Mastercard, the American multinational financial services giant intends to patent a blockchain anonymity solution. Their patent application is currently under the review of the United States Patent and Trademark Office (USPTO).
The patent application addresses an interesting area in the burgeoning blockchain/crypto landscape. Different stakeholders in the blockchain/crypto ecosystem have widely divergent views about the anonymity that cryptocurrencies promised.
A large section of the global crypto enthusiasts values the relative anonymity that blockchain and cryptocurrencies offer. In fact, privacy enthusiasts form a large portion of the global crypto community. An ability to guard the privacy of their financial transactions is important to them.
However, they aren’t entirely satisfied with the privacy features of most cryptocurrencies. Public blockchains, i.e., the distributed ledgers that underpin cryptocurrencies are transparent. Users can hide their identity by using their private and public addresses, however, anyone can see all transactions in a public blockchain.
It’s possible to analyze all transaction data in a public blockchain well up to the genesis block. It’s also possible to use other information already available on the web and in the public domain, to finally identify the users. As a matter of fact, Bitfury has already done this with their robust analytics suite, and they have used both on-chain and off-chain data for this.
Bitcoin (BTC) and Ether (ETH), while the most popular cryptocurrencies, don’t quite protect the anonymity of users fully. Next generation cryptocurrencies, for e.g., Zcash (ZEC) and Monero (XMR) are more privacy-focused.
However, these privacy-focused cryptocurrencies don’t quite command very high reputations. Some crypto exchanges at times stop dealing with them, moreover, ‘cryptojacking’ involving Monero mining agents don’t exactly enhance their reputation!
Mastercard, with their half-a-century worth of reputation jumping in the fray to protect anonymity, could address this issue of trust deficit. They have taken a different approach in their proposed solution.
Most crypto wallets and even privacy-focused coins focus on the user requesting the transaction. They try to provide anonymity to users, whereas, the public blockchains remain open for any law-enforcement agents to analyze. As I have stated earlier, an analyst, using an analytics suite, for e.g., the kind that Bitfury has, can identify most crypto users.
Mastercard plans to obscure the transactions, instead. They propose to use several intermediary addresses. This will mean that all transactions will pass through these intermediary addresses, although the source and destination addresses of the transaction are varied.
An analysis of the blockchain transactions will put the spotlight on these intermediary addresses. However, the real initiators and recipients of the transactions are entirely different addresses.
This is a way to obfuscate the analysis since all analysis of the blockchain will find that these intermediary addresses are being used overwhelmingly. You can think of it as another ‘wall’ in front of the analytics toolset that it must break through to get to the real users. Considering that a large number of transactions are involved, going beyond this obfuscation is not easy by any means.
We need to wait and watch how this proposed solution of Mastercard will play out. There is the big-picture aspect here. The privacy-focused crypto users could find the solution tempting. However, how will the other stakeholders react to it?
Money-laundering using cryptocurrencies isn’t new, moreover, there have been worrying reports of terrorists using Bitcoin to raise funds. Several national governments and regulators have expressed their concerns about this. For e.g., India continues to oppose cryptocurrencies while batting for blockchain, mainly for this reason.
While we wait for the future of Mastercards’ blockchain anonymity patent application, there’s no denying that the company is bullish about blockchain. They have other patent applications around this promising technology. For e.g., they plan to patent a solution that will make activation of new blockchain nodes easier.
