How Silent Payments work in Bitcoin
The Bitcoin ecosystem is constantly evolving, and as adoption grows, so do innovations to improve the privacy and efficiency of transactions. One of these emerging innovations is the concept of Silent Payments (silent payments), which aims to offer a higher level of anonymity and confidentiality. But, what exactly are Silent Payments and how do they work?
What are Silent Payments?
Silent Payments are a proposal that improves privacy in Bitcoin transactions by allowing a recipient to receive funds without publicly revealing their Bitcoin address. Unlike traditional transactions, where a fixed and public address is used to receive funds, Silent Payments generate unique and unrepeatable addresses for each transaction.
This means that even if a user shares a single receiving address with multiple senders, the generated transactions will not have a visible link to that address. In this way, the identity of the recipient is hidden and the ability to track is made difficult for external observers.
How do Silent Payments work?
To understand how Silent Payments operate, it is useful to make a comparison with other privacy techniques in Bitcoin, such as Stealth Addresses or CoinJoin. Silent Payments address the privacy problem in a different way by allowing each payment to be made to a unique address derived from a single shared public key.
The process is carried out in the following steps:
Generation of the recipient's public key: The recipient creates a special public key that they can share with the sender. However, this key will not be used directly to receive funds, but rather as a "seed" to generate unique receiving addresses.
The sender generates a unique address: Using the recipient's shared public key and the transaction information, the sender generates a unique address that will only be known to them and the recipient. This process is carried out using a cryptographic algorithm that ensures that each generated address is unique, unrepeatable, and, most importantly, untraceable to the original public key.
Fund transfer: The sender transfers the funds to the generated address. From the perspective of the blockchain, the transaction appears as a normal movement to any address, with no visible link to the original recipient.
Fund receipt by the recipient: The recipient, knowing the public key that generated the unique address, can verify that the transaction was intended for them and spend the funds. Despite the fact that the generated address is completely different from their original public key, the recipient can decipher it and recover the funds with their private key.
Advantages of Silent Payments
Greater privacy for the recipient: By using unique addresses for each transaction, Silent Payments make it practically impossible for an external observer to determine how much funds a recipient has received. This eliminates the possibility of tracking income through a single address.
Simplification for the sender: The sender does not need to worry about generating multiple addresses to avoid reuse. A single shared public key is sufficient to make anonymous and unique payments.
Compatibility with the existing blockchain: Silent Payments do not require changes to the Bitcoin protocol or hard forks (hard forks). They can be implemented on the current infrastructure with additional development in wallet software.
Comparison with other privacy techniques in Bitcoin
Stealth Addresses: Like Silent Payments, stealth addresses also generate unique addresses from a shared public key. However, they require a more complex data structure and, in some cases, incur greater computational resource consumption for generating and verifying addresses.
CoinJoin: CoinJoin mixes the transactions of multiple users into a single transaction to hide the relationships between inputs and outputs. Although it is effective in hiding the trail, CoinJoin can be identified as mixes in the blockchain, attracting the attention of observers looking for these transactions. Silent Payments, on the other hand, leave no visible trace of using a privacy technique.
Challenges and limitations of Silent Payments
Like any innovation in cryptography and blockchain, Silent Payments face certain challenges and limitations:
Larger transaction size: Due to the generation of unique addresses, Silent Payments can increase the size of transactions, thereby increasing fees.
Availability of compatible software: Currently, Silent Payments are not yet part of the Bitcoin standard, so not all wallets and node software support them. Their implementation will require updates and adoption by the community.
Risk of long-term detection: Although the generated addresses are unique, if an observer had access to both the shared public key and the destination address, they could deduce the relationship between the two. Therefore, it is important to combine Silent Payments with other privacy techniques such as using networks like Tor or VPN.
Silent Payments are a powerful tool that, along with other privacy techniques, can make Bitcoin even more resistant to tracking and more effective in maintaining transaction confidentiality. Although their implementation is still in its early stages, interest in this technology shows that privacy in Bitcoin remains a priority for developers and users.
As with any emerging technology, it is important to be informed about its use, advantages, and limitations. Silent Payments could become the privacy standard for Bitcoin transactions in the near future, providing a new level of security and anonymity that meets the needs of users seeking greater control over their financial privacy.
