Bitcoin continues to revolutionize the digital age by allowing people to transact with each other without the need for a third party. Bitcoin Magazine covered the topic of silent payments over two years ago to highlight one of Bitcoin’s shortcomings: privacy. Privacy was an issue then and it still is today… As it noted:
“…a push-based payment system (no one is allowed to take payments from you, you have to explicitly authorize them yourself and “push” them to other people), Bitcoin requires the sender to have the necessary information to determine where the money they are sending is going. This requires the recipient to communicate with the sender with their Bitcoin address in some way. In the case of trying to raise money from the general public, this has serious consequences in terms of privacy or the need to maintain a continuous interactive presence online. Anyone is perfectly capable of posting a single Bitcoin address somewhere online, and from that point on, anyone who wants to send money to that person can simply do so, but there is no privacy in raising money this way. Just take that address and look it up on the blockchain, and not only can you see how much money was sent to that person, but you can see the blockchain footprint of everyone who sent them money. Both the person trying to raise money and the person who donated to them have no privacy at all; everything is completely open and interconnected for the whole world to see.”
Before Silent Payments, the only alternative was to reuse addresses on a per-connection basis to protect your privacy, or run a server that provided a new address every time someone asked to send you money. Neither option is viable or scalable for most users, as privacy is reserved for a privileged few who know how to achieve privacy. Fortunately, the community has made tremendous progress since then, with the release of Silent Payments.
BIP352 (Silent Payments)
After much discussion about how to implement the feature as efficiently as possible, BIP352 is now a reality. When someone wants to receive money privately, say from an activist organization, they can publish their silent payment address on their site instead of a traditional Bitcoin address. Now, when a user wants to send money to the organization, they use the silent payment address inside a supporting wallet. This will automatically use the unique public key attached to the silent payment address, along 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 it all works behind the scenes. All the user needs to do is paste the address in and send money to it, just like any other address. There are several benefits:
1) All the organization itself has to do is publish only one address on its website so that it can continue to receive the benefit of generating new addresses for each transaction.
2) The user sending money to the institution can always refer to the same fixed address, making it easier for them to send money continuously without having to track down multiple addresses.
3) If the same user continuously sends funds to the same silent payments address, a new Bitcoin address will be generated each time, so the sender does not need to worry about the recipient knowing that it is the same user sending them funds.
4) The recipient gets huge privacy benefits as users cannot easily view their wallet funds and know who is sending them money.
5) Addresses generated for transactions between users appear like any other Bitcoin transaction, meaning that the use of the feature is hidden from third parties.
6) No server required. Any wallet that supports silent payments handles all of this technology locally within the wallet.
To summarize the benefits: With Silent Payments, any person or organization can now choose to use a static Bitcoin address from Silent Payments instead of their traditional static address, not only gaining better privacy for themselves, but also protecting the people they are trying to send money to by ensuring that even they as recipients cannot obtain information about the senders. With Silent Payments, both the sender and receiver gain a massive layer of privacy, while greatly leveraging the power of the underlying Bitcoin protocol to give them the freedom to transact as they please.
However, there are drawbacks. The first is a direct result of the benefit of not needing a dedicated online device to facilitate transactions. Users will need to scan through blockchain transactions to reveal the payments made to them. This scanning can be time-consuming, but it comes with huge privacy benefits for both users. Over time, scanning performance could also be improved to reduce this issue for users.
The second issue is adoption, as silent payments are new, and wallet support was somewhat limited at the time of writing. Both the sender and receiver must use a wallet that supports this feature. Silent Payments.xyz It is a resource that shares wallets that support silent payments, the first of which is
Currently, full support for Cake Wallet is still lacking. If the community hopes to see wider adoption of Silent Payments, wallets need to integrate the functionality to bring the privacy benefits of Bitcoin Silent Payments to more users.
Overall, the idea of protecting user privacy through the original Bitcoin protocol is an important one that can provide user privacy without compromising what makes Bitcoin, Bitcoin, valuable. In fact, the privacy benefits that silent payments provide reinforce the core beliefs of the Bitcoin community by giving users the freedom to transact with greater privacy if they so choose.
This is a blog post written by our guest, Henry Fisher. The opinions expressed here are entirely his own and do not necessarily reflect the views of BTC Inc or Bitcoin Magazine.