The credit card giant Mastercard has filed a patent with the US Patent Office for the mixing of blockchain transactions. The methods used are not entirely new – but they raise the question of what the company intends to do.
On December 6, the US Patent and Trademark Office published a patent filed by Mastercard in June 2017. The patent, waiting for confirmation by the Office, is dedicated to the question of how to anonymize transactions on a blockchain.
According to the patent, many users would use digital currencies “because of the anonymity provided by blockchain transactions”. It is often extremely difficult to deduce a user from a blockchain address, which enables the user to maintain a relatively high degree of anonymity. However, the transparent nature of a blockchain allows each transaction to be tracked and it is possible to identify the transactions of a particular wallet. For many users, this is an unacceptable state in terms of data protection, especially if they use blockchains to promote their anonymity. There is therefore a need for technical solutions to improve the anonymity of wallets and users.
With the patent, Mastercard now reveals a description of systems and methods for anonymizing blockchain transactions in such a way that blockchain analyses produce little or no information about the activity of users. The method uses “intermediate addresses to disguise the source and destination of transactions”. Transactions are sent to a processing server, which then forwards them to their destination. Since this server is used by many users, the individual transactions are anonymized in a stream of incoming and outgoing transactions. An observer will only be able to recognize that someone has sent transactions to or received transactions from this server.
Mastercard also demonstrates the possibility that the server uses multiple wallets to further increase anonymity. The server can then divide the transfer into several transactions between several wallets. This will maintain anonymity even if only a small volume of payments passes through the server. In addition, the patent explains how the amount of a transaction can be obfuscated by the server dividing the outgoing transaction into several transactions with smaller amounts.
All of this is nothing fundamentally new. Such methods of anonymizing coins have long been known and used under the term “mixers”. It is difficult to say whether Mastercard will add something by variations to the methods already in use. The existing mixers achieve a degree of anonymity that is sometimes higher, sometimes lower, and depending on the quality can be cracked by blockchain analysis or not. There are particularly sophisticated variants such as TumbleBit, and Lightning should also significantly increase the anonymity of transactions.
It is rather boring that Mastercard now wants to patent a rather trivial concept for the mixing of coins in 2018. The interesting question, however, is why? Is the patent simply a by-product of some Mastercard analysts dealing with blockchains? Or is it a first step to process Bitcoins or other crypto currencies via Mastercard? If so, the product could reproduce the privacy features of traditional electronic money on a blockchain: The payment service provider knows the private data of a transaction, but outsiders do not.