If you wanted to buy contraband online in the last five years or so, you may have noticed that the option to pay in bitcoin — once the most popular form of payment on darknet markets — is slowly disappearing.
You may ask why it matters to you or the average Bitcoin enthusiast. (You’re presumably an excellent, law abiding citizen — good for you, but that is irrelevant.) Allow me to explain.
The Silk Road
The first major milestone of bitcoin was to be accepted as a form of money. This happened with small obscure merchants at the early stages, but as the word spread, bitcoin found itself as the “official” currency of the darknet, and allowed the creation of a market called “Silk Road.”
A CoinJoin is a collaborative transaction that combines users’ coins in order to create a large anonymity set for them. This increases the privacy of all participants.
This is by far the most effective method for privacy on Bitcoin and has been used heavily on darknet markets as well as outside of them.
Bitcoin stealth addresses, prominently BIP47, introduced a way to have a stealth, reusable address that only discloses the real address of the user when a notification transaction was made.
This creates a new Bitcoin address for each user you connect with to ensure privacy. This was never widely used in darknet markets, but it’s decent tech nonetheless and a personal favorite of mine.
What Can We Do To Fix This?
I can not stress enough how important it is that we have decent privacy on Bitcoin that everyone can take advantage of. The solution is within Bitcoin’s culture and community. There are app-level privacy upgrades that can be standardized to improve overall privacy on the network.
CoinJoins of all sorts, stealth address solutions like silent payments and BIP47, and encouraging users to run their own node and use non-custodial and open-source software where they can.
When transacting, make sure it’s peer-to-peer and not through an exchange or other intermediary. Never use a custodial wallet — you can not ensure your privacy if you count on a third party to take care of it for you. Also, when acquiring bitcoin make sure to use a non-KYC (know-your-customer) exchange. Otherwise, your data and privacy could be at risk.
My advice is to do your own research and make sure to take every precaution when using bitcoin to ensure your own privacy.
The more people that use bitcoin privately, the better privacy everyone gets, and the more likely it is that bitcoin will emerge again as the prominent currency of the darknet markets, and consequently of other markets too.
This is a guest post by Wildsnow. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.