A recent BIP proposal was pulled by Bitcoin developer Jonas Schnelli with the title “ Peer-to-Peer Communication Encryption.” The change would encrypt peer traffic making the analysis of individual users more difficult in the future. Currently, the cryptocurrency’s network does not encrypt communication between peers making it a bit easier for any entity to monitor and use surveillance methods against Bitcoin users.
Typically broadcasted transactions over the internet can reveal quite a bit about specific individuals using the Bitcoin network. Simplified Payment Verification (SPV) wallets are said to have significantly reduced privacy and rely on connecting to a “trusted” node. The balance between verification resources reduces security and seem to be inherent with SPV nodes. Concepts like Bloom Filters have tried to mend the problem but have been relatively ineffective in the past. The BIP 151 written by Schnelli says:
“Encrypting peer traffic will make analysis and specific user targeting much more difficult than it currently is.”
Traffic encryption between peers is possible with different mechanisms such as VPN’s or Tor. Yet Schnelli explains that it’s not very “practical” for SPV or DHCP/NAT and implementation is quite difficult. As well as outside mechanisms an SPV wallet user can run their own full node and toggle broadcasts from the SPV to only that node. Andreas Schildbach created the Bitcoin Wallet for Android which allows users to specify which node to tether to but it’s a rarity for SPV clients offering this feature. Other wallets such as Greenbits and msigna also offer this service.
The news of BIP 151 had made its way through many social media forums, and some complained about the same post being “spammed” on r/bitcoin. Some users in the community are not quite convinced the BIP adds privacy centric features to the network. One redditor writes, “Even though the Bitcoin network can be trusted without requiring trust for any particular participating node, it really has very few privacy protecting features built in. Still, I’m unclear on the pressing need for this BIP, and I’m concerned it will introduce unneeded overhead.”
Some community members believe things of this nature are not imperative and in their opinions working on scaling should be the priority. However, Bitcoin Core developers seem to gravitate towards privacy-centric and fungible solutions to the network at the moment. Core believe concepts like this are critical to keeping Bitcoin users safe from surveillance. It is possible it could curb the reliability of software such as the Chainalysis architecture and hackers with malicious intent. Core developer Gregory Maxwell feels BIP 151’s encryption method will make a privacy attack very noticeable once implemented. Maxwell states on r/bitcoin:
“Someone who can monitor your network connection can see everything no matter what peers you use. Encryption means that you at least need a detectable active attack to do that. (Tor HS also has this benefit) Several SPV wallets (like Greenbits and msigna) support connecting to your own trusted node for improved privacy and security. But without encryption and authentication, you might not actually get the expected improvement.”