The Bitcoin White Paper: 10. Privacy

The Bitcoin White Paper: 10. Privacy...

Data Privacy

"Bitcoin: A Peer-to-Peer Electronic Cash System
Satoshi Nakamoto
October 31, 2008"

Now we have the 10th section of the Bitcoin White Paper. Privacy is a great feature of the Bitcoin network. Privacy can be a problem if you reveal which public keys are yours. It's even worse if someone knows your private key, then they can take your bitcoin! Bitcoin itself doesn't need anything other than your public and private keys to do a transaction.

"10. Privacy

The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the "tape", is made public, but without telling who the parties were."

Bitcoin transactions are visible to everyone but these public keys are anonymous (unless someone chooses to reveal who they are tied to).

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Bitcoin provides far more privacy than the traditional banking system. It provides freedom from the central control of a bank or government.

"As an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner. Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner."

A best practice of preserving privacy is to use a new private key and public key combo for each transaction. Guess how many can be generated from your master private key? An infinite number!

Thanks to the Nakamoto Institute for making the whitepaper available freely via an Attribution-ShareAlike 4.0 International (CC BY-SA 4.0) license. More info on that here: https://creativecommons.org/licenses/by-sa/4.0/

Source: https://nakamotoinstitute.org/bitcoin/