Unlinking bitcoin transactions

Abstract

While considered as a secure payment system by many, Bitcoin suffers from a serious privacy issue: the publicly accessible blockchain allows one to see transaction details of every transaction that every happened since the inception of Bitcoin. To protect identity of a user, Bitcoin employes pseudonyms (Bitcoin address) instead of real world identities like phone number or email, and a user is allowed to create as many pseudonyms as they wish to increase their privacy. However, with clever analysis and by exploiting various idioms of use such as use of multiple inputs in a single transaction and reusing of addresses to receieve payments, an attacker is able to gather knowledge about various Bitcoin addresses that belong to a common owner. By corroborating public ransaction data with known information on owners of certain addresses, sometimes it also becomes possible to identify them. This thesis work is the study of the aforementioned privacy issue in the Bitcoin system, and the existing strategies that aim to address it. We also propose our own mixing scheme with the goal of addressing this privacy issue which provides unlinkability against all the parties involved, and is also capable of scaling to a large number of users.