Anonymous BitCoin transactions with ZeroCoin

[gollum]

It is a myth that bitcoins are anonymous, since all transactions are recorded forever in the blockchain.

So how do we send bitcoins anonymously without the usage of third party services mixing coins?

Edit:
Conclusion: ZeroCoin seems promising.
"Zerocoin operates like a distributed laundry where the laundry is implemented within the Bitcoin network itself.
Zerocoin achieves this by creating a separate anonymous currency that operates side-by-side with traditional Bitcoin on the block chain. Zerocoins can be thought of literally as coins. They’re issued in a fixed denomination (for example, 1 BTC), and any user can purchase a zerocoin in exchange for the correct quantity of bitcoin. This purchase is done by placing a special new “Zerocoin Mint” transaction into the block chain."
http://zerocoin.org/

Alice creates offline wallet A1 and mines new bitcoins to it
Alice sends 0.01 BTC to a new wallet A2, A3, A4... from the root wallet A1 every time there is more than 0.01 BTC in wallet A1

Now Alice wants to spend her coins on MilkRoad to buy some candy for 0.02 BTC so she uses BitMessage to send wallet A2 and A3 to the seller Bob.
No traces of this transaction will be recorded at the blockchain since she is sending the whole wallet and not a part of the wallet through the blockchain.
Bob can now do the same, send wallet A2 to buy some other product.

Result: Bitcoin has now been used in the same way as Cash: No traces left anywhere (except encrypted traces in BitMessage)

[gollum]

Addendum: The usage of BitMessage to create cash will also prevent the blockchain from becoming too big, too fast.
Optimally the most BitCoin Notes traded would be in standard denomoinations, just like dollar notes and coins:

100 BTC
50 BTC
10 BTC
5 BTC
1 BTC
0.1 BTC
0.01 BTC
0.001 BTC

[rebuilder]

But Bob will have to trust Alice not to spend the bitcoins in A2 and A3, right? And anyone taking receipt of either wallet from Bob will have to trust both Bob and Alice?

[gollum]

But Bob will have to trust Alice not to spend the bitcoins in A2 and A3, right? And anyone taking receipt of the either wallet from Bob will have to trust both Bob and Alice?

You are right, we end up having a web of trust. Do you have any other suggestion for anonymous spending?

[rebuilder]

But Bob will have to trust Alice not to spend the bitcoins in A2 and A3, right? And anyone taking receipt of the either wallet from Bob will have to trust both Bob and Alice?

You are right, we end up having a web of trust. Do you have any other suggestion for anonymous spending?

No, not personally. That doesn't make trust-based schemes any more workable, though.

Anonymity and trust simply don't go together very well, IMO.

[Runescape]

Its not a "myth" bitcoins are as anonomous as you get.

[CasinoBit]

There are a thousand reasons why Bitcoin could not be called anonymous and this is not one of them.

[starsoccer9]

Once you have A2 and A3 you use the blockchain to send it to B1. Then you give B1 to someone and rinse and repeat.

So someone sends from B1 to C1. and so on

[🏰 TradeFortress 🏰]

Its not a "myth" bitcoins are as anonomous as you get.

That's like saying HTTP traffic is secure.

[gollum]

Its not a "myth" bitcoins are as anonomous as you get.

That's like saying HTTP traffic is secure.

Exactly. Even Credit cards are more anonymous, its "only" big brother that knows your shopping habbits, not the whole world.

We need easy and secure methods of spending bitcoin anonymously, or at least mask our transactions through a proxy in order to stay anonymous.
Im not talking about mixing services but rather a trusted party that acts as a middle man for you, something like PayPal.
This proxy services can even be regulated and totally legal if they apply "Know Your Client".

Example:
Alice want to make a transaction from wallet A
So she sends 1 BTC to wallet P belonging to the Proxy service.
Now she want to donate some BTC to Bob and David so she log in to her Proxy account and request to send 0.1 BTC to each of them.
None of them will ever know that Alice was the donator, because there are several other people that also have used the the Proxy Service.
This method will not be totally anonymous, but more like the anonymity you enjoy from your bank.

Traces in the blockchain:
Alice->P
X->P
Y->P
Z->P

P->Bob
P->David
P->Eric
P->Felix