[2018-02-26] Transaction Batching: Good for Fees, Bad for Privacy

[limek]

Transaction Batching: Good for Fees, Bad for Privacy

Over the past few weeks, many people have noticed that bitcoin core network fees and transactions times have been a lot better than two months ago when fees reached highs of 1,000 satoshis per byte or $30-40 per transaction. Many people are wondering why these issues have subsided, and some people believe it is due to a practice called ‘transaction batching.’

Is Bitcoin Transaction Batching Lowering the Network Fees?

For about two weeks or so bitcoin core fees have dropped significantly after reaching all-time highs a few weeks prior. Multiple theories are being discussed across the web on why the fees and transaction confirmation times have decreased. Some individuals believe the drop is due to the number of daily transactions, as BTC now appears to be used less. Currently, the amount of transactions per day is over 154,000, but during the last quarter of 2017 daily transactions were between 250,000 to 450,000. Another theory is the adoption of Segregated Witness (Segwit) may have helped, but Segwit use still only represents 15 percent of all BTC transactions. Lastly, another opinion of why BTC is operating smoother is because of a process called ‘transaction batching.’ The subject of transaction batching is a hot topic that is being discussed throughout social media and forums right now.

Many Big Processors Are Batching Transactions

Transaction batching is a procedure that allows individuals and businesses the ability to group multiple transactions into one TXID. This maneuver essentially alleviates more space in processed blocks. Many companies, wallet providers, and exchanges including Coinbase, Shapeshift, Kraken, and others have begun to bundle multiple transactions. In the past individuals and businesses would send each transaction with its own unique TXID, but would have to pay fees for each one. This past week the peer-to-peer platform Shapeshift revealed it was batching transactions in order to save space on the chain and save customers money on network fees.

“If you’re a customer, you’ll notice significantly lower transaction fees, currently better than any other exchange in the industry,” explains the company.

The Downside to Transaction Batching — Less Privacy

To some individuals the benefits of batching transactions can be seen with fees being lower and a less congested network. However, some people believe there are significant drawbacks — most notably centralization and a lack of privacy. Take for example if a made-up exchange called ‘Centrali’ decided it was going to batch transactions after realizing it was paying erroneous fees for every single transaction processed. Although, if a Centrali customer looks up his/her transaction they will notice their transaction would be combined with hundreds of other people using the same service; Centrali. Some people would have a hard time figuring out who these transactions belonged to using a simple blockchain explorer, but companies like Elliptic, Bitfury, and Chainalysis would likely have a field day with batched transactions. Because Centrali used a batching method, blockchain surveillance companies could easily be able to identify transactions with connected change outputs and other bonded spending habits.

Blockchain Surveillance Sifting Through Batches Would Likely Be Able to Figure Out Inputs and Outputs Tethered to Wallets More Easily

The controversial subject has been discussed quite a bit across forums, and social media on whether or not bitcoin transaction batching is a “disaster for privacy.” One particular post on r/bitcoin discusses this subject in great detail, but most of the commenters have a hard time agreeing on if batching is bad for privacy.

“So I hear people complaining that Coinbase does not batch transactions. But do we really want this? Anyone could easily make a lot of small transactions scattered and link anything in the batches with Coinbase,” the Reddit post states.

Back in August 2017, the bitcoin developer David Harding described transaction batching as mostly positive, and he explains it will help people save “80 percent on fees.” However, Harding also admits the process might not be very ideal for privacy in his Medium blog post stating:

“When you receive your withdrawal from Kraken, you can look up your transaction on a blockchain explorer and see the addresses of everyone else who received a payment in the same transaction — You don’t know who those recipients are, but you do know they received bitcoins from Kraken the same as you,” Harding explains.                 

        That’s not good for privacy, but it’s also perhaps not the worst thing. If Kraken made each of those payments separately, they might still be connected together through the change outputs and perhaps also by certain other identifying characteristics that blockchain analysis companies and private individuals use to fingerprint particular spenders.

Do the Positives Outweigh the Negatives?

We don’t know if transaction batching is the root cause of the lower fees at the present time. What we do know is a lot of big companies are admitting to processing transactions in this manner leading people to speculate that it is the reason. There seems to be some benefits to the action, but the question is — do they outweigh the concerns over privacy?

Source: https://news.bitcoin.com/transaction-batching-good-for-fees-bad-for-privacy

[Qartersa]

Let us take a look at things with a grain of salt. I am thinking there are new developments being cooked -- I am hoping, though, this is not a form of government intervention. It is quite scary to think that almost everyone in power is interested on how to buckle down Bitcoin primarily because the latter is domineering the financial market. Many are, in fact, awaiting its doomsday. This, alone, is creating internal chaos amongst Bitcoin investors because due to a lot of powerful people against it, the former do not know who to guard against anymore.

I think if lowering transaction fees would compromise the privacy of Bitcoin transactions, it is not at all beneficial to Bitcoin investors because it would be risking way too much that has to do with the data that has been in a 'supposed' secure place for quite sometime. Many investors would suffer extreme losses and would probably be put to ridicule and/or animosity just because they are involved with Bitcoin.

[1Referee]

I don't necessarily see this as a bad thing, but I would as user of an exchange love to have more freedom to adjust my withdrawal fees on a manual level. Batching transactions takes a certain amount of time, which in some cases may take 5 to 10 minutes before they even push the transaction to the network. If you are about to purchase something from a site with Bitcoin and you have only 5 minutes to do so, it voids your session and you need to start all over, where the price may even have increased a few % as well. It doesn't cost an exchange much effort (if any at all) to allow people to have more fee control. If a user wants to pay for a single (priority) transaction, then an exchange should allow this to happen.

[xdrpx]

Transaction fees on Bitcoin currenctly are low not just because of transaction batching, but also because of the instant stop in spam attacks (that was present a month or two ago), implementation of SegWit accross small, medium and large exchanges (coinbase being the last / latest) and then transaction batching. The "Good for fees" benefit overweights the privacy concern. When you purchase your Bitcoins from an exchange like coinbase, you've already agreed to their terms and provided them your KYC / AML / Identity details in order to purchase your Bitcoins. Hence, there's no real privacy to begin with. The idea what I'm trying to convey here is, Bitcoin is not truely anonymous and we all know this. Everything is on the public ledger and there's no coin mixing / coin join done automatically or Confidential transactions as of yet to obscure any amount information.

Also, wouldn't it make it hard for the operators of Chainanalysis and similar Blockchain analysis platforms to track the outputs if different receiving / sending addresses are used by the parties everything a new transaction is to be made? It would also still be very much possible to swap the change addresses just the way we would use different addresses to send and receive. I'm not so sure what "bonded spending habits" means here, but if it relates to associating personal identity with an address, then like I mentioned above, it was already lost at the exchange process.

[vit05]

@ achow101 have told the same about Batching months ago when I asked about the bad things that could be happing using this. But I think you could still use some other tools to have more privacy if you really need. Bitcoin Blockchain t is a public ledger, if you need make transactions in totally secret, is better use Monero.