payments are new with wallet support being fairly limited at the time of writing. Both the sender and receiver need to use a wallet that offers support for the feature. silentpayments.xyz is a resource that shares which wallets support Silent Payments, the first of which
to currently have full support being Cake Wallet. If the community hopes to see wider adoption of Silent Payments, wallets need to integrate the functionality to offer more users the privacy benefits provided by Bitcoin Silent Payments.
Overall the idea of protecting user privacy through the native Bitcoin protocol is an important one that can offer user privacy without jeopardizing what makes Bitcoin, Bitcoin. In fact, the privacy benefits of Silent Payments strengthen the fundamental beliefs of the Bitcoin community by offering users the freedom to transact with better privacy if they choose to.
This is a guest post by Henry Fisher. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.