bsips/bsip-0007.md

    BSIP: 0007
    Title: Privacy (STEALTH) Mode
    Authors: Daniel Larimer <Dan@cryptonomex.com>
             Fabian Schuh <Fabian@BitShares.org>
    Status: Draft
    Type: Protocol
    Created: 2015-12-16
    Discussion: <https://github.com/cryptonomex/graphene/issues/452>
                <https://bitsharestalk.org/index.php/topic,20104.0.html>
                <https://bitsharestalk.org/index.php/topic,20499.0.html>
    Worker: tbd

# Abstract

Privacy Mode Transfers (a.k.a. Stealth Transfers) are used to maintain user
privacy. This feature helps set BitShares apart from most other crypto
currencies and offers tremendous value to the users who are most interested in
privacy, liberty, and freedom.

In practise they combine the techniques of *blinding signatures* to hide the
amount of a transfer and *stealth addresses* (similar to TITAN in BitShares 1)
to hide involved parties.

# Specifications

This proposal involves creating a new front-end feature on the account page in
the web wallet to allow users to enter the *privacy mode*. Here, users will be
able to create *private accounts* which are labeled private keys. They will
also be able to manage *private contacts* which are labeled public keys. Neither
private accounts nor private contacts are tracked on the blockchain since those
keys are not used directly. Instead, each transaction will derive a
transaction-specific address from the private contact's public key. A off-chain
memo helps the receiver identify the deposit and derive the corresponding
transaction-specific private key from the private account.

Users will be able to monitor their private balances and take the following
actions:

* Transfer from public account to their own private balance
* Transfer from one of their private accounts to one of their private contacts
* Transfer from one of their private accounts to any public account
* Register a new account using a private balance.
* Receive a private transfer from a 3rd party given a transfer receipt.

These features are already available on the blockchain level using *address
authorities* and *key authorities* and indicating that a transaction to that
account has to be made in private.

# Implementation Aspects

## Backup Considerations

Because private transfers are not recoverable from blockchain data alone,
backups of your wallet after receiving a new private transfer are *required*. 

## Javascript Implementation

This proposal will require the use of a JavaScript library to perform the
necessary crypto operations in the web wallet (see [1]).

# Funding

BitSharestalk.org forum user `onceuponatime` has proposed to fund the
development and implementation of this feature in full as a private investor and
at zero cost to BitShares shareholders.

## Contract between `onceuponatime` and Cryptonomex:

     The purpose of this contract is to develop a Privacy Mode feature, Privacy Mode
     fee accumulation account, Maintenance Account, Initialization Package, and GUI
     interface for BitShares scoped for a firm fixed price of $45K. The following
     requirements apply:

     1.  The Privacy Mode feature shall be implemented as proposed in
         https://github.com/cryptonomex/graphene/issues/452 (as amended).
     2.  It shall provide the following fee based services:
           * Transfer from public account to their own private balance
           * Transfer from one of their private accounts to one of their private contacts
           * Transfer from one of their private accounts to any public account
           * Register a new account using a private balance.
           * Receive a private transfer from a 3rd party given a transfer receipt.
     3.  Each of these services shall charge a fee initially set at 3x the standard
         transfer fee, but which may be adjusted from time to time by the owner(s) of
         the Privacy Mode's management account
     4.  Fees shall be automatically distributed by the blockchain to the following
         accounts:
            * 20% to the BitShares network.
            * 20% to a Maintenance Account.
            * 60% to holder(s) of the Privacy Mode Fees accumulation account
     5.  The Maintenance Account shall be controlled by five specified manager
         accounts in a 3 of 5 multisig configuration. These managers will control
         the allocation of this fund to future maintenance and upgrade tasks.
     6.  The Initialization Package shall modify the blockchain to make the Privacy
         Mode feature available to users.
     7.  The Initialization Package shall make provision for the creation of
         generic Fee Based Assets (FBA) and set the fee for such
     8.  A GUI shall be provided in the OpenLedger and Light wallets to allow
         ordinary users to easily use the Privacy Mode features.
     9.  Documentation of the Privacy Mode feature and Maintenance and Fee
         Accumulation account shall be provided on the appropriate reference web
         sites.
     10. Resulting software patch to the Graphene library shall have the same
         license as the rest of Graphene subject to the condition that the results
         of the Initialization package and fee distribution mechanisms are not
         modified.

# Management Account

The STEALTH asset will be issued by the "management account" for this feature
(as created by the initialization package). `Onceuponatime` will be the initial
owner of the issued asset (not the issuer). This management account will have
3-of-5 multi-signature authority assigned to the 5 *largest* STEALTH holders
weighted proportional to stake and will have the power to set the fee.

# Roadmap

* Feedback and discussion of this thread: *December 8 to December 10, 2015*
* Presentation of an amended Cryptonomex Worker Proposal: *Dec 11, 2015*
  This worker proposal should include Milestones of what is intended to be
  accomplished by the end of week 1, week 2, week 3, week 4 and week 5 so that
  the Community can follow progress in the github.
* Voting for Worker Proposal: *Dec 11 to January 1, 2016*
* onceuponatime forwards $45,000 to Cryptonomex: *Jan.2, 2016*
* Cryptonomex does the development and testing of the feature: *(4 to 6 weeks)*
* Hard fork for implementation of the feature: *Monday Feb, 15th*

# Discussion

For the best user experience this proposal is best combined with proposal for
*hosted wallets* (to be defined).

## No Participation in Referral Program

The referral program does not play with Privacy mode transfers (because it is
private, we don't know who the parties are or who referred them). This means
that even if the fee were the same as the basic transfer, on average the
lifetime member would be paying 5x more a Private Transfer than a Public
Transfer. If you charge 3x the basic transfer fee, then life time members will
pay 15x more for a Private transfer than a Public transfer.

Percentage based fees are not possible with Private Transfers either because the
amount being transferred is *private*!

# Copyright

This document is placed in the public domain.

# See Also

* [1] https://github.com/arhag/crypto-experiments/tree/emscripten/emscripten/libsecp256k1-demo