"Coin Melting" -a community project

[bitlotto]

In my humble opinion, Bitcoin needs a BETTER tool that helps protect the identity of people who wish to remain anonymous. There are many reasons why this is the case. Many of them legitimate. Stalkers, rogue governments, enemies, etc. Because Bitcoin keeps track of every single transaction it can be hard to lose the trail of someone following the Bitcoin trail. That is why some people use "mixing services". It obscures the trail. Many of them operate behind the scenes, with their methods, and security protocols secret. This creates an unknown risk.

I believe that a better, more simple method is possible. I call it "coin melting"

In a nutshell ALL Bitcoins go to a SINGLE Bitcoin address!! No shuffling coins around. You then withdrawal whenever and however much you want at a time! You can also keep it there as long as you want! The longer you keep it there the better your identity is protected. It creates a dead end in the block chain for people to follow, for they won't know what withdrawals are yours.

How it would work:
-When someone wishes to deposit into the "coin melting bank" they do it in such a manner that they know what address it came FROM and make a deposit. (they would use an advanced client/blockchain.info or send ALL their BTC to themselves, then pay to the payment address - this would be explained well on the site to the newbie)
-The service would then pick up the transaction and after 6? confirmations, add it to a ledger
-The ledger is just a list of FROM address/addresses and an amount that was paid
-Even if someone re-used a FROM address the ledger would just update and add it to the total
-To take funds out, the user visits a web form that asks for:
a. Original Address where the funds came from
b. Where they want some funds sent to
c. The amount they would like to take out (doesn't have to be all of it)
After it is input, the form creates a text block that is copied and pasted to Bitcoin to be signed with the private key that made the deposit.
-The user then inputs that signed text and submits the form
-The software then does checks to make sure the signing is correct, the funds still exist, and sends the payment, then updates the ledger and takes off the amount paid from the ledger

Some other possible ideas:
-make it so the OUTPUT transaction has to be signed multiple times by multiple servers doing sanity checks against a shared ledger - thus requiring the attacker to take over multiple machines

The computers don't need to keep track of where all the payments go. It only records a balance remaining for each INPUT address. *IF* the ledger was ever stolen it would be useless to figure out where the funds went to. All they would know is how much they had left in the service.

I think if all the code, setup, and procedures for creating the project where all open source and community developed, we would have a very useful tool. One that perhaps many would use as a "savings account"! For the more who use it, the better it protect it's users.

I was planning on doing it myself and creating a private business, but I think it is something that needs to be run by the community at large. Something that is transparent and uses the best of all our expertise. I think something run this way would be more secure and useful than anyone could provide on their own.

Is creating such a tool worth it? Is it a good idea?

[CIYAM]

I think that this concept sounds interesting, however, the main problem that I can see with it is having to trust the server(s) you are requesting to send coins on your behalf to (to not for example either ignore your request or to actually log it somewhere).

I guess if one were to chain together a bunch of requests so that an amount from one "shared address" is actually first sent on to another "shared address" (and so on like a TOR request) until finally the coins are sent to a normal output address then perhaps this might be a little safer.

[ripper234]

Open Transactions

Also: http://bitcoin.stackexchange.com/questions/2708/how-can-open-transactions-benefit-bitcoin

[frisco2]

So, maybe, we need a general way to hold our bitcoins somewhere else.  Like Freenet, that holds all the information distributed. That would be the meaning of "distributed" community solution. If you are going to use one server, then it is a private business.  I don't see what is the problem with a private business.

[bitlotto]

Open Transactions

Also: http://bitcoin.stackexchange.com/questions/2708/how-can-open-transactions-benefit-bitcoin

I haven't looked too closely at open transactions. Can it work right now with Bitcoin?

[Garr255]

What would be the methods for redundancy and security? We don't want to pull a Bitcoinica, obviously.

http://dl.dropbox.com/u/9542654/btc/bitcoinica/image.png
http://dl.dropbox.com/u/9542654/btc/bitcoinica/image%20%281%29.png
http://dl.dropbox.com/u/9542654/btc/bitcoinica/image%20%282%29.png

[NothinG]

Open Transactions

Also: http://bitcoin.stackexchange.com/questions/2708/how-can-open-transactions-benefit-bitcoin

I haven't looked too closely at open transactions. Can it work right now with Bitcoin?

Theoretically, yes. Though, it would take a minimum of 2 people to get it started.

[da2ce7]

We have a thread on this forum for Open Transactions for windows:

I'm always looking for more testers!

https://bitcointalk.org/index.php?topic=77301.0

[MoonShadow]

You pretty much described how coin mixers work in your OP.

[R-]

You pretty much described how coin mixers work in your OP.

Agreed. OP, please see The Bitcoin Fog.

summary

The bitcoin network might be anonymous in terms of single-handedly revealing your ip address, but the transaction history is recorded in the block chain and is publically available, which makes your anonymity very vulnerable. Once the interested parties, be it authorities or just interested researchers (http://anonymity-in-bitcoin.blogspot.com/2011/07/bitcoin-is-not-anonymous.html) have acquired any one of your addresses or transactions, they could easily track your money around the network.

[MoonShadow]

You pretty much described how coin mixers work in your OP.

Agreed. OP, please see The Bitcoin Fog.

summary

The bitcoin network might be anonymous in terms of single-handedly revealing your ip address, but the transaction history is recorded in the block chain and is publically available, which makes your anonymity very vulnerable. Once the interested parties, be it authorities or just interested researchers (http://anonymity-in-bitcoin.blogspot.com/2011/07/bitcoin-is-not-anonymous.html) have acquired any one of your addresses or transactions, they could easily track your money around the network.

While that looks like an awesome hidden service, how is the ownership of the site you linked to protected?  If the autorities can figure out who set up that site, and there is no reason to assume that they cannot, finding the hidden server simply involves some baseball bat interrogation.