Bitcoin is pseudonymous. Most people associate it with a greater form of privacy, but the truth is that if not used properly, bitcoin can be less private than physical cash and other forms of transacting value. You have to be careful: a potential adversary could read through open, public transactions and find personal identifiers that can trace the rich open transactional data available on the blockchain to your own identity.
While bitcoin promises to be uncensorable, that’s only strictly true for what happens on the chain itself — you might be subject to any number of attacks that try to punish and censor you from using bitcoin in the first place, from a government punishing you for transactions on the chain to private individuals trying to tie the money you spent digitally to your economic livelihood and social reputation.
This is one of many reasons why people might want to signal a higher amount of privacy intent for their transactions, just like some people might choose to use encrypted chat for any number of things — however, in practice it’s not so easy to intuitively take all of the steps that would be required to maintain close-to-perfect privacy with bitcoin.
Yet, despite the great challenges present, there are organizations and individuals working towards the ideal of more privacy and decentralization for bitcoin.
The Human Rights Foundation, a non-for-profit which “partners with world-changing activists in creating innovative solutions to unite the world against tyranny” has launched a development fund to address that issue, aiming to make Bitcoin more private and resilient with grant-supported developer projects.
While the goal is to help journalists, human rights activists and civil society organizations use bitcoin more safely, any developments that come out of the mix will surely benefit all bitcoin users. Amidst debates about end-to-end encryption by default, and “the right to be forgotten”, it’s clear that privacy and the avoidance of being placed on a trackable, long-lived database of any kind are rising in the public consciousness as cherished values.
The development fund aims to distribute 95% of proceeds to developers in the form of grants and 5% to maintain HRF’s mission. Bitcoin donations can be made with BTCPay here.
The first grant given was to Chris Belcher, a developer who built a personal server implementation for the Electrum bitcoin wallet. It was sent to support his proposed implementation of a CoinSwap protocol for bitcoin that would address reducing the aggregate amount of demonstrated (and analyzable) bitcoin address reuse.
Imagine a world where many bitcoin transactions that seemed to be sent from address A to address B were actually received at address Z — completely unconnected to either of the two addresses. With enough adoption, aggregate-level analysis of bitcoin transactions becomes much harder, as analysts have to struggle with their changed probability distribution of whether or not two addresses that send transactions to one another are actually connected to one another.
By making it more accessible to mix transactions so as to obscure who was sending a transaction and who was receiving it, the implementation aims to make bitcoin more secure by disrupting the surveillance of aggregators and analysts who might work for corporations with something to market, or governments with people to hunt.
This complements the CoinJoin approach which has already been deployed as a decentralized privacy improvement. CoinJoin involves a protocol that blends many transactions into a transactional block, so that you can’t tell within that block ideally who sent BTC to who. This approach is backed by a liquidity market called JoinMarket which helps connect people who want to join into those transactional blocks together.
The proposed implementation for CoinSwap involves potentially creating a similar liquidity market as a mechanism easily create and intuitively structure the wallets and transaction chains required to meaningfully implement CoinSwap — and work together with CoinJoin to make bitcoin more private and secure for its users.
Beyond the immediate work of supporting privacy-improving projects for bitcoin, the Human Rights Foundation’s involvement is also a decentralizing thread in of itself. There are many different organizations and individuals with different incentives who align together to help support the broad adoption of bitcoin, including retail and institutional investors, ideals-focused developers, and profit-motivated mining pools.
The Human Rights Foundation is aiming to motivate even more non-for-profit organizations and academic institutions to become part of the mix — creating a new set of actors and incentives as well as support behind the broad goal of making bitcoin more secure and private and more compelling to use for everybody.