Transaction Remote Release, a Tor-Inspired Proposed Change to Bitcoin Protocol for Anonymous Transactions

It’s well known that bitcoin transactions are not anonymous. Every transaction and the full transaction history of any bitcoin address are permanently recorded in the tamper-proof public blockchain and open to analysis. A bitcoin addresses isn’t explicitly associated to its owner, but blockchain network analysis can often de-anonymize bitcoin users.
Bitcoin Magazine recently reported that two companies, Chainalysis and Elliptic , sell sophisticated blockchain network analysis tools and services to trace bitcoin transactions back to their participants, and de-anonymize users. Such services often anger libertarian early adopters, but the direction of the evolutionary trend in the Bitcoin space is clear – governments and financial institutions are gradually warming up to blockchain technology as a means to achieve faster, cheaper and better recorded transactions, but consider privacy and anonymity as bugs that need to be fixed.
Recommended privacy practices, from simple measures such as using fresh Bitcoin addresses for new transactions to strong privacy measures such as dark wallets and mixing services, reduce the risk of being de-anonymized, but there are documented attack strategies that often permit identifying bitcoin users by IP. Using the Tor network provides additional privacy protection by masking the user’s IP, but ways to work around Tor privacy have been found.

This post was published at Bitcoin Magazine on September 30th, 2015.