Many researchers, scholars, and developers are trying to find the most optimal solution to hide the identity of users on the blockchain. Three researchers, Tim Ruffing, Pedro Moreno-Sanchez and Aniket Kate, published a paper titled ‘CoinShuffle: Practical Decentralized Coin Mixing for Bitcoin’ in September 2014.
Since then, they have also conceptualized ValueShuffle, their next vision of privacy for bitcoin users. On June 1, 2018, Pedro Moreno-Sanchez appeared in a Cypherpunks 101 interview where shared his ideas and journey into the world of securing bitcoin and its blockchain. He believes that the cryptocurrency has a great future and it will eventually be accepted as a currency for payment.
Early Beginnings in the Crypto World
Moreno-Sanchez was pursuing his Ph.D. at Saarland University in April 2013 under the supervision of Aniket Kate when he first heard of bitcoin. It was his mentor Aniket who introduced him to cryptocurrencies for the very first time.
The concept was new for Moreno-Sanchez, but he found it interesting that a new way of sending payments over the internet could be developed. Since he came from a background of working and solving networking problems, the idea of a global decentralized currency appealed more to him.
He started learning more about bitcoin and blockchain and eventually, his first paper was addressed a security issue in IoT products. He has since contributed to 11 research papers mainly dealing with increasing privacy across cryptocurrency networks.
Research Paper for CoinShuffle Released in 2014
In September 2014, Moreno-Sanchez along with his mentor Aniket Kate and another scholar Tim Ruffing authored a paper in which they proposed a new system to increase the privacy of users. The proposed idea, if implemented, would make it impossible for anyone to track the history of a coin or to conclude who the owner of each coin is.
It was stated, “In this paper, we propose CoinShuﬄe, a completely decentralized Bitcoin mixing protocol that allows users to utilize Bitcoin in a truly anonymous manner.” It was based on the accountable anonymous group communication protocol Dissent and claimed to be better than most previous attempts made to address this issue.
Suppose there is one user sitting exactly at the every edge of an n-sided pentagon. Every user has one coin with him and he does not know who are the other users sitting next to him. All these users then randomly pass their coins in a predefined manner such that no user is left with his original coin. At the end, every user will have one coin but it will be different from the original coin he originally had.By mixing coins of several users and then transfers them a new set of coins from the mixed coins, CoinShuffle can achieve an improvement in privacy.
Previous attempts made to enhance the privacy of users by mixing coins would use a centralized server which would increase the risk of the network failing or getting tampered with. CoinShuffle, however, used a P2P mixing protocol that had no central server as it was mixing the coins among users who were doing the actual work.
Limitations of CoinShuffle Led to CoinShuffle++
The idea to let users work and mix their coins with each other worked fine for a small set of users, but the problem grew when it was tested among large users, as it increased the time it took to perform the operations by each user in a linear fashion.
Moreno-Sanchez says, “The system worked fine for a less number of users but it would take almost seven minutes if there were 50 users who were part of the network.”
Due to this limitation, it was impossible to roll out a working model for bitcoin as the cryptocurrency’s blockchain would process several thousands of transactions every day among all its users.
To do away with the disadvantage, Moreno-Sanchez and his team envisioned CoinShuffle++, which modified the protocol slightly to change the linear nature and perform the operations all at once instead . Praising it, he said, “It would take us seven minutes with 50 users, but now it took us less than seven seconds even with 100 plus users.”
ValueShuffle was then conceptualized in a research paper ‘Mixing Conﬁdential Transactions: Comprehensive Transaction Privacy for Bitcoin’ in 2017 and is an extension of CoinShuffle++. It successfully combines coin mixing, and two partial privacy solutions namely Stealth Addresses and Confidential Transactions (CT). Since with CoinShuffle++ the amounts were public, the shuffle required users to have the same numbers of bitcoins.
“The combination of technologies provides the privacy guarantees of interest in Bitcoin. ValueShuﬄe ensures that no attacker observing the blockchain or the network, or even participating in the protocol, can link inputs and outputs of the CoinJoin transaction created in an execution of ValueShuﬄe.”
Once CT is available on Bitcoin, ValueShuffle can be easily integrated, “…we can directly apply ValueShuffle, we not only get the performance of CoinShuffle++ but we also manage to hide the amounts being shuffled and certain other properties associated with CT,” Moreno-Sanchez remarked.
On his thoughts about the timeframe surrounding the implementation of CT, he said from a technical point of view, “there are not any technical challenges or disadvantages with CT, and I hope in the next few months it will be accepted and integrated.”
Moreno-Sanchez is bullish on the future of bitcoin, saying that researchers are really interested in the protocol, it would become a widely adopted currency soon serving as an alternative for payments.