TumbleBit, a new Bitcoin-compatible system, could make Bitcoin transactions harder to track

Rage Review : Researchers have developed a TumbleBit system that runs on Bitcoin, which makes it more difficult for observers to identify or track encrypted transactions and the parties involved. TumbleBit uses the concept of "mixing services". The two parties to the transaction will transfer funds through the middleman "tumbler". The more parties to the transaction, the more difficult it is to see the identity of the trader, so this system is very safe.

Translation: Nicole

Researchers have developed a bitcoin-compatible system that makes it more difficult for observers to identify or track the various parties involved in any particular cryptocurrency transaction.

Bitcoin was originally conceived as a way for people to anonymously exchange money. However, researchers say anyone can track all bitcoin transactions and identify the parties involved.

Bitcoin operates by providing each user with a unique public key, which is a string of numbers. Users can transfer funds from one public key to another in the form of digital bitcoins.

This is achieved through a system that ensures that users have enough Bitcoin in their accounts to make the transfer.

Using public keys gives users a sense of anonymity, even though all transactions are visible on the public Bitcoin blockchain, which lists all transactions.

Over time, experts and private companies have developed very effective methods to deanonymize these public keys.

Now, researchers from North Carolina State University, Boston University and George Mason University in the US have developed a system called TumbleBit, a computer protocol that runs on top of Bitcoin.

TumbleBit leverages a concept now known as “mixing services.”

In this concept, Party A does not pay Party B directly, but many different Party A’s pay a middleman “tumbler”, who then pays Party B.

The more players involved, the harder it is to tell which party A is paying which party B.

Alessandra Scafuro

Alessandra Scafuro, assistant professor at NC State, said:

“However, there is still a security hole. That is, if an external observer can crack the tumbler, they can know which party is paying which party.”

To solve this problem, TumbleBit takes a three-step approach. The first stage is escrow, where Party A notifies the tumbler that they want to be paid, and Party B notifies the tumbler that they want to receive the payment. This is all done on the public blockchain.

As for the second phase, which will not appear on the blockchain, the researchers have prepared cryptographic tools that will allow the tumbler to pay the corresponding parties without explicitly knowing the parties involved.

The third phase is called withdrawals, where all transactions are carried out simultaneously, making it more difficult to identify which parties are involved in any particular transaction. The third phase will occur on the public blockchain.

Scafuro said:

“We’ve tested TumbleBit with 800 Bitcoin users and found that phase 2 takes only seconds to complete.”