Use Bitcoin Privately
For some users, today's invasive tracking is overwhelming. For others, it is a risk to their life. Find total confidentiality on the Bitcoin Blockchain with these simple steps
Multiple ways to maintain your privacy on-chain
There has been a lot of attention paid to Bitcoin recently and one of the major issues that has been discussed is on-chain privacy. Privacy is a major concern when people use the internet and when people are using the internet to deal with issues related to money, the stakes are even higher.
On this page, we explore the different options available to you today to optimize your privacy on the Bitcoin network. Indeed, several solutions already exist to date to maximize your confidentiality on the Bitcoin chain. That being said, your online hygiene is your responsibility, so you will need to behave strictly, using the right tools to do it right.
Bitcoin Privacy is a spectrum, nothing is white or black
There are several ways and several tools to preserve your privacy. As a first step, it is imperative to analyze your threat level. Depending on your situation, the level of discretion will vary. For most people, the most important thing is to break mass surveillance while still tolerating targeted surveillance. Normally, you will only be targeted if you commit a crime, which will justify more effort and resources to find you. In most cases, severing the ties between your Bitcoin acquisition and subsequent purchases will suffice. The technologies that will help you achieve this privacy are CoinJoins for breaking the ties of your acquisitions and hiding your total balance from criminals, using the Lightning Network, which is a layer built on top of Bitcoin with fewer usage traces and PayJoin for on-chain spending.
Why we need Bitcoin Privacy
All Bitcoin transactions are public, traceable, and permanently stored in the Bitcoin network. Most Bitcoin users are law-abiding people, but that doesn’t mean that you should not have any privacy concerns. For example, suppose you buy 10 bitcoins. A little later, you visit the D-Central website and buy machines worth 3 bitcoins. D-Central can see in some cases that you actually have a total balance of 10 bitcoins. Conversely, your bitcoin seller can now see that you have made a purchase for 3 bitcoins. If we go one step further and add other third parties to the game, including dishonest third parties, this privacy leak could cost you dearly as you could report your total balance to an organized crime player, who could then attempt to extort you.
We will see on this page the most effective methods to break mass surveillance and protect you from the extortions that certain groups might exercise against you. All explanations provided on this page are provided on a voluntary basis, for informational purposes and may be invalidated in the future. As we mentioned above, this isn’t about achieving 100% perfect anonymity, but about discouraging malicious actors from collecting public information that you leave behind in the form of metadata.
The idea of a CoinJoin is to make it easier for people to make private transactions using Bitcoin. CoinJoins can be used to scramble multiple Bitcoin outputs into one. The best way to imagine a CoinJoin is to compare Bitcoin’s UTXO’s to several gold bars, each containing a serial number. The CoinJoin consists of melting these gold bars and then remaking new bars, with new serial numbers, making the identification of the latter much more difficult. This makes it easier for people to break their history when they make transactions using the Bitcoin network.
JoinMarket is the first real implementation of CoinJoin technology. It is not necessarily the most widespread on the other hand. This is explained in particular by the difficulty of operating this kind of program. Indeed, JoinMarket is offered strictly in P2P, making a technically superior implementation, but more difficult to use. A huge advantage of JoinMarket is that if you become a “Market Maker”, or make your coins available to others for CoinJoins, you can increase your anonymity set at no cost and even in some cases earn a slight interest.
Wasabi quickly became one of the most widely used implementations for making CoinJoin on just about any PC OS available. Wasabi includes a coordinator, so it’s not P2P CoinJoins. However, its simplicity of use is envied. Wasabi can be used with your most popular hardware wallets such as Coldcard or Ledger. This makes the practice of “Coin Control” fairly straightforward, once again allowing you to minimize the information you share with third parties you do business with. Be careful though, some optimizations are still necessary in order to make Wasabi completely ZeroLink.
Whirlpool didn’t start as early or as strong as its competing implementations, but is now made up of 3 different CoinJoin pools and a mix capacity of over 3,500 BTC. Whirlpool also offers all subsequent remixes for free, giving you and future users extra privacy. Finally, Whirlpool offers a full CoinJoin ZeroLink, based on advanced mathematics. Whirlpool can only run on Android, it is offered de facto linked to Samourai’s servers and can expose your XPUB to them. To maximize your privacy with this implementation, we strongly recommend that you run a RoninDojo instance.
How does the Lightning Network help with privacy?
Since the Bitcoin Blockchain is eternal, its content is indelible and will also stand up to time. It’s a feature, not a bug. That being said, there are some downsides to these features for your privacy. Bitcoin’s 2nd layer, the Lightning Network, is unicast, not boardcast. That is, only participants in a Lightning Channel or route will not see the content of a transaction. It is therefore a perfect way to spend your funds, without worrying about the mass surveillance being carried out on the Bitcoin main-chain. The Lightning Network was originally designed for Bitcoin’s transactional capability, but improving privacy is a more than welcome extension that comes with it and which we believe will make it a global payment network of choice in a world more and more in the throes of data breaches.
PayJoin or P2EP actually improves the security of the Bitcoin network in several ways. First, users don’t need to find another group of people doing a transaction at the same time to merge UTXOs. This means that it is easier for everyone to use P2EP technology effectively. Second, it’s also possible that PayJoins is even more private than existing CoinJoins technology, as there are only two people doing a transaction at the same time. The purpose of a PayJoin is to make it difficult for the chain analysis to determine what really happened in a transaction, who paid who, as both parties will be signing transactions with each other, hiding who receives and how much.
There are a few reasons why it is so important for everyone to make sure their transactions are private. First, this is a network that impacts everyone. When lots of people are making a private transaction, this makes everyone else more private as well. Furthermore, it is also important to try to undermine people who are trying to carry out something called Chainalysis. These are people who are trying to look into Bitcoin transactions to try to find patterns and take advantage of the network. Keeping these people at bay is important for making sure that everyone is kept safe. There are fears that this type of analysis might taint certain coins and make them unusable in the future. By hiding transaction histories, every Bitcoin can be treated equally, which will keep the network intact for the future. While it is nice that there are now multiple options available for privacy in the world of Bitcoin, it is still critical for everyone to take steps to protect themselves. CoinJoins is still one of the top options out there and the hope is that PayJoins is going to be able to improve on this existing technology. Both of these measures have been designed to work with something called Wasabi Wallet.
What Is Wasabi Wallet?
One of the tools that people use to protect their identities and their transaction histories on the Bitcoin network is called Wasabi Wallet. For those who might not know, Wasabi Wallet was the first technology that was designed to implement with CoinJoin. This is an open-source wallet, which means that the code is out there for anyone who knows where to look. It has been written in C#, .NET Core. The package involved in the design of Wasabi Wallet includes Tor, which is one of the top private browsers in the world. All of the traffic that takes place using Wasabi Wallet has been designed to go through Tor, which hides the IP addresses of everyone involved. This protects people’s identities.
Furthermore, Wasabi Wallet is also popular because it is easy to install and employ. Wasabi Wallet has been designed to use a litany of privacy tech including address reuse avoidance, mandatory coin control, and even a hierarchical deterministic wallet. The Wasabi Wallet also uses block filtering on the client-side. In this manner, Wasabi Wallet has been designed to come up with its own transaction history in a different, private way. These are just a few of the reasons why the Wasabi Wallet has become so popular among those who are looking for ways to conceal their transactions on the Bitcoin network.
Those who use Wasabi Wallet connect to a server that has been designed to coordinate users who are using CoinJoin tech. Then, the Wasabi Wallet uses something called schnorr blind signatures. This is similar to the cryptography that many others use to blind signatures and bear certificates. This server has been designed to make sure that nobody learns about the linkage that is taking place between the inputs and outputs that are required to make mixed transactions happen. The server is run by a unique company that is responsible for running the Wasabi Wallet. The way the Wasabi Wallet company makes its money is by taking a fee from each CoinJoin transaction of between 0.1 and 0.2 percent.
This is one of the big issues that has been debated surrounding Wasabi Wallet. While there is a small fee that the company takes, this is nothing when compared to the benefits that users get in the form of privacy. Wasabi Wallet has become more popular during the past few years as the CoinJoin tech has become more widespread.
Now that there are rumors of PayJoin coming to the surface, many are wondering if Wasabi Wallet is going to become even more popular. Given that PayJoin has been based on the system that is used by CoinJoin, it should be able to pair with Wasabi Wallet easily as well, allowing users some degree of familiarity with the system. Given the extreme measures of privacy that are taken by Wasabi Wallet, it makes sense that users would still want to use this wallet in the future. This could be how users protect their privacy on Bitcoin.
The Future of Bitcoin Might Include More Privacy
Today, there are more people paying attention to Bitcoin than ever before. One of the reasons why Bitcoin hasn’t picked up as much as people thought is that there are a lot of people who are worried that their privacy might be compromised. When this involves money, this is a major hurdle that can be tough for people to overcome. It is nice to see that there are people who are working hard to try to address this issue. If PayJoins becomes more widespread, the sky might be the limit for Bitcoin. The ability of people to protect their privacy on Bitcoin will only help it grow even more.