The future of Bitcoin looks brighter in terms of privacy, scalability, and fungibility now that CommerceBlock has introduced its Mercury solution aimed at improving and optimizing these qualities within the network.
The company providing financial business infrastructure with solutions based on blockchain, CommerceBlock, recently revealed that it is working on the design of a new tool that will help increase and strengthen privacy in Bitcoin, as well as its fungibility and scalability to help the network process a higher number of transactions per second (TPS).
As we have explained in Bit2Me previously, Bitcoin is not a privacy-focused system, but rather a system that offers pseudo-anonymity to users, while guaranteeing transparency in each operation and transaction carried out on the network. Thus, although to make a transaction or payment in Bitcoin it is not necessary to provide any personal data, neither of the sender nor the receiver, in its blockchain each of the transactions and payments made since the beginning of its operations in 2009 can be viewed and verified. Taking this into account, if a person reveals ownership of a Bitcoin address, then anyone can verify all the operations that that person has carried out with that address within the network. It is because of this characteristic that we cannot say that Bitcoin is private, but pseudo-anonymous. In addition, due to the exposure of the values of the payer and the beneficiary, and of the output, the fungibility of Bitcoin can also be questioned.
To improve this, several developers, or in this case companies, have come up with innovative solutions that help improve this quality in Bitcoin; especially in the current times, where governments and regulators show greater interest in the transactions carried out by users within this network. The proposal presented by CommerceBlock, called Mercury, is the first second layer solution to implement so-called statechains, or state chains, which were designed with the main objective of improving scalability within a network.
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Advantages and benefits of the new CommerceBlock tool
As the company explains on GitHub, Mercury will implement statechains so that users can transfer ownership of Bitcoin UTXOs (unspent outputs) between parties without performing on-chain transactions, allowing for near-instant payments and transactions, and ensuring greater privacy on the network.
CommerceBlock notes that Mercury's privacy and speed are due to the tool's ability to perform atomic swaps (atomic swap) off-chain, so transactions made are only recorded within the statechains. This feature will also help to considerably improve the scalability of the network and the fungibility of Bitcoin as money. Likewise, among the benefits of using this network, the company points out that users will be able to make their payments and transactions with commission rates much lower than on the mainnet as no on-chain fees are required.
Also, among the advantages of this tool is the possibility of transferring ownership of a public key of a multi-signature UTXO; or transfer ownership of a position within a discrete ledger contract (DLC); or transfer a share of a network payment channel Lightning Network. All this without the need for cooperation from a counterparty.
For its operation, Mercury uses a trusted third party, known as State chain entity o SE, which can be made up of a service provider or a federation of independent entities, where each of the parties must agree on the generation of signatures. Thus, this is the price that users of the tool must pay in exchange for a higher level of privacy in Bitcoin. However, despite this figure, CommerceBlock assures that the SE will never have custody over the UTXOs, so the level of trust required in this tool is minimal.
A tool in the testing phase
At the moment, and since last August 2020, Mercury has been running on the testnet, or test network, of Bitcoin. To date, the company also implements a wallet or wallet called Mercury Wallet, in the development phase, and which will be available in its alpha test version next week, according to reported CommerceBlock on their Twitter account.
The company notes that they have been making significant progress in developing this tool, and since it is an open source project, anyone interested can go to GitHub and see the progress that has been made in its development, as well as contribute with suggestions or bug fixes to further speed up its construction. CommerceBlock even notes that anyone who wants to can use Mercury's code and adapt it to create their own products.
A boost for Bitcoin privacy tools
Likewise, Nick Gregory, CEO of CommerceBlock, says that the use and implementation of statechains can significantly boost the level of privacy of tools such as the coinjo y CoinSwap, and even privacy wallets like Wasabi wallet y Samourai WalletThe expert points out that the use of this technology guarantees the execution of BTC transactions instantly off-chain, without the blocking of funds, nor the liquidity problems that occur in the LN network, nor the custody problems of the sidechains federated; so these Bitcoin privacy services and tools can also benefit from statechains, to optimize their services and allow instant and inexpensive transactions.
Although this tool is still in development, and is not yet suitable for use with real currencies, it is clear that CommerceBlock plans to prepare a real version to go beyond testing this year. The development of this tool promises to give greater functionality to the Bitcoin network, an important fact that also influences the potential for revaluation of this cryptocurrency.
tap root is another technological innovation aimed at improving the privacy and scalability of the Bitcoin network, and which will possibly be implemented in the Bitcoin code this year, after the network's miners approved it with more than 90% of votes in favor.
Continue reading: Schnorr and Taproot: The Future of Bitcoin Scalability and Privacy