Enhancing Decentralized Privacy : A Systematic Review of Techniques for Permissionless Blockchain

Abstract

Permissionless blockchain operates as a fully decentralized, transparent, and immutable ledger. Preserving privacy in such systems is a complex challenge, as privacy cannot rely on restricting access or deleting data. Bitcoin, the first application of blockchain technology, was initially praised as an anonymous digital currency, but the transactions on the network have been shown to be relatively easy to trace. This realization has led to the development of advanced privacy-enhancing mechanisms with stronger anonymity guarantees. This thesis offers a comprehensive overview privacy-preserving techniques for permissionless blockchain through a systematic tertiary review of existing surveys. It identifies and categorizes key techniques such as zero-knowledge proofs, ring signatures, homomorphic encryption, secure multi-party computation and decentralized mixing protocols. Their capabilities to mitigate risks of linkability and information leakage, as well as limitations like computational overhead, are examined. Furthermore, unresolved challenges and research interests in the field are analyzed. By consolidating fragmented insights into a coherent and accessible resource, this work aims to support the privacy-aware development and adoption of blockchain applications. The findings highlight a fundamental trade-off between the privacy capabilities, efficiency, and trust assumptions of existing techniques. Privacy in permissionless blockchain often requires computationally complex cryptographic methods, leading to significant delays and increased costs for users. Efficiency can be improved by assuming some level of trust in entities or hardware, but this may conflict with the principle of decentralization. Although many powerful techniques exist, there is no universal solution, and the best results are achieved with combining techniques on a case-by-case basis. Current research on permissionless blockchain privacy focuses on improving efficiency, interoperability and usability of privacy preserving techniques. Additionally, regulatory compliance and accountability are critical concerns, as the technology must comply with privacy regulations while preventing anonymity in illegal activities such as money laundering.