Improve privacy on the blockchain by obfuscating transaction history
Because of it´s proof-of-work backbone, Bitcoin is extremely powerful when implemented defensively in cyber security protocols, but is more widely known for its characteristics of universal value (money). It is the highest quality money in the world in terms of portability, divisibility, liquidity, and scarcity. Even when placed in the ring with physical gold coins, it is more portable, more divisible, more scarce, and is as durable as anything digital can be. Bitcoin is money re-invented, and at the heart of this monetary revolution is the “Blockchain”.
Blockchain vs banks | Privacy in a nutshell
Old-banks and Bitcoin´s blockchain are as different as financial infrastructure can be. On one hand, old-banks have custodianship of their client´s money – the client must ask the bank for permission to transfer/withdraw their funds, in trust that they will do so when asked. On the other hand, Bitcoiners (when following good practices) have full custodianship over their wealth. Big difference, but it doesn´t end there! I could ramble all day about the differences, such as fiat printing compared to Bitcoin mining, but let´s keep this concise; we´re talking about privacy here.
In my opinion, the biggest difference between fiat banks and Bitcoin is how they handle transaction data privacy. When we use old fiat banks, we are required to trust the bank to protect our information from intruders, and not to themselves use it in nefarious ways…
On the other hand, Bitcoin is completely transparent. It´s a public ledger. Everyone can look at the UTXO set (unspent transaction output). A Bitcoiner´s level of privacy is in their own hands. For instance, if Tom acquires Bitcoin from Coinbase (a major KYC exchange) and Madison goes to a pier-to-pier seller on HodlHodl, Madison´s identity will have less association to the Bitcoin she´s purchased. Bitcoin by default is completely anonymous; it´s the on-ramps and our own wreckless transaction activity which exposes our identity.
Going back to the UTXO set, there are many companies which have designed AI programs to monitor the blockchain (the public ledger) and decipher the human identities behind the vast number of existing Bitcoin balances. They use a combination of techniques; namely grouping and tracing transactions from KYC on-ramps. It´s a game of cat and mouse, and the surveillance state is the cat. Don´t get lazy, my fellow mouse!
What is CoinJoin, and how does it help?
Imagine you have a blueberry pie, and your friend has an evenly sized apple pie. You both cut your pies in half, and trade one half of your pie with each other. You now have a pie which is half blueberry, and half apple. Next, you see another friend who has been through a similar process. He now has a half raspberry, half mango pie. He cuts his pie in half, and you do the same, and you trade half of your pies. Now you have a pie which is one quarter blueberry, one quarter apple, one quarter raspberry, and one quarter mango. You still have the same amount of pie as before, but after as little as two transactions, you have only one quarter of your original pie.
Imagine repeat this process with a hundred different people. How troublesome would it be for a third party monitor to discern what flavour of pie you entered this bizarre game with? Essentially, this is how CoinJoin works. Knowing that we are being watched, we find ways to throw off and confuse our opponent. “All warfare is based on deception.”
How do you CoinJoin? The Wasabi Wallet
Thanks to the Wasabi Wallet, it is easy for beginners to CoinJoin their Bitcoin. It´s a privacy oriented wallet, open source, and non-custodial. I find that sometimes it takes an extremely long time to load my hot-wallet, because it runs on Tor (which is frequently DDOS attacked) but it is an extremely powerful piece of kit and all initiated Bitcoiners should be familiar with it. CoinJoin is automated by the Wasabi Wallet, and you can choose various options pertaining to your preferred extremity of privacy. Samouri Wallet is another strong option.