Can Bitcoin actually get private transactions without a fork?

[OsaiEmma]

Saw this Shielded Bitcoin proposal yesterday. So they’re trying to bring much stronger privacy to BTC without a soft fork or separate chain. That alone makes it worth watching imo.

Still early though. The in/out part isn’t fully solved yet, and some transaction details can still leak from the outside. So I definitely wouldn’t say “private Bitcoin is solved” yet.

But if this actually works well, I do wonder what happens to the privacy coin narrative. If BTC can get good enough privacy without changing the base layer too much, that’s a pretty big deal.

Would you use shielded BTC yourself?

And do you think Bitcoin should push further into privacy, or is that better left to separate coins?

There is a subtle difference between transparency and privacy though. I know they somewhat sound like opposites, but....they aren't necessarily opposite. I guess the main reason why it feels like there isn't privacy due to the transparency of Bitcoin is because of how we off-ramp, and the utilization of those centralized/non-custodial exchange that requires KYC data; if not these, I think the block chain is somewhat private but pseudonymous—depending on how it is being used—for identity privacy.

I guess this proposal aims at completely separating these two parts of the coin and removing Bitcoin utility from that gray area which is not entirely a bad thing, but let's look at the nitty-gritty of the whole thing:

Since this will be a new protocol, there will be a relatively small pool of users, and this can undermine the core essence of the protocol. Since it aims at improving privacy and move usage from the gray area of pseudonym to being more private. With a small pool of users, it won't be that difficult to link their transactions—I know this can be resolved with time when more users come in—but this will create a "chicken-and-egg effect": where you need more users to maintain full privacy, meanwhile those same users will need the protocol to be private in other to come in.

[FinneysTrueVision]

Shielded Bitcoin’s design reminds me in some ways of Railgun on Ethereum. Obviously, there are some notable differences due to the architecture of their respective blockchains. Railgun is the second most popular privacy protocol on Ethereum behind Tornado Cash, though its use still remains niche. It has not gained widespread adoption because of slow wallet sync times and not so great UX.

I think shielded Bitcoin will also struggle with adoption early on. If somebody builds a great user friendly wallet for it, like Samourai and Wasabi did for coinjoin, that could increase its popularity to similar levels as coinjoining.

Having more privacy options on Bitcoin is nice, but they always feel bolted on and come with certain tradeoffs. This is not as robust as having privacy by default at the protocol level. There’s also the challenge of funds interacting with the protocol automatically being flagged as tainted by some AML scoring systems. If you only care about privacy and avoid centralized platforms that might not be such a problem.

[denshin]

The in/out part isn't fully solved yet

thats the part id worry about too. a shielded pool only helps if lots of normal people use it, otherwise just entering it is a signal. meanwhile silent payments and payjoin already fix a good chunk without any fork and barely anyone uses them

[bitmover]

Forsyth Jones shared this image in another forum, showing a transaction in this shielded  bitcoin

https://x.com/BitsagaRob/status/2103463645153996897




Looks similar to LN, where balance changes happen off chain and later on to be settled.

[masulum]

I remember reading Satoshi Nakamoto's forum posts and getting the impression that he considered the issue of maintaining anonymity and privacy of Bitcoin transactions to be extremely important. However, at that time, this issue wasn't as pressing as it is now.🧖

Therefore, I strongly welcome the Shielded Bitcoin proposal. Yes, I know regulators won't like it... But who cares about regulators! The main thing is that Bitcoin remains as close to its original concept as possible, and for that, maintaining anonymity and privacy of transactions is crucial.

Bitcoin wasn’t created to be fully anonymous, but was designed to be pseudonymous. This is very different (IMO), even though transactions are private, transactions can still get tracked, but the owner remains unknown until the transaction ends up at a centralized exchange address. You might think that government regulators doesn’t matter to you, but this affects regulations and taxes for individuals because everyone who living in a country must pay a tax, if regulator rejected bitcoins, so it will affected to bitcoin status as investment instruments.

i think, if Bitcoin transactions were fully anonymous, this will threaten corporate holders, centralized exchanges (CEXs), ETFs, and other entities would remove Bitcoin from their investment portfolios because it will definitely not be allowed by the government. This may apply in all countries, especially countries that do not legally recognize Bitcoin in any way, including its status as an investment instrument. in the end, bitcoin price maybe plunged after blacklisted by regulators. but we will see, if bitcoin as pseudonym transaction not being replaced with fully private transaction, i think it will not affected too much.

[PERtua]

The adoption issue is interesting, to me. Making privacy sounds optional would be nice. But would be quite effective if it's used by a lot of people. But if a few people are using shielded transactions. The anonymity set may be limited. Making those transactions much easier to distinguish. So there is a technical design problem which may be half the problem. The adoption, usability, fees and wallet support may be as important. There are already privacy tools in the Bitcoin ecosystem, but the majority of users have not been using them regularly. I believe this is a practical aspect that's more important to watch than simply considering whether Bitcoin should be a privacy coin.