I am very excited, not only because it is my birthday today, but also because I am announcing the first release of HiddenWallet, which I believe is a major step down the road of making Bitcoin anonymous again.
In a nutshell TumbleBit is a trustless Bitcoin mixer, where the tumbler cannot steal your coins, nor it can deanonymize you. I would like to also point out TumbleBit is not integrated yet, it’s the next step on the roadmap.
Why does TumbleBit need a dedicated wallet? Why not just integrate it to Electrum or to Blockchain.info or to some other wallet? The problem is, if the wallet, what your peers are using in the mix is screwed up from a privacy point of view, even if you are using TumbleBit in the correct way with a fullnode, your anonymity set is screwed up, because of your peers.
Why does a full node provide more privacy, than a normal Bitcoin wallet? At first glance, they are leaving similar tracks on The Blockchain, but that’s not the only aspect of your privacy you want to protect. Blockchain surveillance companies or various third parties can reestablish the links between your wallet addresses by combining blockchain and network analysis techniques. This is not just theoretical threat, it is reality today and they are extremely successful in this. If you are using a full node as your personal Bitcoin wallet, you defeat the possibility of network analysis, because it doesn’t only asks for data from third parties that it needs, like address balances, but asks for all the a data the Bitcoin network have, like all the blocks, so the other nodes cannot figure out which data it needs. You can read my research on this topic, if you want to dive deeper.
However running a Bitcoin full node is cumbersome and it is expected to get much worse over time as Bitcoin is pressured to scale, but we can do better, if we our only requirement is to keep the full node level privacy, that’s where HiddenWallet and full block downloading SVP wallets come in.
Interestingly this is the type of SPV wallet that Satoshi described in his whitepaper, but none of today’s SPV wallets implemented.
HiddenWallet doesn’t store the blockchain and doesn’t validate the blocks, rather it’s using merkle proofs, like other SPV wallets to make sure a transaction is valid. Unlike other SPV wallets and like full nodes it downloads full blocks, so an curious listener has no idea what information we are interested in, therefore it cannot reestabilish the link between our wallet addresses. This is the kind of privacy that is needed for the ideal working of TumbleBit.