<https://www.coursera.org/lecture/introduction-blockchain-technologies/usage-of-multiple-ids-KKgLf#lecture>
<http://schema.org/transcript>
"In this video, we'll explore transparency and the use of multiple IDs on the blockchain. As we've called out in prior lessons, one benefit of blockchain is that it creates an immutable trusted record of transactions. Though we often hear that bitcoin and other cryptocurrencies are anonymous, it's not exactly true. Distributed ledgers are not necessarily set up to guarantee privacy for users. Transactions can be traced by looking at the different addresses in that transaction, and that poses some problems. But before we delve into possible solutions, let's first address the separate concerns of two different groups. One group are the cryptocurrency advocates themselves, mainly the advocates for bitcoin. They worry about their dealings being traced or detected by entities like the government. That's not surprising or bad considering bitcoin holds much promise for untraceable transactions in, say, corrupt parts of the world. The other group are the enterprise users. Most of them are accustomed to the governments auditing their actions, they worry less about government knowledge, and they may welcome a system with better traceability. Their main concern is whether their actions are traceable by their competitors. Too much transparency could devalue their intellectual property, such as trade secrets. So, let's pose the question. Are actions on blockchains always fully traceable with full attribution? The answer is, of course, no. There are some simple workarounds that can improve privacy and transactions. We will cover one of those in this lesson and dive deeper in the next one. Consider hierarchical deterministic wallets or so-called HD wallets. Hierarchical deterministic wallets have also been proposed as a solution to privacy in private distributed ledgers. An HD wallet uses algorithms to create a new public-private key pair for each transaction or piece of a larger trade. This thus would allow a user to have a virtually infinite number of public addresses all derived from a single master seed phrase, making their identity difficult to trace. Let's suppose a private blockchain network is run by a group of large banks and brokers. Each would create one or more of these HD wallets, and record individual customers holdings within their own systems. Rather than go through a centralized database or depository for the settlement, the wallet settlement occurs on the distributed ledger, on the blockchain. With the distributed ledger, even if someone has access, there is no informational advantage over the central depository solution. Another HD wallet solution to generate privacy is a so-called merge and re-split operation. In this example, several entities anonymously submit new addresses to a smart contract. The contract collects the same amount from each party, let's say it's 100 bitcoins each. Then the contract re-deploys the amount to the new addresses. From the outside, we wouldn't be able to follow the trail of money beyond that point. Now, this is useful for many financial services and enterprise use cases, but in a completely uncontrolled and unregulated public environment could potentially run afoul of the law. So, how do you create a system where digital assets can be moved peer-to-peer, but still with some complete measure of privacy, all in a regulated way? Well, consider using a permissioned blockchain. On a permissioned blockchain, IDs would be known, and a regulator or some authority could have insight. But you could shield your behavior from unwanted outside observers, such as your competitors. If you have any questions about the ideas we discussed here, please check out the discussion forum. We'd love to hear from you. Up next, we explain zero-knowledge proofs."
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