Make transactions in blockchain untracable

[gollum]

Is it technically possible to encrypt the blockchain so the transactions becomes totally impossible to trace for others than the two parts involved in the transaction?

The reason: make it impossible for government to trace how much bitcoins you have, who you have transactions with and so on.

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[Stephen Gornick]

Is it technically possible to encrypt the blockchain so the transactions becomes totally impossible to trace for others than the two parts involved in the transaction?

The reason: make it impossible for government to trace how much bitcoins you have, who you have transactions with and so on.

The architecture of the Bitcoin ledger is such that each node can verify that a transaction has not been previously spent.  There's no way to verify that the transaction hasn't previously been spent without knowing the address and the transaction details (transaction hash and index).

There is a somewhat related project, Open Transactions, that allows Bitcoin transactions with blinding.
 - https://github.com/FellowTraveler/Open-Transactions/wiki

[gollum]

If we trust cryptography we dont need to see the transactions to accept that double spending has not occured - correct?
We can let bitcoin become a huge blackbox that we trust.

[Stephen Gornick]

If we trust cryptography we dont need to see the transactions to accept that double spending has not occured - correct?

No.

This is the data that is needed.

A transaction is a signed section of data that is broadcast to the network and collected into blocks. It typically references previous transaction(s) and dedicates a certain number of bitcoins from it to one or more new public key(s) (Bitcoin address).

- http://en.bitcoin.it/wiki/Transactions