What are Bitcoin silent payments, & how does Bitcoin privacy work?

What are Bitcoin silent payments, & how does Bitcoin privacy work?

What are Bitcoin silent payments, & how does Bitcoin privacy work?

Bitcoin has long been criticized for its lack of privacy. That observation extends to people like whistle-blower Ed Snowden, who noted in a recent interview that “Bitcoin is not an anonymous ledger”.

But can a new proposal - Bitcoin silent payments - finally bring Bitcoin privacy?

    What are Bitcoin silent payments?

    Bitcoin silent payments is an improvement proposal that is being furthered by the Bitcoin Operations Technology Group (Optech).  

    Optech is a not-for-profit organization which works towards bringing open source technologies to businesses that use Bitcoin. This helps to lower costs and improve the customer experience.

    Optech brought the proposal to public attention, having published details of it in a recent newsletter. In essence, Bitcoin silent payments enable users to pay a public address without creating an on-chain, public record of that address having been paid.

    The main developer behind the idea is Ruben Somsen, but the concept builds upon previous privacy-related ideas that have been proposed by other Bitcoin development contributors.

    How do Bitcoin silent payments work?

    With Bitcoin silent payments, the recipient has a single static address. This is not an actual Bitcoin address where the recipient receives payment, but another address created from it, that is only known to the sender and the receiver.  

    Only the recipient can generate the corresponding private key. Only the recipient has control of any funds sent to that address. In order to identify the payment, the recipient has to scan every transaction on the blockchain.

    what are bitcoin silent payments
    Bitcoin was not designed to be private, and can be tracked to individual users

    This concept improves upon previous privacy projects in that it doesn’t require any additional blockchain data. Many previous efforts also required sender and receiver to communicate outside of the blockchain in order to effect payment - something that’s not required with silent payments.

    The feature comes with a trade off though, as there is a need for an additional computational overhead for the recipient. From a privacy perspective, the publicly posted address cannot be linked to the actual address through which the BTC is ultimately received.

    How can I use Bitcoin silent payments?

    Bitcoin silent payments are at a developmental stage and are still not ready for prime time. The developmental work that goes into improving Bitcoin is incredibly conservative and slow. That’s a feature rather than a bug. The Bitcoin improvement process has been devised that way in order to minimize the risk of bugs being added to the codebase.

    The signet Bitcoin testnet is being used to test the technology. Somsen posted details on his proposal to GitHub Gist in March, inviting comments from other developers on the merits/demerits of the feature. At this stage, it remains one of a number of other Bitcoin privacy-centric proposals including stealth addresses (BIP63), reusable payment codes (BIP47) and PayJoin (BIP78).

    Are Bitcoin privacy payments finally here?

    One of the drawbacks of the proposal is the need to scan every transaction in every new block. With that, it could be incredibly difficult to integrate with a light wallet. However, this is only a requirement for receiving payment and so most wallets could add support for sending payment with little added computation required.

    Bitcoin silent payments may not ever see the light of day on mainnet. It may be superseded by another proposal. That said, the encouraging thing is that developmental work continues to be carried out on Bitcoin with a view towards adding to its utility. Bitcoin privacy payments matter so let's hope that the Bitcoin development community can solve the puzzle of Bitcoin privacy.

    Bitcoin and Lightning Network in Exodus

    Exodus added support for Lightning Network back in December 2021.

    If you want to benefit from low cost, lightning fast payments and transfers, you can learn how to access LN via this step-by-step guide.

    This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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