Satoshi Nakamoto’s White Paper Explained – Is Bitcoin Truly Anonymous?

Satoshi Nakamoto’s White Paper Explained – Is Bitcoin Truly Anonymous?

September 30, 2021

In the fall of 2008 someone under the pseudonym Satoshi Nakamoto published the document “Bitcoin: A Peer-to-Peer Electronic Cash System.”

The paper reported on the goals and objectives of a new revolutionary technology that stood at the intersection of digital cryptography and distributed ledgers for storing electronic data.

The work became key, revolutionary: It indicated the direction of development of the cryptocurrency industry and determined the crucial points of the industry. 

Among other important aspects, Nakamoto described the main principle of the new digital currency: anonymity. The unknown developer reported that privacy can be preserved if the public keys are anonymous.

Only information that someone has sent a certain amount to someone will be open, but without being tied to specific persons.

The thesis that new digital money should be private has become the number one item on the list of requirements for Bitcoin. And the task of maintaining anonymity has become a key one.

Because it soon became clear that the anonymity described by Nakamoto remains so until there is an intent to reveal the identities of the recipients and senders.

Since public keys are available for viewing on an open blockchain, the transaction history can be analyzed, and the state of addresses can be monitored. Not to mention, bitcoin addresses can be linked to IP addresses and other identifying information.

The range of Bitcoin’s privacy problems is that instead of true anonymity it uses the so-called “pseudonymity”. This means that instead of the user’s first and last name (as in, to compare, the bank card number and the holder’s name), there is a public address that hides behind itself, like a pseudonym, the user’s identity.

Therefore, by analyzing it, it is possible to establish the owner of digital money. Hence Bitcoin is not a truly anonymous digital currency.

As confirmation of this statement serves the development of capabilities for tracking and calculating cryptocurrency owners, and disclosing transaction history for specific coins (especially in the state and quasi-public sector).

And as a countermeasure a similar development of additional means to increase the confidentiality of transactions is taking place. 

In addition Bitcoin’s lack of privacy creates additional problems and violates the main principle of decentralized digital money. So, in the definition of the term “cryptocurrency”, besides the main aspects, the interchangeability of coins is necessarily indicated.

There should be no “clean” and “dirty” Bitcoins, it doesn’t matter who owned them before, it is only important who owns them now. The values of cryptocurrency units are equal in relation to themselves.

However, this principle is violated if privacy is violated. After all, if it can be established that certain coins were used in socially condemned or simply ambiguous transactions on their way to the current owner, such coins damage their reputation, it becomes more difficult for them to communicate on equal terms with “clean” coins.

It creates fewer opportunities for such coins to interact, and in the regulated sector sometimes there is no opportunity at all. We see examples of such situations on exchanges that require mandatory AML screenings for Bitcoins in order to allow them to be sold, and by the development of services for monitoring the “purity” of the cryptocurrency.

This is a consequence of the pseudo-anonymity of “Digital gold”. When Bitcoin ceases to be private, it loses its definition of a cryptocurrency. However, the anonymity of major digital money can be restored.

The emergence of bitcoin mixers has become a logical and natural opposition in the struggle for the right to preserve the privacy of digital money.

The blockchain of the first cryptocurrency was launched in 2009, the first services for additional anonymization of transactions appeared only two years later in 2011. Their goals and objectives are relevant today.

Mixers (also known as tumblers) for transaction anonymization are effective and popular ways to make it harder to track transactions. These services work like this: crypto coins on their way from one address to another fall into the mixer gateway, where they are split into many small particles.

At the same time, being inside a secure mixer, the particles of the whole are mixed with the particles of other clients who want to remain anonymous.

At the exit, the initial amount is obtained, like a patchwork quilt “sewn” from many particles. Moreover, the money does not come instantly: the recipient accepts the transaction amount gradually from randomly selected mixer users participating in the mixing of crypto coins.

We emphasize: third-party services functions are not provided by the Bitcoin blockchain itself. Indeed, since its launch, the network of the first cryptocurrency has not made qualitative transformations, and still remains in the same technological and functional area. Updates do not affect the way the network works, nor do they change them.

As confirmation — for all the years of development of the industry, mechanisms for increasing anonymity have not been introduced into the core of Bitcoin all of them are developed from the outside and communicate with the network through a series of manipulations aimed at increasing privacy.

One such service — Blender.io — was voted top 5 best mixers in 2021 by Deepwebsiteslinks.com. It is one of the most user-friendly, simple, intuitive and customizable platforms for increasing the anonymization of working with Bitcoin. Blender.io interface is made in a step-by-step style and is understandable even for beginners.

Anyone who has never used such services can easily master the service and mix their coins. No registration is required either, and the mixing time and commission size parameters can be adjusted to get the most suitable result.

In addition, Blender.io uses its own Bitcoins for mixing. This allows faster mixing of coins without waiting for other clients. And so that the clients do not end up with fragments of their own Bitcoins the mixing code is monitored, it confirms that after mixing the user gets an amount “woven” from actually different Bitcoins.

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