Silent Payments: A New Era of Bitcoin Privacy

Author: Area Bitcoin
Translation: Felix, PANews

Summary: Silent payments can reduce address reuse and enhance overall privacy.
The privacy of Bitcoin transactions is receiving increasing attention. As the demand for more secure and private on-chain transactions grows, a new proposal has emerged: Silent Payments.
This article will explore what silent payments are, their importance to the Bitcoin network, and the structure of silent payment addresses.
What are silent payments?
Silent payments are a way to receive Bitcoin that does not disclose your balance or transaction history to anyone who can see your public address.
This concept originates from a proposal called BIP 352, which suggests using reusable addresses in Bitcoin.
Imagine you want to accept Bitcoin donations or need to receive multiple payments throughout the year. What should you do? Currently, you either need to create a new address for each transaction or reuse the same address, sacrificing privacy and allowing anyone to track all transactions associated with that address via blockchain explorers.
However, with silent payments, you only need to provide a reusable public key address without worrying about privacy leaks.
The concept of silent payments was first proposed in March 2022. Recently, this BIP was integrated into the official codebase, marking an important milestone in the development of this technology.
This integration indicates that the technology has undergone thorough review, and wallet developers can start implementing it, though some fine-tuning may still be needed.
Why is this important?
Currently, Bitcoin addresses are similar to bank accounts. However, because the blockchain is fully transparent, anyone can view all transactions associated with a particular address through blockchain explorers.
If you reuse the same address, every payment you receive is publicly visible.
Silent payments change this: you only need to share a public address, and transaction details are only visible to the sender and receiver. This is achieved through cryptographic techniques, allowing the receiver to receive funds to a completely different, unique address each time, which only they can identify and access.
“Silent payments” is not a new concept; it evolved from the idea of “Stealth Addresses” proposed in 2012.
However, until now, this concept has not been effectively implemented in Bitcoin.
Earlier, stealth addresses were mentioned, but what exactly are they?
Stealth Addresses and BIP 47: Challenges and Limitations in Pursuing Privacy
Bitcoin transaction privacy has been a core concern since the inception of the network. Over time, various proposals to enhance privacy have emerged, notably stealth addresses and BIP 47, both initially proposed by Peter Todd.
The following discusses the limitations and challenges these methods face in achieving higher anonymity and transaction efficiency.
Stealth Addresses
Stealth addresses are among the earliest attempts to improve Bitcoin transaction privacy.
Their idea is simple: the recipient generates a unique and private address that only they can access via encryption.
But there is a major obstacle: to operate the system, an additional key must be added to the blockchain, usually using the OP_RETURN field.
This introduces two serious drawbacks:

• Loss of anonymity: Adding extra data to the blockchain makes it obvious that this is a transaction using a stealth address, and observers can recognize this technique, undermining anonymity.
• Low efficiency and high cost: Increasing blockchain data makes transactions bulkier, less efficient, and more expensive, contradicting Bitcoin’s principles of being lightweight and easily accessible.

At that time, an alternative was proposed: using an existing key in the transaction to avoid adding extra data.
However, due to technical complexity and the lack of efficient tools at the time (such as the now-simplified Lipsack P library), this idea was shelved.
BIP 47
Over time, another proposal aimed at solving these issues emerged: BIP 47.
BIP 47 introduced the concept of a notification system, rather than adding data to the blockchain for each payment. In this approach, the sender uploads data to the blockchain once, and the receiver can recognize this data and use the “key” to simplify future payments.
Advantages of BIP 47:

• Clear recognition for the recipient: The recipient can easily identify which part of the on-chain data is intended for them, simplifying verification.
• Reduced extra data: Only the initial notification data is added once, saving space and resources compared to adding data for each stealth address transaction.

Disadvantages of BIP 47:

• More complex for the sender: Each payment requires the sender to first send a blockchain notification, which is equivalent to an extra transaction, making large-scale use cumbersome.
• Inefficient blockchain usage: Data added solely for notifications is unrelated to actual payments, which is considered inefficient.
• Payment linkability: Multiple payments to the same person may reveal that funds come from the same source, harming anonymity (whereas in silent payments, the sender remains completely anonymous).
• Identity disclosure: In notification transactions, the sender’s payment code is revealed to the recipient, which could be problematic in scenarios requiring high anonymity (such as donations to sensitive causes).

Although BIP 47 has advantages (like clear recognition on the recipient side), its major drawbacks—additional transactions and lack of full anonymity—limit its widespread adoption.
Silent payments aim to address these issues, providing a more intuitive and private user experience. Compared to BIP 47, the only downside of silent payments is the need to scan the blockchain, but this trade-off may be worthwhile for significantly improved privacy.
In summary, stealth addresses and BIP 47 have contributed to Bitcoin privacy, but their limitations hinder broad adoption.
Silent payments are now a promising solution, attempting to combine the best features:

• Strong privacy
• High efficiency
• Simplified user experience

How do silent payments work?
For users, the operation is very simple.
Suppose you have a Bitcoin wallet connected to your node. You generate an SP (Silent Payment) code, which can be shared as a QR code. Anyone supporting silent payments can scan the QR code or input the code to make a payment… it’s that simple.
For recipients running a full node, the process is optimized for efficiency, with almost zero cost.
However, for the receiver, some additional work is required. They must check each new Taproot transaction on the network to determine if it contains a payment to their silent payment address, which requires more processing in the wallet software.

What does a silent payment address look like?
Silent payment addresses have the same structure as Taproot addresses. Taproot addresses use the “bc” prefix, indicating a Bitcoin address, followed by “1” and a version number, with the rest encoded in bech32m.
Silent payment addresses also use bech32m encoding, but with the prefix “sp1” (indicating a silent payment address). This address contains two public keys. These keys do not directly show the destination of Bitcoin but provide instructions for generating a Taproot public key script.
In practical use, users can generate, share, and reuse silent payment addresses just like regular Bitcoin addresses, without sacrificing privacy—this is their core advantage.
Which wallets support these addresses?
Currently, wallets supporting silent payment addresses include Cake Wallet and BitBox.
Since silent payments are still under development and not widely adopted, Cake Wallet is one of the earliest wallets to implement Bitcoin silent payments. It has released beta versions on Android and iOS.
Here’s how to use silent payments in Cake Wallet:
Tap the “Silent Payments” button on the wallet homepage card/grid to start scanning the blockchain for these transactions.
Note that because silent payment transactions are anonymous, the wallet must actively scan the blockchain for transactions.

Once scanning is complete, silent payment verification will automatically turn off when reaching the latest block.
If you want the wallet to continue automatically scanning for new silent payment blocks, go to “Menu” -> “Silent Payment Settings” and enable “Always Scan Silent Payments.”

BitBox
Like the hot wallet Cake Wallet, BitBox is one of the first hardware wallets to support silent payments, greatly enhancing user privacy.
Through silent payments, the sender can generate a unique address from the recipient’s fixed public key. This is especially useful for activists, NGOs, and charities: they can share a reusable address to receive donations without exposing identities, donors, or amounts.
This integration allows BitBox users to support various causes and make payments while avoiding exposing financial activities to unnecessary third parties.
Tagging Functionality
One initial challenge with silent payments was how to identify who sent the payment. The solution is to introduce labels.
So, what are labels?
Labels allow you to distinguish different senders when using a single silent payment address, without sacrificing privacy or significantly increasing scanning costs.
This technology enables adding extra information to silent payment addresses without compromising user privacy. It works by deterministically fine-tuning the spending key.
Simply put, the spending key acts like a digital signature, authorizing the use of funds in the address. By fine-tuning this key, you can identify different payment sources.
For example, suppose you have two silent payment addresses:

• One for activities on X
• Another for activities on Nostr

With labels, the first half of these addresses is the same (indicating they belong to you), but the second half differs slightly, helping you identify the payment source.
When viewing funds, you can see some payments coming from X users and others from Nostr.
This flexibility strikes a balance between privacy protection and collecting useful transaction information.
Of course, if you want complete anonymity, you can simply use standard silent payment addresses without labels, ensuring senders have no identifiable information. But if you need to track payment sources, labels offer an efficient way.
This technology can be applied in exchanges, social media platforms, personal use, and more, allowing you to manage multiple online identities without obvious links or only obtaining more payment information when needed.
Exchange Silent Payment Example
If an exchange adopts this technology, interesting use cases will emerge.
Suppose you deposit funds into an exchange. With silent payments, the exchange no longer provides you with a reused deposit address but generates a silent payment address for you.
Each time you pay to this address, the exchange can automatically recognize it as yours (via the label mechanism), without you managing multiple addresses. This is also very useful for automated withdrawals.
You can reuse the same silent payment address across platforms, avoiding the need to manage different extended public keys (xPub) for each platform, greatly simplifying the process.
Conclusion
Silent payments are expected to revolutionize how Bitcoin is used, offering a simpler, more intuitive experience while significantly improving privacy.
If widely adopted, the on-chain address reuse rate could drop substantially, creating a safer and more private environment for everyone.
Silent payments present an excellent opportunity to combine user incentives with best privacy practices, making future Bitcoin payments more private and secure than ever before.