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I know as a merchant it is not a good idea to receive all payments to the same address because then people could track our balance.

But I don't understand why it could be a privacy problem if we receive payments from one customer to the same address (but every customer has a different address assigned).
Why will there be a privacy hole for the customer if we always receive their payments to the same address?

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Assume you are using a unique common address for each customer and at the end of the day/week/month you make payments to your employees, suppliers or partners. When making those payments, if those outgoing amounts exceed the amounts received from one customer, you will have to include inputs coming from other customers. If some of your customer addresses are well known (leaks or otherwise) then people can use those addresses to track others when you are batching multiple inputs to make payments. Once they know those addresses belong to you, they will track those to see how they are included in other inputs. So, a determined person can definitely make interconnections thus compromising privacy.

If you are not re-using addresses, then even if some of them get leaked only few of your addresses gets compromised when you are including them in the transaction. However that will be one-off and snooping will end there. However, if you are persistently using the same unique addresses with the consumers, the problem is compounded as that address will be continuously monitored to compromise other addresses which are also being continuously used.

So now the attacker can create a map of all your customer specific addresses. If you reused the same address for all customer, the attacker could only know the volume of traffic and the revenue from those customers. But with unique address to each customer, the attacker can not only map the above but also now can know customer specific metrics like revenue/customer which is one level deeper and can create competitive issues.

  • I'm still a bit confused about how can they know who is the owner of those addresses. But if I got it right you are saying the problem is mainly if we use always the same address for every customer then one leak will compromise forever to that customer but with not reusable addresses one leak will compromise only one transaction? (so this is a protection against leaks?) – Enrique Jun 4 at 21:57
  • Let's say customer A has transacted 40 transactions with you in the month for a total value of 0.1BTC. At the end of the month, when you make some payments (say 0.3BTC to your valued employee), the entire UTXOs received from customer A are not sufficient to make the payment. As a result you might combine the UTXO from say customer B and customer C in order to make that payment. Now let us assume that the address customer A pays to is publicly known. Now because you batched customer B and customer C UTXOs when making payment along with customer A, their addresses are also disclosed – Ugam Kamat Jun 5 at 6:10
  • @Enrique Now a determined person will keep a track of all the addresses that you combine with A and addresses you combine with them as well. Because you are not reusing your addresses, and you will be using off-the shelf wallet application, many times you will be batching inputs along with other addresses – Ugam Kamat Jun 5 at 6:12
  • OK, someone (maybe a customer) can finally get all our customer addresses if we reuse them. But I cannot see the problem for the customer. I mean the attacker will see addresses, not the indentity of those addresses right? how is privacy violated here (for our customer, not our store) – Enrique Jun 5 at 13:28
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    @Enrique Address reuse generally violates your privacy rather than the one that pays you. If you use the same address for all your customers, the customer's privacy is never violated as they will be paying from many different UTXOs and that will never be disclosed. But now using unique address for each customer you have a bigger problem. If the attackers comes to know of the addresses, now he can not only calculate the amount of money you are making, but can track customer specific metrics like revenue/customer which violates your privacy even more gravely. – Ugam Kamat Jun 8 at 8:36

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