How Mixnets led to Bitcoin: Blockstream Green supported by Nym Connect!

The Nym mixnet has a shared history with Bitcoin. Unsurprisingly, we at Nym want Bitcoiners to have the best privacy possible. We are…

Author: Nym

February 28, 20234 mins read

The Nym mixnet has a shared history with Bitcoin. Unsurprisingly, we at Nym want Bitcoiners to have the best privacy possible. We are therefore proud to announce that we are supporting Blockstream by adding the Blockstream Green Bitcoin wallet to Nym Connect due to its Liquid privacy features. We want to take this opportunity to delve into the pre-history of Bitcoin and its shared history with mixnets…

With the invention of Bitcoin, Satoshi brought together major work by the cypherpunk movement, who were working on technologies for anonymous communication like mixnets — the technology for network-level privacy, launched by Nym. Reviewing this history can help us understand how technologies can promote human freedoms and evolve in the most unexpected ways. The cypherpunks were prophetic in their understanding of how easily the internet would become a vehicle for mass surveillance. It is time to join forces and put their solution to work. Looking towards the future evolution of Bitcoin, the combination of the two technologies via integration into Liquid, Lightning and the wider Bitcoin ecosystem would bring to fruition much of this important work.

Blockstream Green over the mixnet using NymConnect

Mixnets: a short pre-history of Bitcoin

Mixnets like Nym were originally invented by David Chaum in his famous paper “Untraceable electronic mail, return addresses, and digital pseudonyms”. A mixnet mixes packets to unlink the sender and the receiver. Unfortunately, every time you use Bitcoin (or Lightning), your IP address and the timing and volume of your information are leaked. Nym Chief Scientist Claudia Diaz has shown how this leaking ‘metadata’ about your communications can be used to uniquely identify you. We recommend you read her paper On the Anonymity of Peer-To-Peer Network Anonymity Schemes Used by Cryptocurrencies with Piyush Kumar Sharma and Devashish Gosain — which will be presented at NDSS this week.

Proof of work was invented by Adam Back’s work on mixnets: Adam Back was running the Mixmaster mixnet (a pre-Nym mixnet), which provided anonymous e-mail services to spread information anonymously. When anti-privacy fanatics attacked his mixnet by flooding it with fake messages, Adam Back decided he needed a way to stop this e-mail spam. Importantly, he needed a way to do this without assigning each person a unique identity, allowing users of the mixnet to remain anonymous. He implemented HashCash to serve as a way to defeat sybil attacks, by forcing any user of the mixnet to solve a hash puzzle. This effectively defeated spam attacks.

Famously, Satoshi Nakamoto then used this idea from HashCash to reach consensus in the Bitcoin blockchain (solving the Byzantine Generals Problem) without uniquely identifying nodes in the Bitcoin network. It is this fundamental invention that makes Bitcoin permissionless. And with this history, we dare say it’s quite likely that Satoshi Nakamoto was a mixnet user!

While Bitcoin creates different public keys per transaction and so allows some basic privacy, a well-resourced attacker like a government or Chainalysis can identify Bitcoin users by using only on-chain information. Enter the Liquid sidechain, whose use of confidential transactions via homomorphic encryption and blinded (stealth) addresses allow more privacy on Bitcoin than our prior integration with Electrum, at the cost of dependency on a federated side-chain. We strongly encourage Bitcoin users to look into Blockstream Green with Nym Connect for improved privacy for Bitcoin. This is especially useful as the Tor network typically used by Liquid is under a mysterious attack that makes it harder to use with Blockstream Green.

We’re happy to see Nym go full circle. The NYM token was originally the NYMPH token on the Liquid blockchain, and since then we’ve launched a NYM token prospectus. We’ve rewarded early contributors, users and token holders with NYM — although the community has had to go through KYC/AML with long-time Bitcoin supporter STOKR. Our privacy-first approach will require many other integrations to diverse applications in order to maintain the anonymity of Bitcoin users, but we think even Nakamoto would be thrilled to see Bitcoin transactions going over a mixnet. Further integrations with Bitcoin and Blockstream are in the works!