A Tip for IOTA Privacy: IOTA Light Node Deanonymization via Tip Selection

Abstract: IOTA is a distributed ledger technology that uses a Directed Acyclic Graph (DAG) structure called the Tangle. It is known for its efficiency and is widely used in the Internet of Things (IoT) environment. Tangle can be configured by utilizing the tip selection process. Due to performance issues with light nodes, full nodes are being asked to perform the tip selections of light nodes. However, in this paper, we demonstrate that tip selection can be exploited to compromise users' privacy. An adversary full node can associate a transaction with the identity of a light node by comparing the light node's request with its ledger. We show that these types of attacks are not only viable in the current IOTA environment but also in IOTA 2.0 and the privacy improvement being studied. We also provide solutions to mitigate these attacks and propose ways to enhance anonymity in the IOTA network while maintaining efficiency and scalability.