BIP proposal - Dandelion: Privacy Preserving Transaction Propagation

A group of researchers has developed a new privacy solution for Bitcoin users called Dandelion, which provides formal anonymity guarantees by limiting the capability of adversaries to deanonymize the entire network. The protocol sends transactions over a randomly selected path before diffusion, preventing attacks by sending them during the "stem phase" and then diffusing them during the "fluff phase". This routing protocol provides near-optimal anonymity guarantees among schemes that do not introduce additional encryption mechanisms. The team has completed additional theoretical analysis and simulations, built a working prototype, and written detailed documentation for the new implementation. However, since the guarantees are probabilistic, individuals who are worried about targeted deanonymization should still use Tor.