The Mythical Privacy in the Age of Bitcoin - And What We're Doing About Itby@mayankchhabra
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The Mythical Privacy in the Age of Bitcoin - And What We're Doing About It

by Mayank ChhabraAugust 31st, 2019
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Bitcoin works with unprecedented level of transparency that most people are not used to dealing with. Despite popular belief, Bitcoin transactions are NOT anonymous, but pseudo-anonymous. All transactions are public, traceable, and permanently stored in the Bitcoin network. The most significant chunk of transactions happening on Bitcoin network uses poor privacy practices. Wasabi Wallet comes in as a beacon of hope; a rock-solid open-source Bitcoin wallet that implements multiple privacy features on several different layers of interactions with the Bitcoin.
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Bitcoin is an extension of ourselves, it’s our money — the people’s money. We can choose to transact with whomever, wherever, whenever, and for whatever we want — because Bitcoin does not discriminate

However, Bitcoin works with an unprecedented level of transparency that most people are not used to dealing with. Contrary to popular belief, Bitcoin transactions are NOT anonymous, but pseudo-anonymous.

All transactions are public, traceable, and permanently stored in the Bitcoin network. Privacy in Bitcoin is an important (missing) element that gives us the control over who knows what about our identities, our wallets, and our transactions.

Right now, the most significant chunk of transactions happening on the Bitcoin network uses poor privacy practices. Address reuse, exchange linked KYCs, use of custodial wallets, transaction broadcasts to third-party nodes over the open internet, and the list goes on…

A recent survey suggested that about 9 out of 10 people connect to any public wifi available. Key takeaway?

People prefer convenience over safety and we’ve seen that play out over and over in the past.

In the crypto world, you see that when most of the people have their funds lying in their exchange accounts, and custodial wallets being the most popular; which is no different than keeping your money in a bank (albeit the latter has a more secure history than the former).

Cash is (surprisingly) wonderful when it comes to privacy. A $1 note is a $1 note, no matter if the person who handed it to you had stolen it from someone, or used it to buy weed from the street-peddler.

You wouldn’t know that because you cannot trace its history, and even if you somehow figure that out, you will not use special tricks such as shuffling it in a basket of several $1 notes to remove its “taint” and to make it clean.

Strictest privacy settings are applied by default, without any manual input from the end-user, to every $1 note out in the market, making it fungible.

That’s where Wasabi Wallet comes in as a beacon of hope; a rock-solid open-source Bitcoin wallet that implements multiple privacy features on several different layers of interactions with the Bitcoin network, most notably, an in-wallet feature to anonymize your coins by shuffling them with other wallet users in a completely trust-less environment (thereby making them “fungible”), and is built by a highly respected and admired team of developers. 

It received massive global attention recently when 100 Wasabi users participated in the world’s largest CoinJoin transaction (CoinJoin is a special kind of transaction where several users participate to mix their Bitcoin with each other, essentially privatizing their coins; read more). 

Until Bitcoin improves its privacy-preserving techniques via Bitcoin Improvement Proposals or Layer-2 solutions, Wasabi is on the bleeding-edge when it comes to eliminating as many privacy-leaking loopholes that exist in a user’s interaction with the Bitcoin network as possible.
Today it achieves that using features such as address labeling, integrated-Tor, in-built CoinJoins, and such. Tomorrow it could be different —  for instance, if Bitcoin implements something like the MimbleWimble protocol down the lane, most of the features that exist in Wasabi today would be useless, and for good.

However, if privacy is a fundamental human right, why isn’t every Bitcoin user using Wasabi right now?

That comes down to the users of Wasabi. As with every technology, the first set of users who adopt it are those who desperately need it. With Wasabi, the first set of users who require such strong privacy-oriented features are those who desperately need to anonymize their footprint on the Bitcoin network (similar to why one of the first user-base on Tor network came for illegal pornography and the Silk Road market).

The second user-base of Wasabi is comprised of people who really care about their privacy and don’t necessarily have “something to hide”. However, this subset of users is technologically literate enough to understand two things in-depth — #1 the need for digital privacy, and #2 privacy shortcomings of the Bitcoin network. As you might have guessed, this subset is really small. 
That said, I firmly believe that now is the time to bring the third set of users to Wasabi, which is by far the largest and the most important — the average Bitcoin user, because for the Bitcoin network to truly succeed in its original intention of being “a peer-to-peer electronic CASH system” —  as Satoshi titled the Bitcoin whitepaper — privacy-by-default is the only way forward.

And thus, Wasabi as the de-facto Bitcoin wallet, instead of the most private wallet for Bitcoin geeks, has a much brighter future not just for itself, but for the humanity (or at least the crypto-humanity).

So how do we get there?

One can argue that the way to get there would be through education and awareness, shifting the people from the third-set (the average Bitcoin user) to the second-set (those who understand the need of digital privacy and privacy-shortcomings of the Bitcoin network). I don’t disagree with that, and in-fact initiatives such as Wasabi’s new documentation are already doing a stellar job at it!

While the argument itself is correct, education tends to work only if there’s enough curiosity in the subject on an individual level (unless its enforced education like in schools). That’s why your dad is not interested to learn the benefits of using a VPN, and happily uses unencrypted chat applications. 

Education alone is not enough.

I believe that confidence in using the Wasabi Wallet application, achieved via user-centric experience design, is the key to bring the third-set of Bitcoin users to Wasabi.

Some common feedback that I (and even Wasabi’s CTO @nopara73) have received from several people who’ve tried using Wasabi (mostly from the third-set of users) is many times one of these:

“Why is it so hard to use?”,
“I don’t understand it”,
“I was scared to use it”,
“I think its easier to just keep my Bitcoin on exchange”

and sometimes even

“I’m too dumb to figure it out”

With the continuously falling attention-spans, everybody wants to experience the best technology without spending too much of their time and exhausting their busy brains in figuring it out.

The problem gets even worse because unlike non-crypto applications, there is real money involved in Wasabi. For an average Bitcoin user, the downside of not being able to understand the functionality and accidentally doing something wrong far outweighs the upside of him gaining privacy.

"When you combine real with a lack of undo buttons, a lack of password resets, and a lack of central place that fixes all the problems, the risk of something going wrong increases and therefore the user's confidence decreases"

- Taylor Monahan, CEO MyCrypto (Building Confidence, Not DApps)

As a simple example, consider the following screen of Wasabi Wallet where you need to enter a label to generate a receive address. When I hover on the label input it suggests “Start labeling today and your privacy will thank you tomorrow”.

Which is as true as Newton’s law of universal gravitation, but it fails to educate me, as an average Bitcoin user, on the most important ground — “Why?”

- “Why should I label?”
- “Or what exactly is a label anyway?”
- “I’m confused, what do I need to enter here?”
- “What is it for and how is my privacy impacted?”
- “I never had to put or label anything to generate a receive address in my previous wallet.”
- “How can I find my receive address?”

Now consider the following interface. I can easily understand what a label is, what its purpose is, and how it helps my privacy.

Simple things, but the trail of emotions that follow ultimately ruin my experience and I might not want to consider using Wasabi.

Here is a bit more comprehensive example, along with an emotion-trail, from the CoinJoin screen of Wasabi Wallet:

- “Why is the password I typed in Chinese characters? Am I doing something wrong?” (a real issue!)
- “Target? Anonymity set? What’s that? Am I supposed to click it?”
- “Registration ends in 23 seconds? What’s the registration for? Maybe for a CoinJoin?”
- “88 Registered peers???”
- “0.003% coordinator fee per anonymity set? Who is the coordinator? Does that mean I should select the lowest set for the lowest fees?”
- “Enqueue/Deque selected coins? For what? Are my existing coins queued somewhere? I just want to CoinJoin…”

There is a lot of information on the above interface that expects the user to have a certain level of knowledge, and understand specific terminology before participating in a CoinJoin. There are many UI elements that can be comfortably removed depending upon the state of the wallet, such as hiding the “Dequeue Selected Coins” button when the user has not queued any coins because thee shalt not deque what thee haven’t queu’d.

Now consider the following (re-imagined) interface. It’s dynamic, conditional and is broken down into three, where the user sees only one of them depending upon his current state of wallet. 

The user sees the following interface when he has selected the coins for CoinJoin:

The following interface when he has selected less than the minimum amount of coins required for CoinJoin:

And the following interface when he has already registered the selected coins for CoinJoin:

Practically speaking, you don’t need to think a lot when using a well-designed application, just like you don’t think about every gear-shift and turn when driving your car as it’s highly unlikely that something unexpected would happen. You have full confidence in using it, so instead of being confused, scared or frustrated, you just use the app happily to accomplish your desired outcome because everything “just works.”

Everything just works, because everything is well-designed, which doesn’t necessarily mean everything looks beautiful; it means everything works beautifully.

As developers, we always think that we are building the best possible interfaces, which is not wrong. We are building the best possible interfaces, but for whom? Most likely, the users will have way different knowledge and expectation level than us.

That being said, Wasabi has a long way to go before becoming the standard go-to wallet for every Bitcoin user. I’m excited to be a part of this mission, working along with some of the best minds in this space —  both Wasabi’s developers and the amazing community, along with our product and design team at Blockspace.

The first step in this journey has already been taken with the redesigned website going live along with the next wallet release, and the possibilities that lie ahead to take this amazing piece of software to the next level are truly endless. I am excited to explore all of them and encourage you to participate in this mission to bring privacy to every Bitcoin user. 

Disclosure #1: Wasabi Wallet is a completely free, open-source wallet, built with the mission to increase privacy in the Bitcoin network.

Disclosure #2: I work at Blockspace.