More people appear keen to use Bitcoin’s onchain privacy methods going by the size of a recent CoinJoin transfer.
On April 20, a Bitcoin CoinJoin, comprising 351 inputs, fused 209.70283337 BTC, confirming it on-chain before redistributing it through 336 outputs.
The CoinJoin allowed over $6m of value, at the time, to be moved privately on the Bitcoin network, protecting the identities of the senders and receivers.
Bitcoin is pseudonymous, meaning the identity of the sender and receiver can be decrypted. Since all on-chain transactions can be tracked, mapping is easier, and cracking the identities of the transactors via dedicated agents like Chainalysis is possible.
To protect the privacy of Bitcoin users, CoinJoin is a technique that ensures transactions cannot be tracked. The solution was first proposed by Greg Maxwell in 2013 but developed by, among others, creators of the Wasabi wallet. It jumbles different bitcoin transactions as inputs and confirms them on-chain as a single CoinJoin. Afterward, the single transaction is distributed to receivers.
In this design, it becomes harder for agents monitoring transactions to differentiate them, protecting users’ identities. However, the effectiveness of the CoinJoin depends on the number of inputs; the larger the number, the more private transactions are.
Limitations and adoption
The technique has been replicated with the recent CoinJoin on April 20, one of the many executed over time.
While there can be internal limitations on the Bitcoin network that can cap the size of the CoinJoin, such as block size and coordinating the number of people to send transactions in a single block simultaneously, the technique is popular with users.
Even so, CoinJoin, unlike Tornado Cash, a crypto mixer popular with ERC-20 tokens, blocks flagged bitcoin transactions, ensuring the tool is not used by hackers wishing to launder stolen assets.
On April 19, Trezor, the hardware wallet provider, integrated Coinjoin on its Trezor Model T. Other account types options, such as SegWit, Taproot, and Legacy, will still be available. However, those opting for CoinJoin must pay a 0.3% coordination fee and wait slightly longer before the transaction is confirmed.