What are we talking about when we talk about Bitcoin?

Author: Velvet Gold Mine

As long as a system requires professional technicians to operate, the ability to use this technology will definitely be divided among a small number of technicians.

If everyone had to be given a keyboard and a DOS-style command line terminal whenever they wanted to get on an elevator, most people would just walk up. The nerds among us might be eager for programmable elevators to become common knowledge, but the average person just wants to push a button to get from one floor to another, not master the workings of anti-gravity machinery.

Bitcoin addresses have long been a source of confusion for newcomers to the technology. It’s hard to explain Bitcoin addresses in a digestible analogy because there isn’t one that fits the situation. They’re a bit like email addresses—you can create an unlimited number of them—but they’re randomly assigned and hard to remember, much like a phone number. But Bitcoin addresses aren’t two-way like phone numbers.

Let's say you receive money from a friend and you want to send some money back. The address you originally received the money from may belong to your friend, or it may just be an address your friend uses on a Bitcoin service. The funds you send back from this address may end up in your friend's wallet - assuming he has backed up his payment wallet - or they may just go into the Bitcoin service's pocket, and you will never get the money back.

In addition, receiving a remittance is not like receiving a phone call or an email, because there is no area code or caller ID, so it is difficult for people to distinguish the identity of the remitter or explain why he sent the money to you. A small number of users who have studied the details of the internal operation of Bitcoin will have a vague feeling in their hearts that sending money to the same address multiple times is a dangerous thing. (Here refers to the "address reuse" in the Bitcoin community)

This nebulous concept is closely related to the little-known privacy issue that seems to pose no threat to cryptocurrencies that reuse keys, but it does not protect users from the threat of address reuse.

When it comes to addresses, Bitcoin is very similar to the Internet before DNS. Today, we use user-friendly domain names like "Google.com" to access websites, but in the past, users who wanted to connect their computers to the rest of the Internet needed to use cryptic IP addresses like "209.222.18.222".

IP addresses preserve the core of the protocol that allows devices to connect to the Internet, but system designers and engineers have successfully hidden this core content from users by resolving domain names to IP addresses behind the scenes. In the process, they allow users to interact with identity recognition, such as Google search engines.

Promises and pitfalls

As Bitcoin services mature, they begin to find new users, and they also need an address resolution system to tie user-friendly Bitcoin addresses to the identities of individuals and businesses with whom users have financial dealings.

However, we must be careful when abstracting Bitcoin addresses away from the user interface.

Our goal is to make it easier for users to send money to each other while dealing with the underlying technical challenges associated with address reuse. It is tempting to do this by setting up traditional third-party lookup systems, a naive approach that could lead to the leakage and theft of personal information, making it a security and privacy quagmire. They would become a highly valuable database sought by hackers who would scout the database and conduct subsequent attacks on individuals.

Whenever possible, we must not ask users to give up their hopes for security and privacy so that we can get the software they need to use it.

Although consumer attitudes toward security and privacy have changed, companies are generally reluctant to share their income and spending data because it may contain commercial secrets that could be exposed to business partners, competitors, or the world at large. Similarly, we should not expect individual users to disclose their income and spending habits to their friends, close service providers, or unfamiliar analytics companies.

Revealing the prerequisites for using Bitcoin would have a dire impact on user adoption. If this is to be possible, we should find payment identifiers that meet the security and privacy expectations of businesses and individuals, avoiding inherent flaws and the involvement of trusted third parties.

Learning from history

Bitcoin developers have been known to reuse old passwords to work on bitcoin applications, which has become a sore spot for other users.

In 2013, Bitcoin developers developed application concepts such as key derivation functions and hierarchical key management, which date back to the 1990s and early 2000s, causing headaches for many users to set up payment wallet backups. Whereas the old Bitcoin wallets required users to constantly create new wallet backups, the new approach is that users can back up a hierarchical wallet. When he first creates this wallet, he also generates an almost unlimited number of Bitcoin addresses to pay for future transactions.

The most promising user-friendly Bitcoin address system dates back even further, to the 1970s. This decade marked a groundswell of research into key technologies that underpin today’s internet.

Many of the codebreakers of this era had moral motives. They saw themselves as creating an internet that would promote free speech and secure global trade, the way they believed the internet should be, not regulated by governments or dominated by corporate control.

From the mid-20th century to the late 1970s, three of the most prominent code breakers of the era: Whitfield Diffie, Martin Hellman, and Ralph Merkle, together created some of these key technologies.

Computers that wish to ensure secure and private communication must first exchange secret keys for encryption and decryption. Diffie, Hellman, and Merkle pioneered a method for two computers to create a shared secret key without interacting with each other. This seemingly magical protocol, now known as the Diffie-Hellman-Merkle key exchange, is a set of keys known only to the two parties involved, without the possibility of any eavesdroppers.

It's like having a loud conversation with a friend in a room full of spies without any risk of being overheard, and they created a seemingly impossible thing through the greatness of asymmetric encryption.

Bitcoin developers have been hard at work on the Diffie-Hellmann-Merkle address scheme for months, but a mobile-friendly version was recently coded into Bitcoin Improvement Protocol 47 (BIP) by Justus Ranvier, who turned these new addresses into reusable payment codes.

Major bitcoin wallets, library authors and communicators are currently working to deploy reusable payment codes in enterprises by 2016. This will allow enterprises to better protect the privacy of users in bitcoin databases while retaining the ability to authenticate users when needed.

Bitcoin users will soon be able to find their friends via social networks and other familiar identifiers, such as email addresses. Companies equipped with reusable payment codes will have no friction in the Bitcoin user experience and can set up P2P financial systems that invite millions of users to join.


JPM compiled from
Coindesk, How '70s Cryptography Could Improve Bitcoin in 2016 and Beyond, by Kristov Atlas.