Definition
Output linking is the process by which blockchain analysts connect the outputs of one transaction to the inputs of later transactions and, ultimately, to a real-world identity. Bitcoin's UTXO model means every spend consumes prior outputs and creates new ones, leaving a permanent, public trail. On its own this data is just random numbers, but the moment one address is tied to a known person, links can propagate forward and backward through the chain to deanonymize many more.
How links are inferred
Analysts apply heuristics rather than certainties. The most powerful is the assumption that all inputs to a transaction share one owner. They also try to distinguish the payment output from the change output, since correctly tagging change extends the cluster of addresses attributed to a single wallet. Each successful link tightens the surveillance net; each privacy technique aims to produce a wrong link or no link at all.
Breaking the links
Techniques such as CoinJoin, CoinSwap, PayJoin, and Silent Payments are all, at their core, attempts to make output linking unreliable. PayJoin inserts a second owner's input so the ownership heuristic fails; CoinSwap removes the direct transaction between two of a user's addresses entirely. The defender's goal is not perfect anonymity but enough plausible deniability that any inferred link could be wrong.
Output linking is the operational side of the Transaction Graph, and it leans heavily on the Common-Input-Ownership Heuristic to draw its conclusions.
In Simple Terms
Output linking is the process by which blockchain analysts connect the outputs of one transaction to the inputs of later transactions and, ultimately, to a…