Paying bitcoins with PayNyms or BIP47 does not provide as much privacy as it seems

Key facts:
  • It is possible to know when another user is about to receive a payment in BTC using BIP47.

  • There are potential solutions to the privacy problem in BIP47, but they are not very practical.

A group of Bitcoin developers is looking for a solution to the privacy deficiencies of BIP47 (or PayNyms, as it is called in the Samourai wallet interface) when paying with bitcoin.

The acronym BIP translated into Spanish means “Improvement Proposal for Bitcoin”. Number 47 of these proposals consists of a protocol that allows payments to be made using a private address created from a payment code and the keys of the parties involved. In this way, only the sender and the receiver know said private address.

The problem with BIP47 is that all addresses that have interacted with a particular private code have the possibility of deciphering the times in which the address corresponding to the code receives a private payment from someone else.

As an example of the previous explanation, the traditional characters Alice and Bob can be used. In the event that Bob is going to use the BIP47 to pay a few satoshis to Aliceall users who have used the BIP47 to pay Alice will know that she is about to receive a payment in this modalitybecause they know their payment code intended for that purpose.

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The problem with BIP47 is made even worse if Bob’s wallet is not able to separate the funds used in the transactions from the notifications. In that case, users who know Alice’s payment code can also know that it is Bob who will make the payment.

Possible improvements to BIP47 do not look very practical

Developer Alfred Hodler proposed a possible solution to these BIP47 shortcomings on the Bitcoin developer mailing list. Hodler’s idea is add a new 2-byte data structure to the protocol. This will not remove transactions from notifications, but it will it will prevent them from leaving traces on the blockchain.

According to the publication The latest from the Bitcoin Optech research group, Hodler’s proposal should indeed reduce the chances of data leaks occurring when using BIP47. However, such changes to the protocol would imply a greater use of data from the blockchain. This could prevent lightweight Bitcoin clients, such as wallet implementations, from making use of this tool.

There are other proposals that aim to improve the level of privacy of Bitcoin transactions, such as silent payments, developed by Ruben Somsen and previously reviewed in CriptoNoticias, and stealth addresses by Robin Linus. However, at the moment, all are in the testing and development phase.

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At the moment, the only wallet that has implemented BIP47 is Samourai. The tool that makes use of this protocol is called PayNyms, since it allows you to operate under pseudonyms (or pseudonyms, in English). For its part, the BlueWallet user community has been mobilizing to encourage the adoption of BIP47 in this purse. For this they are offering a reward to the developer who makes this possible.

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