bitcoin continues to offer a major advancement in the digital age by allowing people to transact with each other without the intervention of third parties. bitcoin Magazine covered Silent Payments over two years ago to shed light on one of bitcoin’s shortcomings: privacy. It was an issue then and remains an issue today… as stated:
“…a push-based payment system (no one can “pull” payments from you, you have to explicitly authorize them yourself and “send” them to other people), bitcoin requires that the sender have the information necessary to define the destination of the money they send. This requires the recipient to communicate to the sender their bitcoin address in one way or another. In the case of attempting to raise money from the general public, this has massive consequences in terms of privacy or the need to maintain a constant interactive presence online. Anyone is fully capable of simply posting a single bitcoin address somewhere online, and from that point, anyone wishing to send money to that person can simply do so, but there is no privacy in raising money this way. You simply take that address and look it up on the blockchain, and not only can you see how much money has been sent to that person, but you can see the footprint on the blockchain of everyone who has ever 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 everyone to see.”
Before Silent Payments, the only alternative was to reuse addresses for each contact to protect privacy, or run a server that offered a new address every time someone asked to send you money. Neither of these options are usable or scalable for most users, leaving privacy for the privileged few who knew how to achieve it. Fortunately, the community has made enormous progress since then, with the launch of Silent Payments.
BIP352 (Silent Payments)
After much debate on how to implement the feature as efficiently as possible, BIP352 is now a reality. When someone wants to receive money privately, say an activist organization, they can publish their Silent Payments address on their site instead of a traditional bitcoin address. Now, when a user wants to send money to the organization, they use a Silent Payments address inside a compatible wallet. This will automatically use the unique public key associated with the Silent Payments address, combined with the public keys of the results they want to send to generate a completely new, single-use address that looks like any other bitcoin address. It sounds complicated, but this all works 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 needs to publish a single address on its site to continue receiving the benefit of generating new addresses for each transaction.
2) The user sending money to the organization can always refer to the same static address, making it easier for them to send money continuously without having to track multiple addresses.
3) If the same user continuously gives money to the same Silent Payments address, a new bitcoin address is generated each time, so the sender does not need to worry about the receiver knowing that it is the same user who is sending the money.
4) The receiver gains huge privacy benefits as users cannot easily check their wallet funds and see who else is sending them money.
5) The addresses generated to carry out transactions between both users appear like any other bitcoin transaction, which means that the use of the function is hidden from third parties.
6) No server is needed. Any wallet that supports Silent Payments handles all of this technology locally within the wallet.
To sum up the benefits: With Silent Payments, any person or organization can choose to use a Silent Payments static bitcoin address instead of their traditional static address, not only to have better privacy for themselves, but it also protects people trying to send them money by ensuring that not even they, as the receiver, can learn information about the senders. With Silent Payments, the sender and receiver get a huge layer of privacy, while still greatly benefiting from the power of the underlying bitcoin protocol to give them the freedom to transact however they want.
That said, there are downsides. The first is a direct result of the benefit of not needing a dedicated online device to facilitate transactions. Users will need to scan blockchain transactions to detect payments made to them. This scanning can take time, but it brings with it huge privacy benefits for both users. Over time, scanning performance can also be improved to make this less of an issue for users.
The second issue is adoption potential, as Silent Payments are new and e-wallet support is quite limited at the time of writing. Both the sender and the receiver must use an e-wallet that supports this feature. SilentPayments.xyz is a resource that shares which wallets support silent payments, the first of which
Cake Wallet currently supports all payments. If the community hopes to see Silent Payments more widely adopted, wallets must integrate the functionality to offer more users the privacy benefits that bitcoin Silent Payments offers.
Overall, the idea of protecting user privacy through bitcoin’s native protocol is important as it can offer user privacy without compromising what makes bitcoin bitcoin. In fact, the privacy benefits of Silent Payments strengthen the core beliefs of the bitcoin community by offering users the freedom to transact with greater privacy if they choose to do so.
This is a guest post by Henry Fisher. The views expressed are solely his own and do not necessarily reflect those of btc Inc or bitcoin Magazine.
