Privacy is a costly good and we really need to consider how to protect our coins by maintaining a good privacy.
As we know from Bitcoin, all address connections are public, possible to track via Blockchain analysis for everyone. Sending a transaction from one of our addresses to another will cause a connection, not limited if it’s our own address or an address from someone else. It is up to us to maintain a good privacy and avoid that our coins to tell too much about us.
Bitcoin is not private but it can be private if we are careful enough to maintain a good privacy.
When trying to maintain a good privacy, we can divide it into 2 major points:
- Taking steps by ourself to maintain privacy
- Services to enhance our privacy
I've covered point 1 in my topic
"Check twice before sending transaction if it will impact your privacy negatively", so let’s go to point 2 now:
Centralized privacy providers have a single point of failureWe might have heard about it, but centralized services can be seized. Recent examples are several mixers like ChipMixer and Sinbad.io but also privacy enhancing wallets like Samourai Wallet.
As theymos also knows: governments are good at shutting down centralized services if there’s a so called single point of failure, in our case developers which can be arrested and centralized services, which can be seized, online websites, which can be shut down.
And here, we have also to consider to be very careful. Seizing such services will always be a risk to bust our privacy. If privacy services are seized, it'll always be a risk of mixing logs to be leaked and address connections to be revealed.
As it happened to ChipMixer, when several Terabyte of data was collected, among it very likely logs but also private keys (Chips from ChipMixer), where several customers of ChipMixer have reported about coins from such "Chips" being transferred to a different wallet.
We also have to fully trust centralized mixer operators to be honest and to delete logs, which is a big security risk.
Centralized services are somehow against Bitcoin's nature of a decentralized system as we have to trust a middleman, while Bitcoin is fully P2P.
Centralized privacy providers can be honeypotsA honeypot website is a website which is set up and operated to collect certain confidential information on purpose. When people are visiting a honeypot site, various confidential information will be scraped and stored, like your IP address or your entered information but not limited to.
Such data is very valuable for any investigation of crime or business purposes like identifying which wallet belongs to an individual, a company or which interactions an Bitcoin address reveals.
For some cases it might be helpful to catch scammers and hackers but for our privacy, a honeypot website should be avoided, of course.
Honeypots are posing a serious danger to our privacy. We might believe it's quite a normal website and our information is treated confidently, while in reality, any of our data will be stored.
In addition to our IP address etc., entered Bitcoin addresses will be scraped, stored and forwarded to any entity. Addresses will get reviewed and address connections will get revealed.
For privacy enhancing services, we might even pay a fee and not only get nothing in return but also have a privacy risk of believing our Bitcoins are mixed but in reality, logs are kept.
In case of a deliberate honeypot website, deem any privacy assurances as disposable.
I've written more about Honeypot websites here:
"Honeypot websites are dangerous for our privacy - BEWARE"Conclusion: we should not try to maintain our privacy by relying on centralized services as such centralized services are likely to be shut down and such services are full of risks and red flags due to requiring a middle man, when it comes to maintain a good privacy, while Bitcoin is fully P2P.
PrivacyOui
