Privacy - Assessment 2

1. When both parties to a Bitcoin transaction use _________ i), it becomes almost impossible for third parties who are outside the sphere of trust pertaining to the transaction to follow the details. This can be further augmented by _________ ii) to further mask the details. In this way it becomes very easy for _________ iii) to guard their privacy and maintain a secure online presence.

   1. i) strong privacy measures, ii) breaking the payment into multiple outputs or multiple transactions, iii) lawful users of Bitcoin

   2. i) anonymizing techniques, ii) using a coin mixer, iii) users involved in illegal activity

   3. i) digital signatures, ii) multi-output transactions, iii) for users wishing to remain anonymous

   4. i) obscurification techniques, ii) hiding digital signatures, iii) users

2. Which statements are true?(one correct selection necessary to proceed)

   1. In the same way that stock exchanges keep private records of who exchanged with who, and release a cleaned set of records containing only the price and size of each trade, so does the Bitcoin ledger allow for private accounting of all records of exchange.

   2. User wallets can build repositories of transaction data which can be kept in offline archives or stored on the ledger, these records are completely separate to the transaction itself, and could only be exposed through one of the users repositories being compromised.

   3. Not only is the issue of large centralised repositories of data solved by each user holding their own records, the ownership of transaction records is also transferred to the user. This vastly reduces the risk of hacks exposing mass records of users as attackers must compromise many systems.

3. Eventually additional changes to the Bitcoin protocol will allow for greater anonymization for Bitcoin transactions to better facilitate black market exchange by protecting users identity from legal prosecution.

   1. In situations where a user is receiving all of their funds into a re-used locking script, it becomes much easier to see what funds that user has received. How can this risk be mitigated?

   2. The user can encrypt the locking script to hide the key signing process.

   3. The user can choose to alternate locking scripts for each transaction in order to obscure the digital signature.

   4. The user can choose to use a new private key every time new funds are being received in order to separate the digital coins on the ledger.

   5. None of the above

4. Most wallets are capable of generating a new private key every time new funds are being received in order to separate the digital coins on the ledger using what technique?

   1. Using RSA Symmetric Key Cryptography which allows the wallet to generate an effectively unlimited number of keypairs from a predetermined seed.

   2. Using Hierarchically Deterministic Keychains which allows the wallet to generate an effectively unlimited number of keypairs from a predetermined seed.

   3. Asymmetric Key Encryption Algorithm which allows the wallet to generate an effectively unlimited number of keypairs from a predetermined seed.

   4. None of the above.

5. Using Hierarchically Deterministic Keychains allows the user to ‘recover’ their wallet/s through __________ in the event the wallet is lost or destroyed.

   1. A user generated wallet address

   2. A node based password recovery service

   3. A peer based shared seed

   4. The re-creation of the original seed

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