Submitted by: Odio @ 10:03 AM | Thursday, February 9, 2017 | (url: https://phys.org/...)
Researchers from North Carolina State University, Boston University and George Mason University have developed a Bitcoin-compatible system that could make it significantly more difficult for observers to identify or track the parties involved in any given Bitcoin transaction.
Bitcoin was initially conceived as a way for people to exchange money anonymously. But then it was discovered that anyone could track all Bitcoin transactions and often identify the parties involved.
Bitcoin operates by giving each user a unique public key, which is a string of numbers. Users can transmit money in the form of digital bitcoins from one public key to another. This is made possible by a system that ensures a user has enough bitcoins in his or her account to make the transfer. The use of the public keys gave users a sense of anonymity, even though all of the transactions were visible on the public Bitcoin blockchain which lists all transactions. Over time, experts and private companies have developed highly effective methods of de-anonymizing those public keys.
Now researchers have developed a system called TumbleBit, which is a computer protocol that runs on top of Bitcoin.
TumbleBit takes advantage of an existing concept called "mixing service." The idea works like this: instead of Party A paying Party B directly, many different Parties A pay an intermdiary "tumbler," which then pays the Parties B. The more parties are involved, the harder it is to determine which Party A paid which Party B.