Blockchain - Privacy

Unless the ledger that records bitcoin transactions is kept confidential, no one can know who paid whom. The traditional banking system is able to maintain this kind of privacy by keeping its records private.

In the Bitcoin system, privacy is achieved in a different way. We mentioned that the sender of a bitcoin needs to know who to pay. So he asks for the vendor's public key. This key is anonymous.

As an example, as a vendor of some services, you would simply provide your public key to someone who asked where to send the payment. This public key is not linked to you anywhere in the ledger, so anyone outside of this transaction would only know how much money was transacted and which public key was paid out.

To achieve a higher degree of privacy, you may generate a new private/public key for every transaction so that multiple transactions made by you cannot be grouped together by a third party. If you were an outsider, this would simply mean multiple smaller transactions had taken place and were never related to one another.

Finally, every internet-based system is vulnerable to abuse. I will now discuss a few possible types of attacks on Bitcoin and how they can be mitigated.

Frequently Asked Questions

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