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  • Intro
    • Welcome
    • The Benefits of BSV Blockchain
    • What Can I Do?
    • Overview of GitHub repositories
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  • Protocol
    • Introduction
    • BSV Blockchain
      • Blocks
      • Transactions
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    • SPV Wallets, Overlays and SPV Processes
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    • Privacy
      • Keys and Identity
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  • Network Access Rules
    • Rules
      • Table of Contents
      • Background to the Rules
      • PART I - MASTER RULES
      • PART II - GENERAL RULES
      • PART III - ENFORCEMENT RULES
      • PART IV - DISPUTE RESOLUTION RULES
      • PART V - INTERPRETIVE RULES
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    • Overview
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      • TypeScript
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        • Low Level
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          • 42
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        • Examples
          • Creating a Simple Transaction
          • Verifying a BEEF Structure
          • Creating Transactions with Inputs, Outputs and Templates
          • Creating the R-puzzle Script Template
          • Message Encryption and Decryption
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          • Building a Custom Transaction Broadcast Client
          • Verifying Spends with Script Intrepreter
          • BIP32 Key Derivation with HD Wallets
          • Using Type 42 Key Derivation for Bitcoin Wallet Management
          • Creating a Custom Transaction Fee Model
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          • Using ECIES Encryption
      • Go
        • Examples
          • Simple Tx
          • Keys
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      • Python
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  • BSV Academy
    • Getting Started
    • BSV Basics: Protocol and Design
      • Introduction
        • Bit-Coin
      • The BSV Ledger
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        • Example
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      • Theory
      • Conclusion
    • BSV Enterprise
      • Introduction
      • About BSV Blockchain
        • Introduction
        • Safe, Instant Transactions at a Predictably Low Cost
          • Reliably Low Fees
          • Comparison to Legacy Transaction Systems
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        • A Plan for Regulatory Acceptance
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      • Technical Details
        • The Network
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    • Hash Functions
      • What are Hash Functions?
        • The Differences Between Hashing and Encryption
        • The Three Important Properties of Hash Functions
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        • What is Base58 and How Does BSV use it?
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        • The Data Elements
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      • Merkle Trees and the Block Header
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        • The BSV Unified Merkle Path (BUMP) Standard
        • Simple and Composite Proofs
      • Merkle Trees and Simplified Payment Verification
        • SPV
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    • Digital Signatures
      • What are Digital Signatures
        • Background
        • Introduction
        • Digital Signatures Protocol
        • Properties of Digital Signatures
      • ECDSA Prerequisites
        • Disclaimer
        • Modular Arithmetic
        • Groups, Rings and Finite Fields
        • Discrete Logarithm Problem
        • Elliptic Curve Cryptography (ECC)
        • Discrete Logarithm Problem with Elliptic Curves
      • ECDSA
        • Introduction
        • ECDSA
        • Further Discussion
      • BSV and Digital Signatures
        • Introduction
        • BSV Transaction
        • ECDSA (secp256k1) for BSV Transaction
        • Summary
        • Signed Messages
        • Miner Identification and Digital Signatures
    • BSV Theory
      • Abstract
        • Peer-to-Peer Cash
        • Digital Signatures and Trusted Third Parties
        • Peer-to-Peer Network
        • Timechain and Proof-of-Work
        • CPU Power
        • Cooperation in the Network
        • Network Structure
        • Messaging Between Nodes
      • Introduction
        • Commerce on the Internet
        • Non Reversible Transactions
        • Privacy in Commerce
        • The Paradigm of Fraud Acceptance
        • What is Needed...
        • Protecting Sellers From Fraud
        • Proposed Solution
        • Security and Honesty
      • Transactions
        • Electronic Coins
        • Spending a Coin
        • Payee Verification
        • Existing Solutions
        • First Seen Rule
        • Broadcasting Transactions
        • Achieving Consensus
        • Proof of Acceptance
      • Timestamp Server
        • Timestamped Hashes
        • A Chain of Timestamped Hashes
      • Proof of Work
        • Hashcash
        • Scanning Random Space
        • Nonce
        • Immutable Work
        • Chain Effort
        • One CPU, One Vote
        • The Majority Decision
        • The Honest Chain
        • Attacking the Longest Chain
        • Controlling the Block Discovery Rate
      • Network
        • Running the Network
        • The Longest Chain
        • Simultaneous Blocks
        • Breaking the Tie
        • Missed Messages
      • Incentive
        • The Coinbase Transaction
        • Coin Distribution
        • Mining Analogy
        • Transaction Fees
        • The End of Inflation
        • Encouraging Honesty
        • The Attacker's Dilemma
      • Reclaiming Disk Space
        • Spent Transactions
        • The Merkle Tree
        • Compacting Blocks
        • Block Headers
      • Simplified Payment Verification
        • Full Network Nodes
        • Merkle Branches
        • Transaction Acceptance
        • Verification During Attack Situations
        • Maintaining an Attack
        • Invalid Block Relay System
        • Businesses Running Nodes
      • Combining and Splitting Value
        • Dynamically Sized Coins
        • Inputs and Outputs
        • A Typical Example
        • Fan Out
      • Privacy
        • Traditional Models
        • Privacy in Bitcoin
        • Public Records
        • Stock Exchange Comparison
        • Key Re-Use
        • Privacy - Assessment 2
        • Linking Inputs
        • Linking the Owner
      • Calculations
        • Attacking the Chain
        • Things the Attacker Cannot Achieve
        • The Only Thing an Attacker Can Achieve
        • The Binomial Random Walk
        • The Gambler's Ruin
        • Exponential Odds
        • Waiting For Confirmation
        • Attack Via Proof of Work
        • Vanishing Probabilities
      • Conclusion
        • Conclusion Explained
    • Introduction to Bitcoin Script
      • Chapter 1: About Bitcoin Script
        • 01 - Introduction
        • 02 - FORTH: A Precursor to Bitcoin Script
        • 03 - From FORTH to Bitcoin Script
        • 04 - Bitcoin's Transaction Protocol
        • 05 - Transaction Breakdown
        • 06 - nLockTime
        • 07 - The Script Evaluator
      • Chapter 2: Basic Script Syntax
        • 01 - Introduction
        • 02 - Rules Around Data and Scripting Grammar
        • 03 - The Stacks
      • Chapter 3: The Opcodes
        • 01 - Introduction
        • 02 - Constant Value and PUSHDATA Opcodes
        • 03 - IF Loops
        • 04 - OP_NOP, OP_VERIFY and its Derivatives
        • 05 - OP_RETURN
        • 06 - Stack Operations
        • 07 - Data transformation
        • 08 - Stack Data Queries
        • 09 - Bitwise transformations and Arithmetic
        • 10 - Cryptographic Functions
        • 11 - Disabled and Removed Opcodes
      • Chapter 4: Simple Scripts
        • 01 - Introduction
        • 01 - Pay to Public Key (P2PK)
        • 02 - Pay to Hash Puzzle
        • 03 - Pay to Public Key Hash (P2PKH)
        • 04 - Pay to MultiSig (P2MS)
        • 05 - Pay to MultiSignature Hash (P2MSH)
        • 06 - R-Puzzles
      • Chapter 5: OP_PUSH_TX
        • 01 - Turing Machines
        • 02 - Elliptic Curve Signatures in Bitcoin
        • 03 - OP_PUSH_TX
        • 04 - Signing and Checking the Pre-Image
        • 05 - nVersion
        • 06 - hashPrevouts
        • 07 - hashSequence
        • 08 - Outpoint
        • 09 - scriptLen and scriptPubKey
        • 10 - value
        • 11 - nSequence
        • 12 - hashOutputs
        • 13 - nLocktime
        • 14 - SIGHASH flags
      • Chapter 6: Conclusion
        • Conclusion
    • BSV Infrastructure
      • The Instructions
        • The Whitepaper
        • Steps to Run the Network
        • Step 1
        • Step 2
        • Step 3
        • Step 4
        • Step 5
        • Step 6
      • Rules and their Enforcement
        • Introduction
        • Consensus Rules
        • Block Consensus Rules
        • Transaction Consensus Rules
        • Script Language Rules
        • Standard Local Policies
      • Transactions, Payment Channels and Mempools
      • Block Assembly
      • The Small World Network
        • The Decentralisation of Power
        • Incentive Driven Behaviour
        • Lightspeed Propagation of Transactions
        • Ensuring Rapid Receipt and Propagation of New Blocks
        • Hardware Developments to Meet User Demand
        • Novel Service Delivery Methods
        • MinerID
      • Conclusion
  • Research and Development
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  1. Protocol
  2. Privacy

Keys and Identity

We will look at the concept of possession of a key and how it is irrelevant to identity

PreviousPrivacyNextPrivate vs Anonymous

Last updated 12 months ago

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One of the most misunderstood aspects of blockchain is Identity. From the notion that possession of keys represents ownership to claims that Bitcoin allows anonymous value exchange, there has been many such assertions that has mislead not just the individuals but governments who are trying to regulate this technology. Let’s look at some of the concepts around this to analyse their validity and impact on designing systems to better understand how Identity and Privacy work in the world of Web3.

In the Account model every account is represented by an Identity. A common misconception is that the same applies to the UTXO model used in the Bitcoin protocol.

A UTXO is created when funds are locked to a Public Key infrastructure (PKI) key-pair. The logic was extended from legacy-based understanding that, since it stores funds, the key-pair becomes an identifier of its owner. This is not the case, as is illustrated in the example below.

For Payment transactions (any type of transactions which focus on using BSV as payment method)

The above examples depict scenarios where data and payment transactions are made in hypothetical entities and where identity resides in these flows. It is not possible for anyone to determine who the transactions and funds belong to on the blockchain, unless someone publicly declares that they own a certain key (presuming they have some form of proof of ownership). But that again, is the same as a merchant storing KYC information; the record-keeping of identity is done off-chain and never on the blockchain.

Taking the analogy in the traditional account model where you deposit money in a bank account; this becomes a loan to the bank for a certain rate of interest that the bank pays to you. The bank stores your KYC information and can conduct enquiries to determine whether you have obtained it by valid means. That means the bank validates that the money you deposit has been obtained using legally valid means. When you transact the bank actually does that for you. This is called the bank acting in lieu of their customer.

The mere possession of a key does not give ownership. In the traditional banking system, knowing the password for accessing a bank account doesn't mean that you own money. If someone without authorisation does this they are legally conducting theft. In the same way, Similarly, if someone uses a key-pair which is not legally owned by them, they are conducting theft involved in theft and this will be evidenced using the proof that the funds were acquired from and who owns them. In the same way that having a copy of a house key does not provide you with ownership of a house, a key does not provide you with ownership of bitcoin.

If you lose a key to a safe-deposit box, you can still gain access even if it’s a Swiss safe-deposit box. This requires not having a key to prove your identity but rather having other things to prove your identity. Keys don’t prove identity and they are not same as holding ownership. Holding the key to your car doesn’t mean that you own the car; the car registration documents which have your name provide you ownership of the car