Summarizing and Analyzing the Privacy-Preserving Techniques in Bitcoin and other Cryptocurrencies

TL;DR

This paper reviews privacy-preserving techniques in Bitcoin and other cryptocurrencies, analyzing attacks on user anonymity, evaluating algorithms that enhance privacy, and discussing ethical and legal implications.

Contribution

It provides a comprehensive analysis of privacy attacks, evaluates various privacy-preserving algorithms, and discusses ethical and legal considerations in cryptocurrency privacy.

Findings

Bitcoin and similar cryptocurrencies are vulnerable to privacy attacks.

Privacy-preserving algorithms can mitigate some privacy issues.

Ethical and legal impacts of privacy techniques are significant.

Abstract

Bitcoin and many other similar Cryptocurrencies have been in existence for over a decade, prominently focusing on decentralized, pseudo-anonymous ledger-based transactions. Many protocol improvements and changes have resulted in new variants of Cryptocurrencies that are known for their peculiar characteristics. For instance, Storjcoin is a Proof-of-Storage-based Cryptocurrency that incentivizes its peers based on the amount of storage owned by them. Cryptocurrencies like Monero strive for user privacy by using privacy-centric cryptographic algorithms. While Cryptocurrencies strive to maintain peer transparency by making the transactions and the entire ledger public, user privacy is compromised at times. Monero and many other privacy-centric Cryptocurrencies have significantly improved from the original Bitcoin protocol after several problems were found in the protocol. Most of these deficiencies were related to the privacy of users. Even though Bitcoin claims to have pseudo-anonymous user identities, many attacks have managed to successfully de-anonymize users. In this paper, we present some well-known attacks and analysis techniques that have compromised the privacy of Bitcoin and many other similar Cryptocurrencies. We also analyze and study different privacy-preserving algorithms and the problems these algorithms manage to solve. Lastly, we touch upon the ethics, impact, legality, and acceptance of imposing these privacy algorithms.