Async Payjoin, the HTTPS of Bitcoin Privacy

7 hours ago

Async Payjoin is the best hope for strong privacy

Async Payjoin is the best hope for strong privacy in Bitcoin. Modeled after HTTPS, which enabled secure payments for the web, the Payjoin foundation

(image by Atlas21Cryptocurrencies that focus on maximizing on-chain privacy, like Zcash or Monero, offer higher default degrees of on-chain privacy by encrypting the amounts transferred among parties. This, however, comes at a high cost; validation of the total supply of coins in these alternative cryptocurrencies is much more complicated. As a result, bugs in the related cryptography could lead to inflation bugs that are undetectable, a risk which undermines scarcity, another critical quality of sound money.One of the challenges historically with traditional Payjoin is that it required both parties to be online to coordinate the creation of the transaction. To solve this, Payjoin V2 introduces a blinded directory server to provide asynchronous Payjoin coordination among parties, using the well-known Internet standard, Oblivious HTTP.

Gould told Bitcoin Magazine that “the cool thing is the protocol has the directory server blinded. The directory server is only reachable by oblivious HTTP, which is basically a forced proxy. So the IP addresses (of users) are never leaked to the directory server.” Adding that, “the payload (pre-signed transaction) is actually end-to-end encrypted between the sender and the receiver anyway. So the directory just gets an 8-kilobyte uniform encrypted blob. They don’t see anything.”

In fact, Gould compared the use of OHTTP to Tor, explaining that “The reason we used it is because it’s a web standard. So it’s gone through the rigorous review process. OHTTP is literally supported in the iOS operating system. It’s used in browsers.” adding that “OHTTP it’s kind of like the minimal viable product of Tor where Tor layers encryption and does multiple hops and this is just the most minimal version where you just have one hop. You just have one layer of encryption.” Similar multi-hop network encryption is used in the Lightning network to protect user privacy.

The Payjoin V2 servers provide no financial reward to those who run them, similar to Tor exit nodes, which have sustained these privacy networks on a volunteer basis for decades.

What about compliance?

Regulators and, as a result, exchange operators often have concerns about Bitcoin privacy technologies, as they are perceived to be in conflict with topics of compliance. Gould considers this a misconception, saying that “the reality is that a compliance regime is totally independent from the nature of the chain. If an exchange wants to collect your baby’s name, know the place you live, your phone number, and what source of funds, having privacy by default doesn’t stop them from doing that. Doesn’t stop them from asking for it in order to do business with the user.” Adding that “It just doesn’t give them complete insight into your whole wallet, past, present, and future. So it puts the power to consent to reveal the information about your money in your own hands.”