Let's put the UTXO commitments/anti-fraud proofs to one side for a moment.
I would like to see them happen one day, but they aren't critical to these
protocols and are just proving to be a distraction.

> Then they make fresh random connections to different nodes and request
> download of the respective individual transactions from the full node.


About privacy the node can make different random connections to
> different nodes to fetch addresses ..... The full node cant
> correlate the addresses as belonging to the same person by correlating
> the download requests for them, because they are made via different
> nodes.

Apologies for the wall of text, but I don't think this will work nor solve
any real problem. And I must justify such a strong statement clearly.

*First: technical issues*

When you download the per-block Bloom filter and test, what you get back is
a set of script elements (addresses, keys, OP_RETURN tags etc). But then in
the next step you are saying that you connect to random peers and request
individual transactions. We don't know that at this point. All we know are
a set of addresses that possibly matched. So I think what you mean is
"wallets connect to random peers and request transactions in block N that
match a given set of addresses".

This is what Bloom filtering already does, of course. Doing the test
against the per-block filter first doesn't seem to buy us much because with
thousands of transactions per block, even a very tiny FP rate will still
trigger a match on every single one.

The second problem I see is that we can't do this in parallel because of
the following edge case: wallet contains key K and someone sends it money
using an OP_CHECKSIG output. The input which spends this output does not
contain any predictable data, thus we do not know what to look for in the
following blocks to detect a spend of it until we have seen the first
transaction and know its hash.

In practice this means we must either scan through the chain in sequence
and update our matching criteria if we see such an output (this is what the
Bloom filtering protocol already does server-side), or we must constrain
the user such that output scripts always force repetition of predictable
data - this is what mostly happens today due to pay-to-address outputs, but
not always, and correctness is more important than completeness.

If we can't do it in parallel then we must suffer a node round-trip for
every single block we traverse, because we can't request long runs of
blocks with a single command. That latency will kill performance dead. It's
a non starter.

But let's imagine we don't care about OP_CHECKSIG outputs and are willing
to ignore them. There are cases where they are the best and most efficient
technical solution, but let's put that to one side.

The primary difference after making the above changes are that no one node
gets a filter containing *all* our keys and addresses. I don't think a per
block pre-test filter would gain us much efficiency so from a privacy
perspective this is what it boils down to - sharding of the scan.

But we can already do this with the current Bloom filtering protocol.
BitcoinJ doesn't do so because having multiple parallel scans uses up
network IOPs which are a resource of unknown quantity, and because stepping
through the chain in parallel with multiple peers complicates the chain
sync implementation quite a bit.

*Second: this doesn't solve any real problem*

Who cares about collecting Bloom filters off the wire?

Commercial fraudsters? Doubtful. There are much easier ways to steal money.

Spies? Yes! Without a doubt NSA/GCHQ are building or have built databases
of IP addresses to Bitcoin addresses and are correlating it via XKEYSCORE
with other identifiable information.

However, just requesting data from different nodes doesn't help with that,
because they are doing DPI and can still see all the connections, so can
still combine all the filters or received transactions.

Ah, you say, but we're requesting everything via Tor.

Yes, about that. We've implemented that already. Some wallets even use it
by default, like Alon & Chris' Bitcoin Authenticator wallet. It's just one
line of code to activate.

Unfortunately there are severe practical problems to using Tor:

   1. If you don't have a warm consensus then booting it up is very slow.
   We're already slower than our competitors like blockchain.info and
   VISA/MasterCard, we can't make this any worse.

   This one is possibly not that big a deal and can be solved with more
   technical tricks.

   2. Bitcoin Core's DoS strategy means anyone can block all of Tor quite
   trivially. So we'd need some complicated fallback mechanism to disable Tor
   remotely, in case someone did this.

   3. Bitcoin wire traffic isn't encrypted or authenticated so it makes it
   much easier for trolls to tamper with lots of wire traffic at once, whereas
   without Tor it's much harder.

Let's ignore the fact that the Tor project insists on poking the law
enforcement bear with rusty nails, and has been receiving tipoffs about
plans to seize directory authorities. How much Bitcoin wallets should rely
on Tor sticking around is a debate for some other time.

There's a much simpler way to fix all of this - add opportunistic
encryption to the wire protocol.
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