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The bitcoin is by many people believed to be used as a method of payment, just like fiat currencies, in the future. Apart from the other big use case of a stable store of value.

But the payment use case is very flawed currently. because from the day someone starts to make a payment and shows her public key around, everyone (also people who have malicious ideas) could start to track this person based on her public key for the rest of her live basically on the blockchain. Everyone using btc payments would be sitting "naked in a cup made of glass".

This is horror scenario for all, companies, private persons, a dangerous inherent feature.

this is currently not possible with cash or bank transfers. everyone can have your IBAN accout number, but no other person who has your IBAN (and is not a bank employee) can ever track you or know about your financial state, etc.

How can btc in such grave circumstances achieve mass usage status as payment method?? Is privacy not needed as prerequisite for payment use case?

How are bitcoin devs trying to tackle this unsolved issue? Or do you think this is not an important issue.

Thanks

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3 Answers 3

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Bitcoins themselves are fungible, and addresses are designed to be for one-time-use only. It really comes down to how you use it, and it is entirely possible to transact using Bitcoin in a private manner.

If the user is naive and has poor practices, then it is possible to track their financial history.

But if the user is smart and uses best practices (no address reuse, coinjoin/payjoin transactions, lightning network, etc), then they can enjoy a very high degree of privacy, and sovereignty (you don't get this with traditional banking).

This article is a great writeup about privacy while using Bitcoin.

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  • Monero was created precisely because Bitcoin is not truly fungible. If a group wanted to ban accepting all Bitcoins originating from some address xxxx (due to e.g. some political reason) they could do it with ease. Unless something about how Bitcoin works changed in the past few years
    – HiddenBabel
    Nov 24, 2019 at 0:07
  • Bitcoins themselves are fungible, despite having a history. Attempting to ban coins that were once related to some address sounds simple enough, but becomes untenable in practice. Coinjoin/payjoin transactions are designed specifically to make the idea of ‘taint’ and traceability moot. Lightning payments are even more powerful in this regard: when you receive a payment, it is basically impossible to point to some UTXO on the network and say ”this is where those coins came from”. Technically, you now just own a larger portion of the channel UTXO, but the payment could come from anyone.
    – chytrik
    Nov 24, 2019 at 0:23
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    @HiddenBabel the thing to keep in mind is that your privacy/fungibility is dependant on how you interact with the network. eg If every user decided to just use one single address, then it would become trivial to enact controls and ban coins like you’ve suggested. However with good engineering and use techniques, I believe the network can provide a high level of privacy and sovereignty. It is a nuanced subject to explore, in any case!
    – chytrik
    Nov 24, 2019 at 0:39
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How can [Bitcoin] ...achieve mass usage status as payment method?

I suspect much research has been done in this area. Privacy is an important obstacle but not the only one.

Motivations and Barriers for End-User Adoption of Bitcoin as Digital Currency. Presthus and O'Malley, 2017

The largest group, the non-users, state that they are awaiting for others to start using bitcoin, as they question the value and security issues. We conclude that we may witness a deadlock where “everybody waits for everybody”

Cryptocurrencies: Overcoming Barriers to Trust and Adoption. Gurgec and Knottenbelt. 2018

A number of challenges remain to cryptocurrencies becoming more widely adopted as a method of payment. Many of these challenges are linked to the underlying technology but also include legal, economic and social factors.

...

More specifically, the 6 issues listed below and discussed in detail throughout the report, hold the key to the adoption process and improving trust:

  1. Scalability
  2. Privacy
  3. Volatility
  4. Regulation
  5. Incentives
  6. Usability/Design thinking

Top Ten Obstacles along Distributed Ledgers’ Path to Adoption. Meiklejohn. 2017.

  1. Scalability: do we need full agreement?
  2. Privacy: how to protect data?
  3. Cost-effectiveness: what is the cheapest way?
  4. Scalability: why store every transaction?
  5. Interoperability: how to talk to each other?
  6. Agility: which algorithms do we use?
  7. Key management: how to transact?
  8. Meaningful comparisons: which is better?
  9. Governance: who makes the rules?
  10. Usability: why use distributed ledgers?

It is necessary to read the full document for the description of the actual problems in the above areas.

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The previous answers are better but I want to add results in my research on track address.

I must create the graph address of blockchain bitcoin, and with this work, I understand it is very difficult.

Example with my transaction

I have created this transaction with id 3fc83ee4331f5ff628ffe280b4edd893a6eb3d90ef0803808e33ae4856293359 and I sent the bitcoin from 3JUdeoEgE4kszNqTBY9tqoziQ7KfnC7uMg to this address 1KEdN2XMuS2b8xVcHqjgJN7wwztTpPB1N3, if you noted In the exchange the transaction contains the another destination address start with "bc1". The destination address starts with "bc1" is exchange-transaction.

The partial graph of address is this

enter image description here

How the simple flow the bitcoin is more complex with the graph of address because I used only 3 different wallets, there is:

  • Wallet A: “1KEdN2XMuS2b8xVcHqjgJN7wwztTpPB1N3”, “1JP5FmXVUCBCUhubMEoDmowpvQprchyP3q”.
  • Wallet B: “1CPD7DqguruujwvfaegKsV6ewiFvSZTiB3”
  • Wallet C: “3PPSrzVwYk8x5R6XdZjyUW5Pbpv7L4PW5x”, “38SjHExbhiDnmsqGTh6BwoHsUQxDjKkue9”

The transaction is simple and I have created this for my example, and I know the real flow of bitcoin, but if you don't know the flow of bitcoin how you can associate the address to the wallet?

there is the other problem, with the address starting with "3" can contain more public key, an example the address 38SjHExbhiDnmsqGTh6BwoHsUQxDjKkue9 contains 2 public key, and now the question is "If using the single public key inside the address 38SjHExbhiDnmsqGTh6BwoHsUQxDjKkue9 in another transaction with another address?

I can't track it.

Conclusion it, with the new type of address P2SH, P2WPKH, P2WSH is more difficult tracking it.

This answer doesn't substitute or doesn't is the alternative to the previous question, but illustrate another difficult in the tracking bitcoin address.

ps: for the moment (November 2019) the actual software analisis considered the only case of reuse the address.

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