The use of privacy coins has skyrocketed this year. This was fuelled by the increasing ease with which transactions using Bitcoin could be de-anonymized and eventually traced back to real-world identities.
January’s $10 coin, Zcash, peaked at $376 in June and Monero which started the year at $12 reached $136 in August. Reports of Confidential Transactions (CT) testing could suggest that the likes of Litecoin and Bitcoin could follow suit and add a privacy layer.
In the world of cryptocurrency Bitcoin and Litecoin are the OGs with the latter essentially being a clone of BTC. For users, this means that the features which work on the Litecoin network very often work on Bitcoin and vice-versa. For example, the likes of Segwit and the Lightning Network both made their trading debuts on Litecoin.
Coinjoin developer Greg Maxwell this week announced that significant progress had been made with testing CT.
During previous testing rounds, CTs had been some 16 times the size of normal transactions. However, researchers Benedikt Bünz and Jonathan Bootle have now possibly found a way to compress CTs. And the result is output that is only three times the normal size.
The basic principle behind Coinjoin is that two users can make a deal simultaneously, therefore masking the inputs and outputs of both parties. Maxwell explained that in the new breakthrough the bloat factor is cut to only three times those of normal transactions.
He said that since the scaling of this approach is logarithmic with the number of outputs the use of CoinJoin could make the bloat factor very small. He said that this was a huge step forward. A step which moves currencies such as Bitcoin and Litecoin closer to adding Monero-like privacy features.
Charlie Lee, Litecoin developer tweeted that he was pleased and listed the benefits of CTs. These included no new cryptographic assumptions, high performance, or trusted setups were required. He also said that all major alternative schemes failed at a number of the criteria.
Many believe that it would be premature to advise that CTs would have Monero’s Riccardo Spagni a little rattled. Experts say that Litecoin, which is the smaller and nimbler sibling of Bitcoin, may have CTs up and running relatively soon and that there would be no need for a hard fork.
They also believe that it is unlikely the new feature if rolled out, would have users from Monero and Zcash users flocking to Litecoin. And it is also reported that Bitcoin users will not see CT’s anytime soon. At the birth of Bitcoin, it was widely seen as an anonymous or at the very least pseudonymous currency which was virtually impossible to trace.
But, as law enforcement officials became more and more adept at mapping activities through blockchain, a string of busts followed. And, today there are genuine and reasonable reasons why it is desirable to be able to transact anonymously on the web.