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Privacy is indeed the main motivation. But you're missing the threat model. Facebook,Google, Target, etc all run sophisticated customer tracking programs. Target was predicting if their customers were pregnant based on spending habits 5 years ago[0]. If blockchain payments go mainstream, customers will use them and those companies will build profiles based on that data. If 10 grad students on a shoe string budget with ethics/IRB restrictions can break a system, so can many people you should be worried about far short of goverments.

[0]https://www.nytimes.com/2012/02/19/magazine/shopping-habits....

It really isn't difficult to tell if someone is pregnant. I actually make a game out of it when looking through facebook at women I know. So many will drop hints that are seemingly unrelated, but which often tip me off that they're pregnant.

More on topic, there is a difference though, from what I read in the article it doesn't seem like Target had access to what the people bought at other stores. It would be like if Target could see what you bought at Walmart, or at least went there and see how much you spend.

To me this feels like concern without regard for the full differences. With bank accounts you usually have the restriction of "as many accounts as you can afford" where with bitcoin addresses you can have countless. So someone could just as easily watch you drive up to the bank and know you bank there. Keep your private addresses private, duh.

I know that, you know that, but is that something the average person is aware of or do they think it works like Venmo?

If I go to a bar should I have to cycle currency between addresses to pay for a drink and avoid the bar man knowing my complete financial history? That sounds like a terrible UX.

I shouldn’t have to think about it. This is why I like the concept of privacy coins.

The wallet UI should do that for you automatically. Wallets which reuse addresses have been a constant source of privacy breaches and even lost coins (is it iota where you can lose coins if you use the same address as few a two different times?)

Most wallets these days don't reuse addresses, but without mixing, confidential transactions, or another approach, it's trivial to cluster a wallet via its chance outputs, etc.

Iota is/was incredibly broken, and shouldn't be used as an example IMO.

If I make a new bitcoin wallet, and transfer money from my 'main' wallet into that one, would that be traceable by anyone who deal with my new wallet? Would I need to use/trust some kind of 'washing' service to hide my transaction among several others?

Any "wallet" is not single address, but set of addresses. Each address is just cryptographic private key and you might have as many as you want. Though as soon as you sent any transaction public key of your wallet become known.

This is why by default each time you make transaction for any amount bitcoin client send specified amount of coins to target address and all that remain to some new address that you own. While you not announce that you have access to that new address it's fairly easy to track your money.

> Would I need to use/trust some kind of 'washing' service to hide my transaction among several others?

So answer is yes.

So what good is keeping the coins in separate addresses then? An earlier poster implied that you should keep separate addrs to avoid people knowing how much you have in full - but if you still have to wash the coins to separate accounts, what good is that? You're still washing all your coins - how many addrs you have seems like a side detail.

The only thing I can think of that separate addrs gives you, is that you can have a small amount of the coin in an address that you use for daily transactions. Meaning each transaction doesn't need to be washed, because you don't care about that address.

Am I missing something?

> So what good is keeping the coins in separate addresses then?

Publishing of your public key slightly decrease security of your coins. While ECDSA is strong it's still safer when only hash of your public key (bitcoin address) is known. After all you can always end up with weak key due to software or even hardware bugs.

> Am I missing something?

You're completely right, but you underestimate how important that little detail is. If you only receive money to different addresses each time then until you actually start spending it's will be impossible to prove that you actually control any of these addresses.

It's like with session keys for secure communication. Generating different keys for each session doesn't solve all your problems, but there would be no benefit to reusing a nonce key and doing so amplifies certain risks.

>would that be traceable by anyone who deal with my new wallet?

yes

>Would I need to use/trust some kind of 'washing' service to hide my transaction among several others?

congrats, you just reinvented mixers and coinjoins

Yeah, but lets say you make a website and want to accept donations using bitcoins. What you generally do is put "donations welcome at <bitcoin address>!" (I see this all over the place). Are you saying that webmasters should write a script that generates these public/private keys on every page hit, and then somehow stores all of those millions of private keys... somewhere? On your server? Or do you have to build an entire infrastructure of key exchanges to some safe place just so you can accept bitcoin donations privately?

> webmasters should write a script that generates these public/private keys on every page hit

Not on every page hit, but on every donation or every few days depending on how many transactions you've received. It doesn't have to be completely new set of keys - you can use deterministic wallet to generate as many as you want from a single master secret.

Why would it have to be "donations welcome at <bitcoin address>!"? There's plenty of ways to ask for donations and it doesn't always require to have a single address shown. You can have a "Donate" button that when clicked, ask for a generated wallet (all from the same private key but that would be a different wallet still) and show it with a QR code in bonus.

Look, I'm not making this up. Lots of people and projects do exactly this. Tails, the super-secure privacy-focused version of Linux asks for donations in exactly this way [1] (and if you go to blockchain.info you can see a full wonderful list of all the bitcoin addresses who have donated to them [2]). It's a totally reasonable way to set up bitcoin donations (hell, it's even recommended by the bitcoin wiki! [3]) and it's a significant weakness of bitcoin that these transactions are not private.

It is absurd defense of bitcoin to say "well, it COULD just be as private as these other things, if you only jump through ten more technical hoops and not use bitcoin as intended". Clearly, these other cryptocurrencies offer something that bitcoin doesn't.

[1]: https://tails.boum.org/donate/?r=contribute

[2]: https://blockchain.info/address/1BvBMSEYstWetqTFn5Au4m4GFg7x...

[3]: https://en.bitcoin.it/wiki/Receiving_donations_with_bitcoin

>>Are you saying that webmasters should write a script that generates these public/private keys on every page hit, and then somehow stores all of those millions of private keys... somewhere? On your server?

There's actually a solution called stealth addresses that let you publicize a single static donation address and yet receive every donation at its own unique address:

https://bitcoin.stackexchange.com/questions/20701/what-is-a-...

This is an off-chain construct so can be utilized with any blockchain.

Even with multiple wallets, the point is the same that your Bitcoin address is tied to your complete transaction history and account balance. Your Bitcoin address is just an alias for your real identity. If (or once) your Bitcoin alias is tied to you, you have zero privacy. Through public meta-analysis you can get a pretty clear picture of the spending habits and maybe even location of a Bitcoin address. Or, a purchase of a physical product where you give your home address and your Bitcoin address and your alias is linked to your actual home (albeit in the records of a 2nd party). But still, it's not hard to imagine how non-private Bitcoin is.

And following someone to BofA doesn't exactly give you much if any information about them. Even if I gave you my checking account number (which is on all my checks), you still can't go and access my financial records without doing something illegal.

This is not quite true if you are using an HD wallet.

Well that's a weak argument. Just give them a new address. Many bitcoin owners have 100+ addresses within their wallet.

That's why the standard advice on any cryptocurrency is to use a different address per transaction. It's just... people are lazy, and more technically (in the past anyway) change addresses became an issue.

and once you transfer money from your onetime address to your main, everyone will be able to see how much money you have. the only difference is, that they will know it "little" later. still good enough f.e. for eshop to categorize customers and retarget them

Is there really a need to even have a “main wallet”? Most implementations I know of will aggregate multiple wallets into your balance, and I think handle sending transactions from those wallets in sum of the full amount being requested to send.

if you want to pay for something what is more expensive than what you have in one wallet (or transfer larger amount), you will eventually have to combine multiple wallets

That's one legit use of a mixing or joining service.

Not saying there isn't tracability though those services (especially since we aren't ideal) since the point of the distributed ledger is tracability.

Something that was rather easy was depositing to an exchange, and just withdrawing; you lose the identity of the coins, at the cost of the exchange knowing the connection.

I think the traceability concerns are mostly handled since while it might be possible to infer an identity from an address that's sent to or from an exchange account, it's a lot more murky once those coins are moved elsewhere. If you know that address ABC belongs to me, and you see I sent coins to address DEF (which is entirely offline and using a brainwallet), and later DEF sends coins to GHI, you're left with the task of proving that DEF and GHI belong to me, and weren't me paying someone else.

What you're saying is correct, except you keep saying "wallet" where you mean "address". A wallet is a collection of addresses.

You can specify more than one input in a transaction, so that shouldn't be necessary.

Isn't it relatively simple to create a new wallet tho?

fungibility

It is trivial to get around the problem you are describing, you just create a new address for every transaction, which is actually what the reference wallets do by default.

Cryptocurrency only real use cases are currency speculation and crime.

Of course they'll mention illegal uses. It's what it's for.