Improving privacy with light wallets (SPV)

[20kevin20]

As far as I know, when you're using Electrum in SPV move you're asking some servers to retrieve your addresses' balance.

I was wondering whether there was an option for Electrum to send false requests to those servers so that you confuse it about the addresses you truly own.. is there any way to enhance your privacy through it?

I'm looking for either this or using a new Tor route/identity for each balance request so that address balances never get requested from the same IP. The main principle is the same: I'm looking for a way I could use Electrum with Tor without telling a certain server which addresses I truly own..

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[Charles-Tim]

I'm looking for a way I could use Electrum with Tor without telling a certain server which addresses I truly own..

Even, if you connect with different VPN, I do not think this will work. I am not expert in this but I know you know Bitcoin core is the answer for such privacy you need or any other reputed full client wallet.

[LoyceMobile]

You can create a read only wallet with many other addresses. Combine that with offline signing and you're safer too.

[ranochigo]

Electrum isn't very centered around privacy so you will find it hard to do anything with it. Confusing the server with multiple addresses can be fairly inefficient and would be ineffective if the transactions would be broadcasted through it anyways.

Manually changing the Tor circuit could work but doesn't solve it being more resource intensive, depending on how many addresses you want to hide it in. I'm thinking that you're wanting to mimic the behavior of Wasabi wallet, so I'd say just going to it would solve the issue and make your life easier. If you insist on using Electrum, you can probably get better privacy by running an Electrum private server on a RPi or an old computer.

[PrimeNumber7]

I'm looking for either this or using a new Tor route/identity for each balance request so that address balances never get requested from the same IP. The main principle is the same: I'm looking for a way I could use Electrum with Tor without telling a certain server which addresses I truly own..

I don't think this would do very much for you. To my knowledge, electrum will request balances/transactions from each of your addresses that have received transactions in the past, plus the next xx depending on the size of your keypool. This means your last request would expose all of your addresses to the electrum server.

A better solution would be to run your own electrum server that you exclusively connect to.

[pooya87]

You can create a read only wallet with many other addresses. Combine that with offline signing and you're safer too.

Interesting suggestion but I'd say it is risky.
If you choose addresses that may be known (eg from an exchange or a an individual) it may become apparent that they don't belong to you.
Another risk would be choosing a seemingly harmless address but end up being mixed up in some shady activity and unintentionally linking your address (and possibly more info about yourself) to those activities.
If the number of additional addresses is large it could also significantly slow down the wallet's performance as the number of outputs and the wallet size grows.

[PrimeNumber7]

You can create a read only wallet with many other addresses. Combine that with offline signing and you're safer too.

Interesting suggestion but I'd say it is risky.
If you choose addresses that may be known (eg from an exchange or a an individual) it may become apparent that they don't belong to you.
Another risk would be choosing a seemingly harmless address but end up being mixed up in some shady activity and unintentionally linking your address (and possibly more info about yourself) to those activities.
If the number of additional addresses is large it could also significantly slow down the wallet's performance as the number of outputs and the wallet size grows.

It should also be apparent that you are querying addresses that do not belong to you.

Electrum will query [gap limit] addresses with no transactions going to them. This means you should query an address before it ever receives a transaction. If you don't query the address prior to it receiving a transaction, any electrum server 'spying on you' will know the address might be a decoy.

[o_e_l_e_o]

Electrum will query [gap limit] addresses with no transactions going to them. This means you should query an address before it ever receives a transaction.

Not in the case of a watch only wallet.

Let's say I keep my full wallet permanently airgapped. Whenever I receive a transaction to a new address, then I copy that address across to my internet connected computer and add it, along with 9 other decoy addresses which have also just received their first deposit, to my watch-only wallet. I keep all my empty gap limit addresses offline and therefore never queried.

[20kevin20]

Thanks for the replies. The closest solution I can get to is the one suggested by @LoyceMobile.

What is the safest way I can get a list of those "decoy addresses" though? It doesn't make sense to add decoy addresses if I don't take them safely as well, right..?

Also.. I thought this could be a good addition to Electrum's code as well: as soon as you set up a watch-only wallet, for each address you list it adds X more decoy addresses and although it does ask for the balance of each of them, only yours are shown up. If privacy can be improved through SPV as well, why not?

EDIT: read-only wallets are the same as watch-only ones, right?

[ranochigo]

What is the safest way I can get a list of those "decoy addresses" though? It doesn't make sense to add decoy addresses if I don't take them safely as well, right..?

You probably have to choose it carefully. If you accidentally choose the wrong kinds of address, those associated with more of an illicit activities, it could be used against you though I highly doubt so. You probably have to choose a huge pool of addresses to be able to hide your own addresses within them and that could lead to a degraded experience when using it. If your primary purpose is to just see if there are any transactions which are related to your address, just use blockexplorers with Tor.

Also.. I thought this could be a good addition to Electrum's code as well: as soon as you set up a watch-only wallet, for each address you list it adds X more decoy addresses and although it does ask for the balance of each of them, only yours are shown up. If privacy can be improved through SPV as well, why not?

That is something like Bloom filters I suppose. The caveat is that the Electrum servers does have some limitations and could result in a significant slow down if you make too many queries. It doesn't help that the solution would only work when you're querying addresses and not when you're sending any transaction.

If I may ask, would you consider Wasabi Wallet instead? That will be more suitable for the purpose.

[ranochigo]

Does Wasabi request balance from a different Tor identity for every address? I have tried looking into their Docs but haven't found much about it. Therefore, I thought it uses a single IP hence still revealing which addresses I own..

They use different Tor identities for each connection with BIP158 filtering as mentioned prior to that. Their docs actually has a comprehensive overview of it[1]. Using a privacy-centric wallet is far better than using a wallet that doesn't do anything for it's privacy and attempting to modify it to enhance it's privacy; Electrum is just not for privacy. I'm not exactly sure how the communication between the server as well as the Electrum client operates, perhaps someone can shed some light as to whether Electrum does transmit anything that could identify specific Electrum instances?


[1] https://docs.wasabiwallet.io/why-wasabi/NetworkLevelPrivacy.html#full-node-by-default-block-filters-over-tor

[PrimeNumber7]

Electrum will query [gap limit] addresses with no transactions going to them. This means you should query an address before it ever receives a transaction.

Not in the case of a watch only wallet.

Let's say I keep my full wallet permanently airgapped. Whenever I receive a transaction to a new address, then I copy that address across to my internet connected computer and add it, along with 9 other decoy addresses which have also just received their first deposit, to my watch-only wallet. I keep all my empty gap limit addresses offline and therefore never queried.

I don't think you can add 9 decoy addresses if you are only using a light wallet. In order to identify additional addresses that have received their first transaction, you would need access to the full blockchain, aka a full node. If you have access to a full node, it defeats the purpose of running a SPV client, and you also might as well run your own electrum server if your full node is not local to you.

Also, one purpose of using a watch-only wallet is to tell you when certain addresses receive transactions. It is not uncommon to request a payment from someone, and not receive it right away. If you are adding addresses to your watch-only wallet prior to the addresses receiving transactions, any spying electrum server would know the address belongs to you.

[LoyceV]

What is the safest way I can get a list of those "decoy addresses" though? It doesn't make sense to add decoy addresses if I don't take them safely as well, right..?

You can use a random selection of funded addresses, used addresses and freshly generated addresses.

EDIT: read-only wallets are the same as watch-only ones, right?

Watch-only is the phrase I was looking for indeed.

If you are adding addresses to your watch-only wallet prior to the addresses receiving transactions, any spying electrum server would know the address belongs to you.

You can add any address you see posted when someone asks for a payment.
There's a risk though: you don't want to accidentally request a payment to someone else's address, so you need to rely on the Labels.

I don't think you can add 9 decoy addresses if you are only using a light wallet.

Electrum can do this.

[bob123]

A similar approach is implemented through Bloom Filters (BIP 37).
But those have been shown to be insecure and to basically not improve your privacy at all.

You can add some "decoy addresses" as mentioned by others, but keep in mind that this will barely (if at all) improve your privacy.
I honestly wouldn't count on it.

If you want to somewhat preserve your privacy, do not use electrum at all. Or at least with your own full node.

[PrimeNumber7]

I don't think you can add 9 decoy addresses if you are only using a light wallet.

Electrum can do this.

Can you please explain how it can do this while keeping this in mind:

In order to identify additional addresses that have received their first transaction, you would need access to the full blockchain, aka a full node. If you have access to a full node, it defeats the purpose of running a SPV client, and you also might as well run your own electrum server if your full node is not local to you.

From a technical perspective, I believe electrum can add additional addresses that are not associated with the user. However, I don't believe it can identify which addresses to use (which is my point).

[LoyceV]

Can you please explain how it can do this while keeping this in mind:

In order to identify additional addresses that have received their first transaction, you would need access to the full blockchain, aka a full node. If you have access to a full node, it defeats the purpose of running a SPV client, and you also might as well run your own electrum server if your full node is not local to you.

From a technical perspective, I believe electrum can add additional addresses that are not associated with the user. However, I don't believe it can identify which addresses to use (which is my point).

You'll need to use manual coin control. You can do this either per address:


Or per input:

Hold CTRL to select more than one.

Alternatively, and even easier, you can Freeze all decoy addresses:


Too bad Electrum can't import a combination of private keys and (decoy) watch-only addresses. Now you need an offline wallet to sign transactions.

[bob123]

Why? In my understanding  if adversaries  servers were associated your addresses with say  100 or more IPs neither of which is yours it would add nothing to their knowledge about you. Changing IP every time you let Electrum go online seems to be the working solution to add to privacy. Correct me if I'm wrong with this thought.

It is not only about de-anonymizing you.

If you connect to the same server (or to multiple server which are owned by the same entity) through different IP's, he will still know it is you. Simply by looking at the addresses you are interested in.
And in this case, you might get wrong data transmitted (transactions confirmed / not confirmed / not received / wrong block height / etc..) to your client.
A targeted attack is still possible, regardless of the IP you use to connect to that server.

Further, what if the adversary is the person in control of the VPN server you use?


There are SPV wallets with good privacy available (Wasabi, Samourai).
Trying to improve electrum to be more privacy-focused is not as easy as using a VPN or Tor. If you are serious about your privacy, don't use electrum.

[ranochigo]

Can not  get it. The only thing he will know is that some anonymous soul  is linked to those addresses. This gives no clue as to who I am if those addresses are not linked to my identity. The only danger (seen by me)  of using rotating IPs with the 3rd party servers  will come if those servers read my MAC address somehow. Are they capable of doing this, what is your view?

Which is what we're concerned about. Let's say I have 100 addresses and I am cautious about spending their outputs separately. I don't want to link them all to a singular identity; I have used different pseudonyms across various services and I've used it to pay for anonymous hosting, used an exchange on one, etc etc. If my SPV wallet queries all of the addresses on the same server, there is a high chance that all of the queried addresses belongs to the same person and thus negating the benefits of me so cautiously segregating all of the addresses from each other.

Most people would not want anyone to be able to link a group of addresses together. That might not be your focus or definition of privacy but it certainly is for loads of people.

They are also SPV, what then ensures their "good privacy"?

Here: https://docs.wasabiwallet.io/why-wasabi/NetworkLevelPrivacy.html#wasabi-s-solution. Not all SPV wallets are created equal.

[bob123]

Can not  get it. The only thing he will know is that some anonymous soul  is linked to those addresses. This gives no clue as to who I am if those addresses are not linked to my identity. The only danger (seen by me)  of using rotating IPs with the 3rd party servers  will come if those servers read my MAC address somehow. Are they capable of doing this, what is your view?

The MAC address is completely irrelevant since it can be spoofed. No one cares about the MAC address of your wifi/ethernet card.
Further, linking those addresses together can be too information already.

This means all of your purchases can be linked to one entity. Each of those purchases tells something about you. While a single one wouldn't even be close to deanonymize you, all of them might be.
Because you are that single person in the intersection of all those purchases.
People seem to be obsessed with IP addresses. That's not the only thing which makes you vulnerable. By far not.

They are also SPV, what then ensures their "good privacy"?

Yes.
Wasabi is probably the best one, followed by Samourai.

[PrimeNumber7]

Can you please explain how it can do this while keeping this in mind:

In order to identify additional addresses that have received their first transaction, you would need access to the full blockchain, aka a full node. If you have access to a full node, it defeats the purpose of running a SPV client, and you also might as well run your own electrum server if your full node is not local to you.

From a technical perspective, I believe electrum can add additional addresses that are not associated with the user. However, I don't believe it can identify which addresses to use (which is my point).

You'll need to use manual coin control. You can do this either per address:


Or per input:

Hold CTRL to select more than one.

Alternatively, and even easier, you can Freeze all decoy addresses:


Too bad Electrum can't import a combination of private keys and (decoy) watch-only addresses. Now you need an offline wallet to sign transactions.

I think you are misunderstanding my point. In your screenshots, you list 1NXY as a "decoy" address, and this means this address is not associated with you in any way. When you are adding addresses to your watch-only wallet, electrum does not have any way of knowing that 1NXY had recently received a transaction for the first time.

In other words, every time you receive a transaction, you will need to give electrum 9 addresses that have just received transactions for the first time, but you have no way of finding 9 addresses that meet this criterion to give to electrum.