Why does bitcoin use public keys as pseudonyms? Is there any reason for that? What are the advantages of using public key as the pseudonyms? Highly appreciate if someone can give me an answer.
1 Answer
More accurately, the pseudonyms most commonly used are addresses, which are derived from public keys (not the longer public keys themselves).
In order for Bitcoin's idea to work, you must have coins that can only be spent by the owner of a given private key. This means that whatever you send to must be tied, in some way, to a public key.
Using arbitrary pseudonyms (e.g. user names) would mean that you'd have to then somehow link the pseudonym to a public key in order to enable public/private key crypto. This would remove the ability to securely create addresses/pseudonyms offline (e.g. before someone could send money to the user name "tdumidu", you'd have to announce in the blockchain that "tdumidu" is owned by public key "a1c...", and include a fee so others have a reason to announce it), reduce anonymity (by encouraging you to reuse pseudonyms), and needlessly bloat the size of the blockchain. It would also create a false sense of security that you're sending to who you think you are (if I take the name "Linus Torvalds" before he does, then it's mine and people might send money thinking they're paying the creator of Linux, not me).
Using a pseudonym that either is, or can be calculated from, the public key removes these problems: the mere act of sending the money also describes, in cryptographically secure detail, who can spend it. As the existence of vanity addresses shows, it also allows a small amount of customization.
