How this Bitcoin privacy wallet inspired a community “torch passing” of BTC private keys
An often-quoted Bitcoin criticism is the lack of privacy due to the BTC blockchain being an open ledger visible to all. But Mercury Wallet looks set to change that with its layer-2 privacy solution.
Last month, Mercury Wallet announced the beta release of its privacy-enabled wallet. The technology they’ve developed allows users to securely send private keys while incorporating an integrated link to the CoinSwap dex to facilitate the swapping of keys.
The development team behind MercuryWallet built engineered a clever way of sending private keys across the other users and also built the first bitcoin CoinSwap implementation on MercuryWallet, essentially allowing users to swap keys.
Not only does this pave the way for greater privacy on the Bitcoin network, but it also significantly enhances BTC scalability as well.
The team thinks the Mercury Wallet will be the most significant leap forward for Bitcoin since the Lightning Network rolled out in January 2017.
How does Bitcoin privacy work on Mercury Wallet?
Mercury is a Bitcoin layer-2 scaling technology that runs on a newly developed concept called statechains. It enables private keys for BTC deposits (UTXOs) to be transferred securely between parties without an on-chain transaction at the base layer.
Through this function, users can transfer full Bitcoin custody to anyone instantly, with increased privacy and without attracting miners’ fees.
All of this is possible due to statechains, which the firm describes as a “cryptographic structure” made up of a chain of digital signatures that transfer token ownership of a specific statecoin across different owners.
Like a blockchain, the statechain provides immutable cryptographic proof of ownership and integrates fraud fail-safes to avoid double-spending.
Facilitating this process is the use of a “statecoin. ” A statecoin corresponds to a particular amount of Bitcoin deposited to an address with the private key split between the depositor and a Mercury server.
The depositor holds a time-locked “backup transaction,” giving them the right to claim control of the coin after a set time lock period. The private key of the statecoin is not known by any party, and the owner and statechain entity must both sign a transaction to release it.
More about statecoins
In essence, statecoins carry out atomic swaps in blinded groups hosted by a “conductor” who doesn’t know who swapped which coins beforehand.
This protocol uses a blind signature scheme to block any party from reconstructing the coin’s history. Therefore, giving Mercury users a powerful privacy tool at their disposal.
It works by the “conductor” offering several different swap pools of different sizes and denominations of statecoins, such as 0.001 BTC or 0.1 BTC. Users can choose any of their statecoins and add them to any pool.
The statecoins currently have a 3-month expiry period; with the expiry getting increasingly shorter, the more it is transferred. Ultimately this means the statecoin is “broadcast back” to the Bitcoin network.
To popularize the Lightning Network on its release, Bitcoin community members launched the #lightningtorch campaign to encourage its use.
This boosted the usage rate, leading to an initial 2.8 million satoshis changing hands nearly 150 times across 39 countries.
Similarly, Mercury, and its supporters, intend to borrow inspiration from this campaign of grassroots usage under the #statechaintorch.
CommerceBlock CEO Nicholas Gregory said the campaign has helped to unearth bugs and issues during this beta release, assuring him of solid community support behind the project.
“We did not think about creating #statechaintorch, it was started by someone outside of the team, however, it’s been great, being a beta product, some users have found bugs and issues that we had not thought of and it be great to see the touch pause in real-time and we fix the issue and onboard new users.”
Mercury anticipates other projects will come onboard to develop protocols that run on the statechain.Source