Bitcoin Privacy Feud Erupts After Edward Snowden Pans Long-Awaited Taproot Upgrade

By Jeff Benson

Edward Snowden is a former National Security Agency contractor who exposed a secret surveillance program of American citizens. As one of the world's foremost privacy advocates, he thinks Bitcoin isn't private enough—and that an upcoming software update could make it worse.

His comments have created something of an uproar from fellow activists such as Alex Gladstein, the Chief Strategy Officer of the Human Rights Foundation, who thinks Snowden has misrepresented the upgrade, known as Taproot. Others have argued that the Russian exile can't see the importance of mainstream adoption to the project, which could falter if it turns too far toward anonymity.

"Cryptocurrency, and by this I'm just going to say Bitcoin, is really failing comprehensively, terribly, on the privacy angle," Snowden told the Electronic Frontier Foundation's Marta Belcher at the Ethereal Summit on Thursday. Taproot, he added, isn't a good fix.

Taproot, which was first proposed in early 2018, is in the process of making its way from developers' brains to the Bitcoin protocol itself. When it does come online, it's supposed to improve privacy as well as scalability and security.

That's because it can take complex, multi-step transactions on the Bitcoin network and make them appear as though they're single transactions. Thus, transactions involving multi-signature wallets or the Lightning Network, for instance, just look like any other peer-to-peer transaction. Moreover, the Taproot upgrade will likely be combined with Schnorr signatures, which combine multiple signatures into just one signature, further obscuring the mechanics at play and adding privacy.

Snowden doesn't buy it. "People are like 'Taproot! Taproot!'" he told Belcher. "Look at what Taproot actually does. Taproot does not fix Bitcoin's privacy problem. And there are some arguments it actually makes privacy worse by sort of fragmenting address space, making forensic sort of flow analysis easier."

He went on to praise privacy coins Zcash and Monero and urged Bitcoin to be "private-by-design" before questioning the willingness of those who help maintain the Bitcoin blockchain to embrace such a paradigm: "It's really frustrating, I think, for a lot of people in this space that the core development team for Bitcoin has not prioritized this, because the longer they wait, the more obstacles are going to be put in place to prevent that from being the case."

Several developers and researchers shared with Decrypt that Snowden's comments about Taproot were incorrect. And Gladstein suggested Snowden misunderstands Taproot.

"With great respect for Edward Snowden, who has sacrificed so much to reveal the surveillance state to the world, I disagree with his assessment of Bitcoin privacy and hope he can consider looking more deeply into the Taproot upgrade and existing privacy tools like CoinJoin and Lightning," he told Decrypt, referring respectively to the tool that mixes multiple transactions into one to anonymize transactions and the second-layer application that allows transactions to happen quickly off-chain.

Gladstein also said Snowden's swipe at Bitcoin developers' priorities was wrong. "They are in fact constrained by Bitcoin's users, who will not accept any software upgrades which ruin Bitcoin's auditability, backwards-compatibility, or stability," he told Decrypt. "The developers can't just do whatever they want, they have to carefully design solutions which don't sacrifice the values which make Bitcoin so important in the first place, namely, decentralized digital scarcity and the ability for users to control the system, not corporations or governments. This arrangement means that Bitcoin cannot put experimental cryptography onto the main chain today."

BlockTower Capital founder and CIO Ari Paul disagrees. "Core devs have clearly not prioritized privacy," he wrote in a tweet thread that included Snowden and Gladstein. "That’s an objectively true statement. We could have mixing or other privacy tech built into the Core client. That’s not a criticism—maybe it’s smart not to prioritize privacy. But it’s objectively accurate."

Chris Blec, a decentralized finance researcher, told Decrypt he doesn't think that's a great state of affairs: "Taproot is a good step toward improving pseudonymity on Bitcoin. However, real anonymity is needed to maintain privacy in today's world of pervasive surveillance. It's sad that anonymity is not a priority for Bitcoin core, but it would only serve to impede mainstream adoption and slow Bitcoin's absorption of the world's wealth."

Others agree that Bitcoin, now with a market capitalization above $1 trillion and growing mainstream acceptance, is playing a long game that requires patience.

Messari founder Ryan Selkis tweeted of Snowden, "His character is a self-righteous truth teller and he’s performed that role admirably. But those who actually win the war (ie get crypto to “too big to fail”) know anonymous [transactions] kill the whole ecosystem."

Others, like Bitcoin dev Eric Lombrozo suggested that making Bitcoin, a decentralized database with various stakeholders around the world, more private was both a technical feat and an implementation challenge. 

"Until he manages to successfully fork the Bitcoin protocol to add more privacy, he has no place criticizing others for not doing it," tweeted Lombrozo. "He clearly has no conception of just how difficult this is."

Taproot probably won't be implemented until November. Until then, expect to hear a lot more about whether it goes far enough in keeping with Bitcoin's ethos or if it's just a concession as the upstart cryptocurrency goes mainstream.

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