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Issue #627: Confidential transactions

Issue #627: Confidential transactions

Dec 5, 2019
Marty's Ƀent

Issue #627: Confidential transactions

You freaks may have noticed an uptick in conversation around the prospect of Confidential Transactions on Bitcoin as the team working on Litecoin mulls over the potential inclusion of Mimblewimble via extension blocks on their blockchain. (Litecoin is known to ride Bitcoin's coattails by pawning itself off as a testnet for Bitcoin.) If you haven't noticed the growing conversation, it revolves around the age old debate around these parts of whether or not Bitcoin will be fully private at the protocol level. As with every moving part of this distributed system, changes come with tradeoffs.

If we bring Confidential Transactions to the base layer of Bitcoin there is a good possibility that we can kiss the auditability of the finite supply of 21,000,000 bitcoins goodbye. This is obviously not very good considering the fact that Bitcoin was created as an affront to the seignorage the world's central banks have become so fond of. If bitcoiners aren't able to transact privately, it makes using bitcoin much more of an awkward and open experience. Basically, what it's like transacting today. This certainly needs to be improved, but how?

Above is an excerpt of a response from Pieter Wuille to a question about bringing Confidential Transactions to Bitcoin via extension blocks. I highly recommend you head over to Reddit and read through the full response as Pieter, as always, does an incredible job of laying out the tradeoffs that would come with implementing CTs via extension blocks on Bitcoin. There are many different scenarios that can play out and many things to take into consideration just with this one particular proposal for bringing privacy to Bitcoin. But these are hard conversations we should be having more frequently in my opinion because Bitcoin's privacy assurances at the moment are very sub-par.

Personally, I think we'll be able to achieve privacy on layers above the base protocol. We're already beginning to see exchanges take advantage of Confidential Transactions via the Liquid sidechain. The Lightning Network, while certainly not perfect by any means, can be used privately with more ease than can be achieved at the protocol level. CoinJoin tech keeps improving from what I can tell, and the prospect of Schnorr signatures and Taproot potentially being added to Bitcoin give me confidence that these tools will continue to improve.

Nevertheless, it's always important to discuss the different tradeoffs that will come as we try to make transacting with bitcoin more private. The bubbling conversations that have been happening recently are very encouraging.

Final thought...

Need more Slater 24/7. There should be a new episode every day.


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