chris-belcher

Design for a CoinSwap Implementation for Massively Improving Bitcoin Privacy and Fungibility

25/5/2020

Abstract

Imagine a future where a user Alice has bitcoins and wants to send them with maximal privacy, so she creates a special kind of transaction. For anyone looking at the blockchain her transaction appears completely normal with her coins seemingly going from address A to address B. But in reality her coins end up in address Z which is entirely unconnected to either A or B.

Now imagine another user, Carol, who isn't too bothered by privacy and sends her bitcoin using a regular wallet which exists today. But because Carol's transaction looks exactly the same as Alice's, anybody analyzing the blockchain must now deal with the possibility that Carol's transaction actually sent her coins to a totally unconnected address. So Carol's privacy is improved even though she didn't change her behaviour, and perhaps had never even heard of this software.

justusranvier

SPV clients lack the ability of full nodes to detect whether or not a chain provided to them by another source complies with the rules of the Bitcoin protocol.

SPV clients can connect to multiple full nodes in the hope that at least one of the nodes is honest and will provide them with the best valid chain, however situations may arise where the non-compliant chain contains more proof of work than the compliant chain. In this situation, there is no way for the honest full node to signal to an SPV client that it should disregard the chain with more proof of work.

Fraud proofs are a technique which provide honest full nodes the capability to conclusively demonstrate that chain is invalid regardless of the amount of proof of work backing the invalid chain.

If Bitcoin nodes implement the ability to create, propagate, and verify fraud proofs, the security of SPV clients will be improved.

Assumptions and Definitions