Decentralized Anonymous Payments

Abstract

Decentralized payment systems such as Bitcoin record monetary transactions between pseudonyms in an append-only ledger known as a blockchain. Because the ledger is public, permanent, and readable by anyone, a user’s privacy depends solely on the difficulty of linking pseudonymous transactions either to each other or to real identities. Both academic work and commercial services have shown that such linking is, in fact, very easy. Anyone at any point in the future can download a user’s transaction history and analyze it. In this work, we propose and implement privacy preserving coins, payments, and payment channels that can be built atop a ledger. In particular we propose:

* Zerocoin A blockchain based protocol for breaking the link between a transaction that receives non-anonymous funds and the subsequent transaction that spends it.

* Zerocash The successor to Zerocoin, a blockchain based payment system supporting anonymous payments of arbitrary hidden value to other parties. While payments are recorded publicly in the blockchain, they reveal almost nothing else: the recipient learns only the amount paid but not the source and anyone else learns only that a payment of some value to someone took place.

*Bolt A payment channel protocol that allows two parties to anonymously and securely make many unlinkable payments while only posting two messages to the blockchain. This protocol provides for instant payments while providing drastically improved scalability as every transaction is no longer recorded in the blockchain.