A recent BIP proposal was pulled by Bitcoin developer Jonas Schnelli with the title “ Peer-to-Peer Communication Encryption.” The change would encrypt peer traffic making the analysis of individual users more difficult in the future. Currently, the cryptocurrency’s network does not encrypt communication between peers making it a bit easier for any entity to monitor and use surveillance methods against Bitcoin users.
Typically broadcasted transactions over the internet can reveal quite a bit about specific individuals using the Bitcoin network. Simplified Payment Verification (SPV) wallets are said to have significantly reduced privacy and rely on connecting to a “trusted” node. The balance between verification resources reduces security and seem to be inherent with SPV nodes. Concepts like Bloom Filters have tried to mend the problem but have been relatively ineffective in the past. The BIP 151 written by Schnelli says:
“Encrypting peer traffic will make analysis and specific user targeting much more difficult than it currently is.”
Traffic encryption between peers is possible with different mechanisms such as VPN’s or Tor. Yet Schnelli explains that it’s not very “practical” for SPV or DHCP/NAT and implementation is quite difficult. As well as outside mechanisms an SPV Read more ... source: LiveBitcoinNews
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