The following is a direct excerpt from Marty’s crooked problem # 1214: “Silent Payments”. Sign up for our newsletter here..
This is an interesting suggestion from Ruben Somsen that helps increase the privacy of those who receive Bitcoin: Silent payment.. Somsen’s proposal is based on a concept like BIP47. This allows individuals to create reusable payment codes that others can tweak to create unique public addresses that only senders and recipients can see. This allows recipients to accept Bitcoin in a more private way than when publishing xpubs or reusing a single address to receive payments.
BIP47 brings the trade-off of increased data usage by including OP_RETURN messages that require more data than the average Bitcoin transaction to generate reusable addresses. Silent payments eliminate the trade-offs made by BIP47 in the form of additional data related to the creation of payment codes using OP_RETURN and replace it with increased scanning requirements for wallet software. My understanding is that the sender gets the public address of the silent payment provided by the receiver and uses the input private key (UTXO) that is used to send Bitcoin to the receiver. Create and send a new public address you own Bitcoin to that address. The recipient then scans the blockchain for input and uses the data associated with the silent payment address to determine where the payment was received.
This is an interesting trade-off. Adopting a solution such as that realized with BIP47 will reduce the long-term data load when operating a full node, but it requires the approval of the build wallet software to ensure product compatibility. Use the silent payment design scheme. It’s a heavy lift, but it might be worth trying to implement it throughout these wallet software. This makes it more useful for anyone who wants to receive Bitcoin payments with better privacy guarantees and less interactivity with the chain. Consider opponents living under oppressive regimes who need to receive payments as personally and easily as possible.
Earlier today, someone started the first silent payment transaction on the Bitcoin testnet Signet.You can dig into it Here.. Stay freaked out to keep up with the deployment of silent payments.