The anatomy of anonymity: like Dandelion improve the privacy of Bitcoin

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Many believe bitcoin is an anonymous digital currency, the characteristics of whose privacy can hide their actions when buying a dubious and illicit goods on the darknet.

These same people over time are surprised to learn that bitcoin is not anonymous. Blockchain, the underlying technology of cryptocurrencies actually has a number of technological “Windows” through which can be determined the identity of network users. The parties concerned, be it research firm, government or anyone with sufficient knowledge of IT can use the P2P network-analysis to associate the public address of the Bitcoin network with the IP address. This allows you to see who owns the purse and to whom he sent his own expense.

When tracking transactions and the public addresses to the IP addresses of the users of these “spies” also known as “opponents” effectively deanonymizing users. The Bitcoin community has long been trying to find a way to solve the problem with the privacy.

This work led to the creation of the Dandelion Protocol is developed by Julia Fanti (Fanti Giulia) together with the Bode Salesem Venkatakrishnan (Shaileshh Bojja Venkatakrishnan), Bakshi Surya (Surya Bakshi), Bradley Denby (Denby Bradley), Bhargava Shruti (Shruti Bhargava), Andrew Miller (Andrew Miller) and Vishwanatham Pramod (Pramod Viswanath), researchers from the School of computer science Carnegie-Mellon in Pittsburgh, mit, and University of Illinois.

If their theory can be implemented in practice, Dandelion effectively neutralizes P2P-analysis, which plays a significant role in the compromise of user identity.

The problem

Whenever someone sends a transaction to the Bitcoin network, as a rule, this transaction is broadcast to multiple nodes, until it is picked up by a miner and included in a block.

This relay process is known as transaction propagation in the network. It starts when the source node (the one that created the transaction), transmits it to other nodes in the network. As soon as the node broadcasts the transaction, each of the other participating nodes in the network, continues to independently distribute it, sending the transaction to another with exponential delays.

During the presentation
Dandelion at the conference “Building on Bitcoin” in Lisbon, Giulia Fanti explained that the IP address of the source node is often possible to recognize, because “the spread of susceptible to discovery.” When network nodes receive the transaction spies, they can participate in P2P network is analyzed to trace the path of a transaction.

In principle, observing the temporal characteristics of each broadcast and by studying the structure of the active nodes in the network, spies can track a transaction to the source node. And, from there, spy has a higher chance to get the IP address of the sender of the transaction.

The Decision Of The Dandelion

Dandelion tends to abstract a relay process to make it more difficult to track transactions. This in fact will make it nearly impossible to track transactions to the source node, which first started transmission.

To achieve this goal, the Dandelion sends the transaction on a random path through a variable number of nodes before the transaction will be distributed throughout the network. The random path is known as the phase of “stem” (stem) Protocol, since the transaction passed at this stage, apply only among themselves, handed down from one node to another. The expansion phase known as the phase of “fluff” (fluff), because a transaction is broadcast to multiple nodes, which must be distributed over the network (visually and in fact, these two processes repeat the anatomy of a dandelion (dandelion), hence the terminology).

In the phase of “stem” each node has a 50/50 chance, or continue the phase “stem”, passing the stream to another node, or to distribute the transaction to the rest of the network. In case of further transmission, the next node will be the same chances, and the transaction will be passed on and on, until you initiated the distribution process.

The addition is the first phase of the transaction until the distribution is designed to implement a layer of anonymity in the process of transferring transactions. If the network passes the transaction to multiple potential source nodes before distributing, it should theoretically hide, where the transfer was initiated, thereby extremely complicating the tracing of transaction to its source.

The Growth Of The Dandelion

Offer Dandelion is considered a possible step towards addressing the issue of the anonymity of Bitcoin, which does not require a complete revision of its code and add-ons P2P tools of obfuscation networks that are developing crypto-currencies like Monero.

The team is often asked why she doesn’t want to use the same multi-layer routing, which focuses on Monero. Fanti admitted that the “Monero refers to the same problem that tries to solve the Dandelion”. However, he noted that “this realization is very labor intensive,” since the Monero development team is working on it in 2014.

Focus instead on your basic approach, the Dandelion has come a long way after was presented
2017. Once during expert review its code was found to have severe deficiencies, the team made the updates and re-released a new White paper
with the updated method (known as the Dandelion ++) in may 2018.

It is expected that the Dandelion will be implemented in a future update Bitcoin Core, although it will not be part of the upcoming release 0.17.0.

On the problem of privacy Bitcoin work and other teams. In January of this year, Gregory Maxwell (Greg Maxwell), one of the famous developers of the network suggested a possible solution – technology Taproot. In addition, other teams also continue to work
in the framework of other projects.

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