Does the Blockchain protect privacy?

Satoshi Nakamoto’s initial vision regarding the creation of bitcoin, differs years later with the massive adoption of the market, many of the Crypto-Exchanges are on the way to be converted or acquired by regulated financial institutions.

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” (bitcoin white paper)

The intrinsic traceability nature of the blockchain makes it possible for example, to perform statistical analyzes such as graph analysis, time based analyzes, in conjunction with other techniques, such as tracking IP addresses, “taint” analysis, malicious nodes, dustink attacks, to re-identify Bitcoin wallets and their owners.

State Channels

While blockchains have byzantine fault-tolerant consensus models that don’t require input from the user, state channels require unanimous consensus and interactivity, offering the possibility of performing multiple off-chain transactions, in such a way that it can be obfuscated and provide an extra layer of privacy in transactions. These transactions however, do not provide the explicit record of how funds have moved inside the Network, unlike the Bitcoin on-chain transactions. Lightning network is one of the most mature solutions in the market.

Axolotl Finance uses an off-chain mechanism to make payments between individuals, without broadcast the transaction on the blockchain. The advantages of use State Channels is not only the privacy, but also to avoid the high cost of gas and increase the speed of the transaction

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Thanks
Axolotl Finance Team