Bitcoin Transaction Privacy
December 29, 2020
The idea behind a private transaction in the Bitcoin world is often over looked, with most stating the core Bitcoin principles such as your wallet hash being a measure against censorship.
This works to a certain extent, you are able to send and receive without the need of verifying your identity as the Bitcoin protocol is based on trustless cryptographic procedure. Though with taint analysis, transaction tracking technology, IP address monitoring nodes, web-spidering and many other mechanisms, your privacy may be difficult to maintain.
This post aims to look into the concept of CoinJoin, a method of combining multiple Bitcoin payments from multiple spends in a single transaction. Making all the previous methods of breaking privacy harder.
"CoinJoin is a trustless method for combining multiple Bitcoinpayments from multiple spenders into a single transaction tomake it more difficult for outside parties to determine whichspender paid which recipient or recipients. Unlike many otherprivacy solutions, coinjoin transactions do not require amodification to the bitcoin protocol"- CoinJoin wiki
Investopedia describes the CoinJoin strategy as a first generation privacy hack for Bitcoin, this is interesting as prior to this there were not methods of enabling privacy on the blockchain.
Another interesting aspect to this article is the mention of Monero (XMR), Monero uses a similar method to enable privacy, by mixing users signature with other users breaking privacy is nearly impossible.
Several tools were made to automate this strategy, DarkWallet, JoinMarket, and SharedCoins were one of the original automated methods for coin mixing (CoinJoin).
Currently wallets that do this at a acceptable level is Samourai Wallet’s Whirlpool and Wasabi Wallet.