Improving the Anonymity of the IOTA Cryptocurrency

IOTA differentiates itself from other cryptocurrencies by being based on a non-blockchain data structure with a highly scalable approach to transaction confirmation. In addition, it exclusively uses post-quantum cryptography. However, as with most cryptocurrencies, IOTA’s ledger is currently completely transparent. Constructing an acceptable privacy solution within these parameters is a considerable challenge. The report begins with a brief introduction to IOTA, followed by a general overview of privacy and anonymity in cryptocurrency. This leads to a review of methods currently used to enhance anonymity in other cryptocurrencies, and an assessment of their effectiveness and applicability to IOTA. Ultimately, off-ledger mixing using payment channels is found to be the most promising long-term privacy solution. In the meantime, centralised mixing forms a practical way to perform anonymity-enhanced transactions over the IOTA network, and can build a foundation for trustless solutions in future.