Chaumian E-Cash For Custodial Bitcoin Wallets And Services To Scale Bitcoin

  1. Custodial entities can inflate the money supply.
  2. Custodial entities control the funds of their customers.
  3. Custodial entities know their customers’ activity.

How Custodial Bitcoin Wallets Work

Chaumian E-Cash For Custodial Services

  1. The server knows which serial numbers it signed. Therefore it knows exactly that when, for example Alice tries to spend a serial number signed by Bob.
  2. The amounts credited to the accounts are leaking information it shouldn’t.

Blind Signing

To solve the first problem we can simply apply this handy cryptographic technique. When we want a serial number to be signed, we just blind it, give the blinded serial number to the server and the server gives back to a blinded signature. We unblind a signature, that will verify against the original serial number.
Now, the server does not know who send the money to Satoshi.

Avoid Account Reuse

In Bitcoin we generate a new address every time when we receive a transaction. Similarly, every time when we receive a transaction to our custodial account we can generate a new account. But we can do even better. Why do we even have accounts? We only need signed serial numbers! With this we can work with. Here how I can send Satoshi money:

Legal Notes

I am not qualified to comment on the legalities of this service, however I believe it can be sold to regulators if the company that builds it makes sure it brands this service as a Bitcoin scaling solution, where privacy is just a side product.

Feedbacks/Further Research

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