In this article, we’ll explain how Wasabi coinjoin fees work, how it differs from Wasabi Wallet 1 with Free Remixing, what Friends don’t pay means, the importance of accessibility in coinjoin transactions, what Plebs don’t pay means, why mining fees are never waived, and finally how to minimize mining fees in a high-fee environment.

Basic Explainer of Wasabi Coinjoin Fees

There are two types of fees in a coinjoin transaction: coordinator fees and network mining fees.

As with all bitcoin on-chain transactions, there’s a network mining fee proportional to the amount of space your inputs and outputs consume. This is also true for Wasabi coinjoin transactions; you pay for the space you use. For example, if you have two P2WPKH inputs and two P2WPKH outputs, your transaction size is 209 virtual bytes. If the fees are 50 sats / vbyte, you will pay 10450 sats in mining fees. 

In a coinjoin transaction, a coordinator (default is zkSNACKs) takes care of the complex communication between all the participants and receives a fee for the hefty task. This allows users to gain privacy. This fee is 0.3% of the total bitcoin you bring to a coinjoin round, so if you bring 3,000,000 sats (0.03 BTC), you will pay 9000 sats in coordinator fees.

Unlike Wasabi Wallet 1.0, where you paid coordinator fees on every transaction, since the 2.0 release you pay upfront on your first coinjoin transaction and then enjoy free remixing.

Pay Coordinator Fees Upfront: Free Remixing

It doesn’t matter if you participate in 1 or 100 coinjoin transactions with the same bitcoin, you will only pay coordinator fees for the first one. This allows you to enjoy additional privacy at a massively reduced cost.

How is this possible?

Whenever you join a coinjoin round, the coordinator can detect that your UTXOs (unspent transaction outputs) are from a previous Wasabi coinjoin, and therefore waives the coordinator fees for those coins. 

But what if the ownership of coins changes hands between two coinjoin transactions? Would the same apply? Yes, and this is what we call Friends don’t pay.

Friends Don’t Pay

The “Friends Don’t Pay” feature allows users to coinjoin as many times as they want for as long as they want at no additional cost other than the mining fee. 

This is great for liquidity as users are incentivized to coinjoin many times to improve their own privacy, making coinjoins better, faster and stronger for everyone! Anyone can coinjoin multiple times for 0% coordinator fees. 

Just send some previously coinjoined bitcoin to your friends and family members and watch them enjoy the benefits of acquiring privacy without having to pay coordinator fees. That must feel pretty awesome.

But wait, there’s another way to avoid paying the coordinator fees.

The Importance of Accessibility in Coinjoin Transactions

Before we get into the Plebs don’t pay feature, we want to reiterate our commitment to the accessibility of coinjoin transactions. We’re always working to improve on this front, whether it’s making the software more performant for low-bandwidth users as we did with the 2.0.4 release, or by adding the “Buy Anything Button” to allow you to purchase literally anything with your coinjoined bitcoin. 

The most important way to improve accessibility is to lower fees, and we’re doing that with Plebs Don’t pay.

Plebs Don’t Pay

If you participate in a coinjoin transaction with less than 1,000,000 sats (0.01 BTC), you will never pay any coordinator fees. Not a single sat. 

Wasabi is the only coinjoin protocol that waives coinjoin coordinator fees for users with small amounts of bitcoin,  often referred to as the bitcoin plebs in various bitcoin community channels. 

I know what you’re thinking, you’re almost convinced to coinjoin, but the high network mining fee environment makes you doubt. Yes, you will pay zero in coordinator fees but you will end up paying more in mining fees. 

Well, read on to learn why mining fees are crucial and shouldn’t be waived, and how to minimize your coinjoin transaction mining fees.

Why Mining Fees Should Never Be Waived

By enforcing mining fees for all coinjoin participants, we ensure an economic cost for everyone and collapse the opportunity for sybil attackers.

What is a Sybil attack? 

The U.S. National Institute of Standards and Technology defines it as: “A cybersecurity attack wherein an attacker creates multiple accounts and pretends to be many persons at once.”

Coinjoins work because many participants join together to form collaborative bitcoin transactions. The privacy gain is strictly correlated to the diversity of participants, and a Sybil attack in this context means that an attacker can fool others into believing that they are many different people, when in fact they’re only one.

This could theoretically be taken to the point where you think you’re with dozens of participants, when in fact you’re with only one attacker. This could easily compromise your privacy.

By never waiving network mining fees, we ensure that Sybil attacks have a cost that will deter potential malicious attackers.

Now for something practical…

How to Minimize Mining Fees

When you set up a wallet on Wasabi, you will be asked to choose a coinjoin strategy between Minimize Costs, Maximize Speed, and Maximize Privacy. The first two strategies aim for an anonymity level of 5, and the last one is a random number between 50 and 100. You can also customize the parameters.

The Minimize Costs strategy will ensure that you only participate in coinjoins that take place at times of the week when there’s less pressure on the network mining fee market, so you can minimize the fees you pay.

You can change coinjoin strategies at any time in your coinjoin settings.

Conclusion

The next time a friend wants to coinjoin but is hesitant because of the fees involved, be sure to point them to this blog article so they can understand the many ways they can pay zero coordinator fees and minimize their mining fees. 

No doubt he’ll be grateful to you!

The post Friends and Plebs Don’t Pay Wasabi Coinjoin Fees appeared first on Wasabi Wallet - Blog.

You can buy anything (legal) you want through the Wasabi Wallet interface with the Buy Anything feature in partnership with ShopInBit. The argument that using coinjoin makes your coins unspendable is no longer valid. To learn more about this release, read the blog post here.

You’ve downloaded the new version and now you’re ready to give it a try. You want to treat yourself and your loved ones to some nice gifts, but you feel uninspired and don’t know what to get. If that’s the case, this article is for you. 

We asked ourselves: “What are 10 crazy things you can buy with Wasabi Wallet’s Buy Anything feature?” Let’s push the boundaries of your imagination. Expect to be surprised, even shocked for some.

1. Garden with 50 Bonsai Trees

Are you a fan of the Japanese art of growing and training miniature trees? How about going all out and creating a bonsai garden with up to 50 trees? 

This is what your backyard could look like (if you have a yard the size of a downtown area).

Not a Bonsai fan? On to the next one. 

2. Pay for a Funeral Bill

Things got dark pretty quickly, but the point is that we’re here for you in the good times and the not-so-good times. Whether the funeral home accepts credit card payments or only bank transfers, ShopInBit’s support agents can take care of it for you.

Let’s go back to something happier.

3. A Harp

The Buy Anything feature is also geared toward musicians, and there’s no discrimination based on the size of the instrument. Just make sure you have enough storage space for your harp. 

You + A brand new harp + the Scottish Highlands? 

But how are you going to get your harp there? You’re going to need a car, and while you’re at it, you might as well forget about the harp and just get a very cool car.

4. A Mercedes GLE 63 S AMG

Imagine it’s the middle of 2025 and Bitcoin is now at $300,000, wouldn’t you dare to buy your dream car? I know the most frugal of you will still have only one chair in your house, but the rest of us deserve to live a little!

Of course, you will be sure to print your favorite wallet’s logo on your brand-new Chad car.

Enough with the jokes and the luxury, let’s talk practicality.  

5. 1 Year Rent for your New Apartment

You just found a great new place in your town. The only problem is, they want you to do an extensive credit check investigation, but that goes against your principles. You’d rather pay a year’s rent in advance so they’ll respect your privacy. 

Wherever you are in the world (except Iran, North Korea, Ukraine, and Russia), you can pay your rent using the Buy Anything feature in Wasabi Wallet. 

You have the apartment and a floor mattress. Try to guess what’s next.

6. Completely Furnish your Apartment

For the interior designers out there, Wasabi and ShopInBit have got you covered. We already know you love bitcoin, so we took the liberty of imagining a living room with an orange touch.

We know you do a better job of designing than we do, and whatever you choose to furnish and decorate your home, you’ll be able to have it shipped to you directly from your Wasabi Wallet.

7.A 3m² Swimming Pool

We imagine that after all that hard work decorating your home, you are hot and ready for a dip in the pool, but where can you get one? 

Open up Wasabi Wallet, click Buy Anything, and order the outdoor pool of your dreams. Or pay a pool contractor to build you an indoor pool.

Bitcoin or Swimming Pool? Why not both? 

8. An 85″ TV

After a long day of swimming, why not end it by watching the bitcoin price rise on an 85 inch TV you just got delivered from ShopInBit? Might as well bring the family together for that.

Ok, enough with the fun, let’s get serious.

9. 2x Server Rack R182-Z93, Dual Epyc

We know that you value privacy and self-custody, not just for bitcoin, but for your entire digital life. 

You live by two mottos: “Not your keys, not your coins” and “Not your metal, not your computer”.

You want to take things to the next level and build a server room at home. There you’ll be able to run open-source software to replace cloud-based systems, and also run your own open source LLM (Large Language Model) to train your AI models without the censorship of Big Tech.

Okay, it may not look like that, but it will feel like it, and you will feel like a real cyborg.

10. A Fully Customizable Adult Sex Doll

Now that you’re a cyborg, you might want a cyborg companion. I won’t post any images here, I’ll let your imagination run wild. As crazy as this sounds, it will be possible to buy anything, even this, directly from your Wasabi Wallet.

What are you waiting for? Download Wasabi Wallet’s new version.

The post 10 Crazy Christmas Gifts You Can Buy Through Wasabi Wallet appeared first on Wasabi Wallet - Blog.

The “Buy Anything” Button

What if you could buy a car directly through Wasabi and have it shipped to you? 

Now you can.  

The 2.0.5 release of Wasabi Wallet includes a “Buy Anything” button that allows you to literally buy ANYTHING (legal).

Just click on the “Buy Anything” button next to the “Send” and “Receive” buttons in your wallet to start a chat conversation with ShopinBit’s professional concierge team. 

After letting them know what you want in good detail, you’ll have to wait a few hours (24-48) for a submission. When all the details have been checked by ShopinBit’s team, they’ll give you an offer.

Your order will be confirmed once you accept it and pay the bitcoin invoice.

If the product is physical, you will need to enter your shipping address details to receive it. The shipping time depends on the product and the shipping destination, but don’t worry, you can track your order with the link provided.

“Your Order Has Been Shipped”

The timing of this release couldn’t be better. The new year is starting and Bitcoin’s price is doing well again, you can order anything you want for yourself and your dear ones directly from your favourite wallet.

Download the latest version (2.0.5) of Wasabi Wallet and start shopping now.

We Have Partnered with ShopinBit

We’d like to thank the Shopinbit team for making this possible through their Premium Concierge Service, which allows you to buy anything and get it delivered anywhere. They’re based in Poland and are Europe’s largest Bitcoin store, but they ship worldwide. 

You have a direct communication channel from your Wasabi Wallet client application to Shopinbit’s servers. zkSNACKs (Wasabi’s development company) can’t see anything exchanged on this channel and doesn’t know anything about your orders. 

To learn more about the ShopinBit company and team, click here.  

What are the Limits and the Fees?

For now, the minimum total order price is USD 1,000. There is no limit per se, but only VIP customers can place orders for more than USD 60,000. VIP customers must have at least one previous shopping experience through ShopinBit’s Concierge service.

Fees might vary depending on the order.

Update Wasabi Wallet and Buy Anything with Bitcoin Now

Other Questions You Might Have (FAQ)

1. Can I really buy anything? 

ShopinBit’s Concierge Service does not provide any kind of drugs, prescription medications, weapons, precious metals, cryptocurrencies, financial instruments, or any type of product that is illegal in Poland. You can buy anything else. 

2. Can I pay my rent or another invoice?

Yes, ShopinBit can pay with almost any payment method supported by Wise, Revolut, the banking system and major credit cards, so services like your rent can be paid. 

3. Why does it take 24-48 hours to get my quote? 

All requests are handled manually by ShopinBit’s team and sometimes need to be reviewed with legal counsel. The following 4 points have to be reviewed: 

 a) That the product/service can be bought from Shopinbit;

 b) ShopinBit is allowed to sell the product to you;

 c) ShopinBit can ship the product to you;

 d) It is all legal to do so.

An offer will be issued only until these 4 points are sorted out. If it’s not possible, you will receive a friendly decline with an explanation of why.

4. How is the bitcoin price calculated at the time of the transaction?

The offer quote is always in fiat (in USD precisely) and the final BTC amount is displayed when the user agrees to buy now. The exchange rate is reserved for 30 minutes.

5. Will I get an invoice? 

Yes, it will be available through a download link.

6. What about duties and taxes? 

It will depend on the source and destination of the product. If it has to cross borders, it might be subject to duties or taxes. If it can be purchased in the same country as it’s being delivered, there will be no duty taxes added to the final price.

7. How long does it take to ship a physical product? A digital product?

There is no general answer to this question for physical products. It depends on where the product is (ShopinBit’s warehouse or third-party warehouse) and how it will be shipped to you. 

For digital products, they are shipped on the same day as payment.

8. What is the data management policy? 

ShopinBit pseudonomizes (a.k.a. turns real personal data into generic gibberish) 30 days after completion of the order. ShopinBit is legally obligated to store invoices (with the shipping address), which are kept offline.

Remember that zkSNACKs is never aware of the data of this service, and you can delete your local data anytime.

9.  How does zkSNACKs make money? 

Orders made through Wasabi include an affiliate code and a fair cut is given to zkSNACKs, similar to standard affiliation programs.

10. Will I get in trouble with tax authorities because of this?

We can’t help you with tax issues, you need to know the laws of your own country. In general, if you haven’t paid taxes, you may get in trouble for not paying the taxes, not for spending your money with ShopinBit’s service.

11. What countries are not allowed?

Iran and North Korea are not allowed. Ukraine and Russia are currently halted due to the ongoing war.

12. Does the service include shipping to remote areas? What shipping service will be used?

ShopinBit ships anywhere, if you can pay for it. The service depends on the country. Their team has experience with difficult shipping conditions.

13. What is the return and reimbursement policy?

After you receive your order, you have a 14-day right of return. This means that if you do not like it, you can send it back (you will have to pay for the shipping).

Cars, boats, yachts, airplanes, jewellery, custom and digital items are non-returnable

If you exercise your right of withdrawal, the USD value will be used to calculate the amount of your returned coins on the day your order arrives back at the warehouse. 

The post Buy Anything with Bitcoin through Wasabi Wallet appeared first on Wasabi Wallet - Blog.

What is a bitcoin passphrase? What is a password? What is the difference between the two?

A BIP39 passphrase is an additional layer of protection for your bitcoin wallet; it acts as the 13th word to your 12-word seed phrase, or the 25th word if you have a 24-word seed phrase. If you lose your passphrase, you will lose access to your wallet and won’t be able to recover your funds.

A bitcoin wallet password is a way to lock your wallet application, and in the case of Wasabi Wallet, it’s the same as a BIP39 passphrase. However, in other wallets, it will only lock you out of the wallet, but you will be able to recover with your seed phrase without the need for the password.

In this article, we will explain what BIP39 is, the benefits and tradeoffs of passphrases, how to properly back them up, and how they differ from regular passwords.

What is BIP39?

BIP39 is a bitcoin improvement proposal from 2013 that revolutionized the way bitcoin wallets work. Here’s the description straight from the BIP:

“This BIP describes the implementation of a mnemonic code or mnemonic sentence — a group of easy-to-remember words — for the generation of deterministic wallets.”

Today, BIP39 is the standard for how bitcoin wallets work. You create a wallet and you get a set of words, often 12 or 24, and if you back up that property, you can retrieve your wallet anywhere, anytime.

But what if someone other than you finds your seed phrase backup? They would have instant access to your money, and you wouldn’t be too happy about it.

What can be done to solve this problem?

Passphrases to the Rescue

To add an extra layer of protection to your wallet, you can add a passphrase to protect your seed phrase. This passphrase can be anything you want; any combination of alphanumeric and special characters of any length.

When you set up Wasabi Wallet, you’ll be asked to enter a passphrase. This is a BIP39 passphrase, and you should take the time to understand that you will need this passphrase every time you want to use your wallet, and if you lose it, you will lose access to your funds.

As long as you understand and accept the tradeoff of losing access to your funds if you lose your passphrase, you’re ready to use it. Just make sure you back it up properly.

How to Properly Backup a Passphrase?

First of all, remember why you’re using a passphrase in the first place: to protect your seed phrase. This means that the first step to properly handling your passphrase backup is to keep it separate from your seed phrase backup.

Then, you should test your passphrase and your full wallet backup before sending a significant amount of money to your wallet. Also, make sure you’re comfortable with the recovery process. 

Some people may tell you that you shouldn’t write your passphrase down anywhere and that you should memorize it, but they’re dead wrong. You should never make your memory your single point of failure, unless you have no choice, like crossing a border in a war zone.

So is there a difference between passphrases and passwords?

The Difference Between a Passphrase and a Password

The answer is that it depends on the wallet. In the case of Wasabi Wallet, there’s no difference between a passphrase and a password, they are used interchangeably.

However, in many other wallets, such as Blue Wallet, a password is not part of your wallet, it’s just a way to protect access to your application. This means that if you restore your wallet from your seed phrase backup, you won’t be asked for your password to access your funds, and you will be able to set a new password.

Conclusion

In this article, we explained what BIP 39 is, how passphrases help protect your seed phrase, how to properly back them up and what is the difference between a passphrase and a password.

Bitcoin self-storage isn’t too difficult, but you do need to take the time to familiarize yourself with the basics and feel comfortable with the recovery process. We recommend that everyone take the time to properly test their wallet backup so that they are not nervous when the time comes to do it for real.

The post What is the Difference Between a Passphrase and a Password? appeared first on Wasabi Wallet - Blog.

As a coinjoin user, you’re not only looking for privacy for your coins but also efficiency in terms of fees and time. We could say that the perfect on-chain coinjoin would be one transaction, would cost very little, and would provide a lot of privacy for all your coins while leaving no toxic change. At Wasabi, we have always improved our software so that it becomes more efficient, because this increases the accessibility of privacy. 

With the 2.0.4 release, we have improved coinjoin efficiency in multiple ways so that you reach private status on all your coins faster and incur less cost. Our main goal is to even further reduce the occurrence of toxic change. 

How are we improving coinjoin efficiency on the 2.0.4 release?

First off, the maximum number of outputs per user per coinjoin transaction is no longer 8 but is now 10. Then, output decompositions that produce toxic change outputs are now rarely chosen. Additionally, we have slightly changed how the anonymity scoring is calculated, to reflect further the reality. Finally, Wasabi’s definition of private coins has changed to a random value of an anonymity score of 27 to 76, instead of 50 to 100 in the privacy profile.

If you want to understand the details of how this works, what the above numbers mean, and understand the motivation behind our update, read further. To better communicate this topic, we have to first take a look at Wasabi Wallet 1.0 and its flaws, then how Wasabi Wallet 2.0.0 fixed many of them, and finally, the improvements done on the 2.0.4 release, to bring us one step closer to providing the perfect coinjoin protocol and application. 

This article assumes you understand Bitcoin’s UTXO model and the lack of privacy it creates, read about it here if you don’t.

The Flaws of Wasabi Wallet 1.0 and Zerolink

Wasabi Wallet 1.0 was released on October 31st 2018. It was the first implementation of a Zerolink Chaumian coinjoin protocol, in which encrypted communication with the coordinator was introduced through blind signatures. 

Trustless coinjoin transactions at scale became a reality. However, nothing is perfect and this mechanism has inherent flaws. Let’s look at how Wasabi Wallet 1.0 works and where the issue relies, particularly around coinjoin efficiency. 

How does Wasabi Wallet 1.0 work?

When you use Wasabi 1.0, you have to manually select the inputs you wish to be part of the coinjoin transaction and queue them. Once enough participants had joined the current queue, the coordination process of the coinjoin transaction would begin, including the phases of input and output registration, and transaction signing. Once all coordination phases are completed, the coordinator broadcasts the coinjoin transaction to the bitcoin network. It confirms and the coinjoin is complete. To learn more about the details of the Zerolink protocol, read about it here.

This is what the Wasabi Wallet 1.0 interface of the registration process looks like. 

What are the Flaws of Wasabi Wallet 1.0? 

Due to the inherent nature of blind signatures, the private output values of a coinjoin transaction in Wasabi Wallet 1.0 are of a fixed set of multiples of a base denomination. This inherent design issue leads to coinjoin inefficiency.

Example of what a Wasabi Wallet 1.0 coinjoin transaction looks like, with a no fee assumption for simplification purposes.

Since it’s unlikely that a participant’s input will equal the sum of the fixed output value and the additional required fees, the coinjoin transaction creates toxic change outputs for almost every user. This means that a user will pay bitcoin mining fees to create outputs that are not even private, and will have to pay even more in the future to get those UTXOs private. 

An additional issue of a fixed set of multiples of a base denomination for private outputs is accessibility. Users with less bitcoin than the base denomination find themselves excluded from participating in Wasabi Wallet 1.0 coinjoin transactions. 

Fortunately, the flaws of Wasabi Wallet 1.0 motivated the team to research and develop a new system that would fix those caveats on the WabiSabi protocol. 

WabiSabi to the Rescue

As previously said, Zerolink’s usage of blind signatures restricted Wasabi Wallet 1,0 to a fixed set of multiples of a base denomination. On the other hand, WabiSabi introduces KVACs (keyed-verification anonymous credentials) to replace blind signatures’ standard denominations with homomorphic amount commitments. To learn more about KVACs, the WabiSabi academic paper explains well the technology behind it.

This allows the coordinator to verify that the sum of any participant’s outputs does not exceed that of their inputs while allowing the user to hide the underlying values from the coordinator. This innovation allows for Wasabi Wallet 2.0 to be more flexible on output decomposition for coinjoins, which means that users can now register inputs and outputs worth anywhere in between 5000 sats and 40000 bitcoin (find all the output denominations here). This greatly improves coinjoin efficiency, allowing most users to avoid toxic change outputs from the coinjoin transaction, and it drastically increases accessibility by lowering the minimum amount by 99%.

Example of what a Wasabi Wallet 2.0 coinjoin transaction looks like, with a no fee assumption for simplification purposes.

Now that we’ve explored the different approaches taken in Wasabi Wallet 1.0 and 2.0, let’s take a look at how coinjoin efficiency works. 

How is Coinjoin Efficiency Measured?

Briefly, the WabiSabi research paper defines coinjoin inefficiency “ to be the fraction of non-mixed change outputs and the total number of outputs in a CoinJoin transaction”. This means that a coinjoin transaction without any toxic change outputs has no coinjoin inefficiency. 

It’s also important to consider that a coinjoin participant wants to minimize the amount of fees he will pay and the amount of time he will spend to gain a sufficient level of privacy. 

Let’s complete this article by looking at the latest coinjoin efficiency improvements.  

Wasabi 2.0.4 Release Improvements on Coinjoin Efficiency

Wasabi Wallet’s 2.0.4 release introduces a few improvements to coinjoin efficiency by reducing further the occurrence of toxic change. It does so by introducing Naive Decomposition, an alternative way to decompose the input value sum into private outputs, which decreases the rate of decompositions that create toxic change outputs. 

Additionally, there is an adjustment to the anonymity score calculator, in which there’s now three types of anonymity score calculation for outputs instead of two. Also, the profile “Maximize Privacy” anonymity score target is now of a different value, from 50-100, to 27-76.

In this section, we’ll explain in detail what this means.

What is Wasabi Wallet’s Naive Decomposition?

Like previously mentioned when introducing Wasabi Wallet 2.0, coinjoin output decomposition happens freely, which means that amounts are no longer fixed, they’re way more flexible. However, it’s nowhere near perfect and some coinjoin transactions still have toxic change. This particularly affects whale users that bring high value UTXOs to the collaborative effort.

To partially solve this problem and reduce even further toxic change, we introduce Naive Decomposition. It’s a method that attempts to break down a larger amount of money into smaller denominations in a straightforward or ‘naive’ manner, while adhering to certain constraints such as maximum number of outputs and minimum allowed output amounts. Here’s the codebase section on the Naive decomposition.

How does Naive Decomposition Create Less Toxic Change?

The way it does this is fairly straightforward: it iterates over the provided denominations and continuously subtracts them from the total sum until it can’t anymore, respecting the constraints of maximum number of outputs and the available virtual size (vsize).

If there’s enough ‘remaining’ to create a change output (greater than the minimum allowed amount + change fee), it adds a change output.  If not, the ‘remaining’ amount is treated as a ‘loss’ that goes to the miners. 

It’s also important to note that on the Naive Decomposition the maximum number of outputs is 10, including a toxic change output. For regular previously used decomposition, the number remains at 8. Increasing this number helps in creating better decompositions, with less toxic change. However, we don’t want to increase this number too much because it could lead to  heavy computer resource consumption and then to software crashes. Also, it’s important to avoid creating too many outputs, to reduce the future fees the user will have to pay to spend each one of them.

Now that we’ve understood the gains of coinjoin efficiency of the Naive Decomposition on the 2.0.4 release, let’s finish up the blog post by describing the motivations behind the changes on the anonymity score calculator and the profile “Maximize Privacy” anonymity score target value. 

The Anonymity Score Calculator Becomes More Accurate

Every coinjoin protocol has its own way to calculate anonymity gain, and on Wasabi Wallet 2 it’s called anonymity score. This term is different from anonymity set used in Wasabi Wallet 1.0, and to know more about the difference between these two terms and how the anonymity score calculator works in detail, read this previous blog post. 

Here’s a brief but exact description of the anonymity score calculator for coinjoin transaction outputs. 

Before the 2.0.4 Release

There are two different anonymity scores possible to inherit for a coinjoin transaction output, they are as follows:

1. Non-Sanctioned: When the output is of standard denomination AND it’s not one of the two biggest output amounts in the transaction. It’s uniqueness doesn’t matter, it is a private output.
   1. Anonymity score is calculated as the sum of the weighted average of the anonymity scores of a user’s own inputs part of the coinjoin transaction, and the total number of outputs of the same denomination divided by the number of a user’s own inputs of that denomination.
2. Sanctioned: When it’s not non-sanctioned, so it’s either not of a standard denomination OR it’s one of the two biggest output amounts in the transaction.
   1. Anonymity score is calculated as the minimum anonymity score of a user’s own inputs part of the transaction. 

Since the 2.0.4 Release 

There’s now three different anonymity scores possible to inherit for a coinjoin transaction output. The changes will be highlighted. They are as follows:

1. Non-Sanctioned : When the output is of standard denomination (uniqueness doesn’t matter) AND it’s smaller than the biggest pair of foreign equal outputs(in other words, my output is smaller than the biggest foreign denomination that has at least two outputs)
   1. The anonymity score calculation doesn’t change for Non-Sanctioned outputs.
2. Sanctioned: When it’s not a standard denomination only (so it won’t be applied anymore for big standard denominations outputs, this is the main goal of the change)
   1. The anonymity score calculation doesn’t change for Sanctioned outputs.
3. Half-Sanctioned (new): When we are not a Non-Sanctioned or a Sanctioned output (is of a Standard denomination AND is bigger than the biggest pair of foreign equal outputs)
   1. The anonymity score is calculated as the minimum anonymity score of our own inputs part of this transaction that are bigger than the biggest foreign output. 

Why did we change this? 

We would previously lower the anonymity score of what is now a half-sanctioned output to the minimum anonymity score of a user’s own input part of the transaction. This calculation is done client-side so the software knows which inputs are yours. 

However, anonymity score should be a measurement of what can be perceived from analyzing the blockchain, so if an input is not in the penalty, well we can’t know it’s yours from a blockchain analytics perspective. It made little sense to penalize a half-sanctioned output to that level, instead we penalize it to the minimum anonymity score of our own inputs that are part of this transaction and are bigger than the biggest foreign output.  

Let’s conclude by explaining the profile “Maximize Privacy” change.

Why Has the Anonymity Score Target of Maximize Privacy Changed?

When you initialize Wasabi Wallet 2.0, you can choose your wallet profile either to “Minimize Cost”, “Maximize Speed” or “Maximize Privacy”. The first two will give the target an anonymity score superior to 5, but differ because the first one will wait for bitcoin network fees to be low to coinjoin. Maximizing privacy used to target a random number between 50 to 100, but that’s now 27 to 76. Why?

Based on our goal to prioritize efficiency for our users, we always want to offer the most economical solution available. We believe that an anonymity score of 100 is currently probably an overkill to recommend as a default setting, and we’ve lowered it because of that reason.

We’ve calculated that an output can never gain more than 26 anonymity scores from 1 coinjoin transaction, so a minimum of 27 enforces at least two coinjoin transactions. We kept the same spread which gives us 27 to 76. 

It’s important to know that this is just a default setting and you can always change your anonymity score target to a maximum of 300. 

Conclusion

This article explains the mechanism behind Wasabi Wallet 1.0 (and the Zerolink protocol), its inherent flaw of coinjoin inefficiency, how Wasabi Wallet 2.0 (and the WabiSabi protocol) improved efficiency and fixed many of the resulting caveats. This part introduces the goal of this article, which is to explain the improvements made on Wasabi Wallet’s latest release (2.0.4) on coinjoin efficiency through the introduction of the Naive Decomposition, and the further changes to the anonymity score calculator and the anonymity score target value of the profile “Maximize Privacy”. 

The post Wasabi’s Latest Release (2.0.4) Improves Coinjoin Efficiency appeared first on Wasabi Wallet - Blog.

As a Wasabi Wallet user, you want your bitcoin activity to be private. Coinjoins are great for that, but they’re not the complete solution. To do bitcoin privacy right, you need to solve both blockchain privacy, which coinjoins do, and network privacy. How does Wasabi Wallet handle the latter? We implement block filters (BIP 157-158) as a solution to download bitcoin transaction data without compromising network privacy.

One of the biggest challenges with this implementation is that users have to download a lot of data compared to other light client solutions. This results in longer load times when restoring or initializing a wallet on Wasabi. Fortunately, the hard work of the contributors has resulted in an optimization.

Turbosync has now been introduced in the 2.0.4 release of the Wasabi Wallet and reduces load times by up to 90%. We did this with accessibility in mind so that even slow internet users can use Wasabi with less friction.

What is Turbosync and How Does it Reduce Wasabi Wallet’s Load Time by Up to 90%?

This release optimizes the filter-checking process to reduce wallet loading times by 90% thanks to code cleanup and a clever key prioritization process dubbed “Turbosync”. With Turbosync, internal addresses that have already been used are not checked for coins in new blocks until after unused addresses have been checked first. Filter performance has been further improved by storing them in a SQLite database instead of a plain text file, reducing disk space requirements by about 1 GB and increasing resilience to file corruption.

To better communicate this topic, we first need to take a quick look at the challenges of network privacy in bitcoin, block filters as an abstract solution, Wasabi’s specific block filter implementation, and the details of Turbosync along with the fixes in the 2.0.4 release.

The Challenges of Network Privacy in Bitcoin

Network privacy in Bitcoin is an essential piece of the puzzle to solve. The goal is to connect to the Bitcoin network privately in order to track your wallet’s addresses and broadcast transactions. As you may know, running and using a Bitcoin node is the best thing you can do because you’re part of the network and you don’t need any intermediaries. Read this article to learn more about the benefits of running a bitcoin node.

While this is easy to say, it is harder to accomplish since running a bitcoin node requires a lot of bandwidth and disk space. It also takes a long time to set up, from a few hours to a few weeks (usually 12-36 hours). Light wallets are inevitably the standard for their ease of use, which is something even Satoshi acknowledged on the Bitcoin White Paper, as SPV (Simple Payment Verification). 

The Privacy Problem of Light Wallets

There are two main approaches to network connectivity for light wallets, SPV and API (Application Specific Interface). Both have inherent privacy flaws that this section will explore. 

SPV was a terrible design because it couldn’t validate transactions, it wasn’t private, and it wasn’t fast. Bloom Filters were added to SPV wallets in BIP37, as an effort to increase privacy. However, this was debunked in the following years because bloom filters download specific transactions, which makes it straightforward to deduct which coins belong to the user’s IP address.

API wallets were introduced as a way to make network connectivity fast. They work by connecting to a central server via an API. Examples include BitPay’s wallet, Mycelium, and the Electrum server framework. This centralized approach means that users’ transaction data can be logged and linked to their IP address. Again, there are privacy limitations with Bitcoin network connectivity.

Doesn’t Tor Solve This?

It partially solves this. Yes, Tor (The Onion Network) is software that allows for anonymous communication by encrypting and routing internet traffic through a network of servers, making it difficult to trace the origin or destination of data. This means that it hides your IP address from the SPV network peers or the API server. However, all your transactions and coins are still linked to each other, which remains a big privacy problem. 

Tor is bundled with Wasabi Wallet and is enabled by default. The remaining part of the network privacy problem is solved by Block Filters.

Block Filters as a Solution for Bitcoin Network Privacy

Block Filters were introduced in BIP 157 and BIP 158 as a privacy improvement over Bloom Filters. Block filters compress block data to help wallets like Wasabi receive transactions from peers without compromising privacy by downloading specific blocks instead of looking up single transactions.

With block filters, full nodes create filters for each block, and light clients fetch these filters. With bloom filters, the light client creates and sends the filter to the full nodes. There’s a key difference in the direction of filter creation.

Although filters consume bandwidth and storage, keep in mind that this additional consumption of network and hardware resources is nowhere near those of a full bitcoin node. Only ≈3GB of filters and blocks are required to sync a wallet instead of 500GB of block history. 

How does this work in Wasabi’s specific context?

Wasabi Wallet’s Block Filter Implementation

Wasabi’s coinjoin and privacy features would not be complete without a block filter implementation. There’s three steps for wallet synchronization: Filter Download, Filter Scanning and Block Download.

Filter Download 

Implemented differently in Wasabi Wallet than on the BIPs because they’re downloaded from the Wasabi backend coordinator server, through Tor. This takes a while the first time, but it’s much faster on the next occasions since it only has to catch up to the newest blockchain state.

Filter Scanning

When you load a wallet, it checks if the generated addresses within the gap limit hit against a block filter. If a transaction of yours is in a block, then the corresponding filter will always be hit, and the wallet will know this is a relevant block for you. There’s a small chance of a false positive where the filter matches, but the block actually does not contain a transaction.

Block Download

When a block filter hits, either a true match or a false positive, the wallet will download it. If you have a Bitcoin full node connected, then it will fetch the verified block locally. If not, then Wasabi will connect to a random Bitcoin P2P node with a new Tor identity, and request only this block for download. In this step, your Wasabi behaves like any other full node, and cannot be differentiated. Once every block wanted is downloaded, the wallet load has finished and your wallet dashboard appears.

It can be annoying for users to be presented with the wallet load screen and having to wait for this to complete before using their wallet. To speed things up, our software contributors noticed that some improvements could be brought to this implementation and Turbosync was born.

Turbosync and 2.0.4 Release Improvements

Turbosync is a feature introduced in Wasabi Wallet’s 2.0.4 release that changes how filter scanning is done in order to present the user’s dashboard as fast as possible. It operates with the heuristic that internal keys (coinjoin outputs or change addresses) should only be used to receive coins once and to spend. As soon as an address (part of the internal keys) hits a block filter twice, it has received coins and then spent them, we skip checking this address and we move on to the next one. 

Once all addresses have been checked and the required blocks are downloaded, the wallet load screen will change to present the user’s dashboard. However, filter scanning will continue in the background and the skipped addresses will be checked. In the case that some additional funds have been received on those addresses. Users in that edge case would see their balance update automatically after some time. Once done, the message “Wallet is fully synchronized.” will be written to the logs file to indicate that the verification process has finished.

Wallets that coinjoin frequently will benefit the most from this feature, as the vast majority of their addresses will be skipped. It’s important to remember that false-positives happen and they lead to unnecessary additional load time. Turbosync reduces the amount of false-positive blocks downloaded before the user’s dashboard appears. 

TurboSync feature shouldn’t cause any issues, but you might want to disable it to debug potential issues with the synchronization of your wallet. In that case, go to your wallet file (search for `Wallet Folder` using Wasabi’s search bar then open the file corresponding to your wallet) and set `UseTurboSync` to `false`.

What other improvements were made to the Block Filter implementation?

Filter performance improved even more by storing them in an SQLite database instead of a plaintext file, reducing disk space requirements by about  1 GB and increasing resilience against file corruption. This is a standard software development practice that is applied to the block filter implementation, but is not related to the steps for wallet synchronization.

Conclusion

In this article, we explained the network privacy problem of bitcoin light wallets and how both SPV and API wallets fail at solving this. We explain how Tor is part of the solution, but how Block Filters are the remaining piece of the puzzle to solve this problem. We then break down how block filters work in an abstract format, but also how Wasabi Wallet implements it. Finally, Turbosync is introduced in the 2.0.4 release with some other improvements such as the introduction of an SQLite database for block filter storage. Together, both of these changes can reduce Wasabi Wallet’s load time by up to 90%. 

The post Turbosync: Wasabi Wallet’s Loading Time Reduced by 90% appeared first on Wasabi Wallet - Blog.

You thought you had good privacy on bitcoin? Think again. In the digital age, privacy is hard to achieve. Privacy is a choice to not share certain information about oneself. As a digital monetary network, every bitcoin transaction is public and visible to all, so maintaining privacy on bitcoin can be a difficult task. The good news is that using the right tools, it has never been easier to reclaim your financial privacy using bitcoin. Why does privacy even matter? Does using bitcoin hurt or protect your financial privacy? What are the right tools to reclaim your privacy on bitcoin?

Good privacy is important for your personal security. Deciding who knows what about you is essential for your financial matters. Few people know how much money you have in your bank account. Your butcher doesn’t know that you went to buy fish instead of meat last week. Your employer doesn’t know which political parties or non-profit you support. It should be no different with bitcoin. And yet, bitcoin is a public network so more privacy precautions are warranted for users to be safe.

Privacy = Security

Let’s start at the beginning. You should generate your seed phrase on a bitcoin wallet that does not leak personal information. Use a private place that you know to be away from prying eyes when you create and backup your seed. A bitcoin wallet should be free and open source, with as many reviews from developers and users as possible so you can trust the integrity of the software. A bitcoin wallet should handle balance queries in a private way, without leaking your addresses and transaction history to third parties. Your wallet should also be integrated with an anonymity network such as Tor, which protects your IP address from being collected and used to track you down the line.

Bad Privacy

There are common mistakes that new bitcoiners (and sometimes even OGs!) make. Re-using addresses multiple times for different payments is the most basic error you can make. Doing so links seemingly unrelated past payments together, making it easy for an external observer to track your future payments.

Leaking all your wallet transaction details by trusting the bitcoin full node of a third party. To preserve your privacy, you should always try to run your own full node through Tor to protect your IP address, verifying your wallet balance and broadcasting transactions. There are other private ways of using a bitcoin wallet that may not include running a full node that we will cover later.

Using public block explorers to view and track personal transactions. This one sounds uncomfortable because we’ve all done it, and yet public block explorers may log your IP address as well as all the bitcoin addresses you have looked up, which could be an indication that they belong to your wallet.

Being vocal about your bitcoin holdings on your social media profiles. Posts of your bitcoin purchases and addresses to receive payments on online forums are scraped by chain analysis companies to cluster wallets in an attempt to identify entities such as individuals and companies.

Buying bitcoin on KYC exchanges. Unfortunately, many bitcoiners give up very sensitive personal information to buy bitcoin from regulated businesses, which may be shared publicly in data leaks, as has happened many times over in the past.

Good Privacy

Buying bitcoin peer-to-peer without KYC. Buying and selling bitcoin with peers using cash or even bank transfers is the best way to protect your privacy when you trade bitcoin.

Labeling addresses to keep track of your funds. Labels in your wallet are very helpful to get additional context on your transactions, whether incoming or outgoing, and should always be done as much as possible to keep track of how much information you reveal publicly when making a transaction.

Being aware of coin control and how it works. This goes in tandem with address labels. Usually when you send bitcoin, this will create a change output (back into your wallet) as the amount you send is larger than the one your receiver gets in the payment. That change is often referred to as “toxic” as it makes your future transactions easily traceable if you’re not careful how you use it.

Using network privacy tools like VPNs and the Tor anonymity network. Network-level privacy is beyond the realm of bitcoin but remains quite important to protect your personal security and avoid leaking your IP address, which can reveal your location.

Using Coinjoins

Most likely you have made some errors in the past. Bitcoin is often said to be unforgiving but there is a way to erase some of these mistakes. You can reclaim your privacy with collaborative bitcoin transactions called coinjoins. A coinjoin allows multiple users to participate in one single transaction together to hide their transaction history from the public. A coinjoin is a type of bitcoin transaction, which breaks the link between inputs and outputs, giving plausible deniability to participants. With a coinjoin, you can unlink some of your past transaction history from your current bitcoin holdings. Coinjoins will never delete the KYC data you have shared to third party exchanges, but it makes linking this data back to your holdings much harder.

Why Coinjoin Is Good

Coinjoins make bitcoin unspent transaction outputs (UTXOs) indistinguishable from each other. Being now fully interchangeable, coinjoin UTXOs are considered to be fungible as their different transaction histories are fully obfuscated from one another. Fungible UTXOs make bitcoin much easier to use as you now don’t have to think about which coin to spend in a payment. Without coinjoins, bitcoin UTXOs are not fungible, and without fungibility, censorship and seizure are possible. A merchant may refuse your coin based on its transaction history and an exchange may seize it if it is deemed risky.

Wasabi Wallet

As a free and open source bitcoin wallet, Wasabi Wallet has a built-in coinjoin feature, which is enabled by default. Wasabi Wallet is also compatible with most hardware wallet devices. Wasabi Wallet communicates over Tor to protect your IP address from being collected and uses block filters to query your wallet balance. Block filters are a bitcoin wallet network privacy improvement which do not require users to run their full nodes to get wallet balances, while not sharing information about their addresses with anyone else. Of course, if you want, you can always run your own full node and connect it to Wasabi.

The Wasabi coinjoin feature has at least 150 inputs in all its transactions for maximum privacy of its participants. A coinjoin coordinator fee of 0.3% is charged to all inputs that register for the Wasabi coordinator for the first time, except for inputs smaller than 1 million sats. All subsequent coinjoin rounds, also called remixes, are free of coordinator fees. All inputs pay bitcoin network fees.

Learn more about coinjoins on the documentation of Wasabi Wallet. As a reminder, the following article was created as a privacy guide for Cryptosteel‘s Operational Security manual, co-authored by folks from Trezor, Bitbox and Wasabi Wallet, which is available for free to download here.

The post Bitcoin Privacy Primer appeared first on Wasabi Wallet - Blog.

In his work “A Cypherpunk’s Manifesto” Eric Hughes wrote, “Privacy is the power to selectively reveal oneself to the world.” The weight of this comment may not be immediately obvious but is increasingly relevant in our day-to-day lives.

The importance of online privacy is relevant to everyone—not just users who are looking to avoid the scrutiny of authorities for reasons related to questionable activities. Even users who are comfortable with having their every move online tracked should be aware that large data breaches regularly occur at major companies and governments. These events expose users’ personal data to hackers, which can be exploited in various ways.

Everyone on the Internet Should Understand Online Privacy. But do they even care?

As a journalist and online privacy advocate, Glenn Greenwald pointed out in a widely-circulated 2014 TED talk that the Internet was, at one time, thought of as a new frontier for democratization and liberation. According to Greenwald, the internet could now be considered a “zone for mass surveillance”.

Greenwald claims that some feel there’s no harm in mass online surveillance because it only threatens those who are engaging in illegal activities. This line of thinking includes the idea that only those who have something to hide should be concerned about their privacy. It frames the notion that some people wouldn’t want to share every aspect of their lives with the government as defensive behavior. In 2010, Facebook’s founder, Mark Zuckerberg, claimed that privacy should not even be expected online as it is no longer a social norm. This is a dangerous belief, which unfortunately seems widely accepted in mainstream narratives despite its negative effects on individual liberties. Why should one care about privacy? Is one truly free to speak without it?

According to one study published in 2022, more than half of internet users are concerned about their online privacy. Let’s take a look at some key concepts and terms relevant to online privacy and steps users can take to better control and protect their data.

Important Concepts Linked to Online Privacy

Common concerns that relate to online privacy may include the preservation of sensitive personal and financial data and users having a say in who they are advertised to.

Personal Data

Personal data is any information that can be used to identify you. It can include your name, address, social insurance number, birthday and can also extend to your entire financial, educational, employment and medical history. Information including online identifiers and browsing history can also be considered personal information. One qualifier that defines personal data is that it is clearly about one particular person.

Personal data is considered valuable by advertisers and regulatory bodies alike, and the collection and sharing of users’ personal data is an important aspect of how many companies and apps are configured. Personal data is collected by websites, social media platforms, employers and more. This data is stored on web servers across the world, often changing hands in ways that are unknown by the users themselves. The selling of data is often part of the fine print and terms of service when using apps and websites, and is defined under things like GDPR or CCPA.Such regulations are often thought of as privacy friendly, but really only state that you have to consent to the sale of your personal data.

Online Encryption

One step that users can take to make themselves less vulnerable online and to put their privacy more into their own hands, is by focusing on apps and software that offer encryption. Encryption refers to the scrambling of the data stored and shared online, aiming to allow only trusted entities to interact with personal data.
Encryption ensures that only those with the relevant access keys are able to view the related content. It allows users to have more, but not ultimate, security over the information they share. Using a secret passphrase known only to the sender and receiver to unlock information is an excellent way to improve your security.

End-to-end encryption refers to encryption wherein only a user and their intended recipient are communicating without the ability of even the communication service to view or collect users’ data. While some messaging services are said to offer end-to-end encryption, some online security advocates challenge these claims as the services may provide “backdoor” access to government bodies. Oftentimes, the justification for this is to collect data necessary for fighting crime.

Threats to Online Privacy

When it comes to ways of protecting personal data, there are steps that individuals can take to decrease the risk of security breaches and minimize the amount of information readily available to unwanted external parties. Tools from ethical, security-minded companies can help users store and share data with more control, making use of the latest web security technology.

While taking steps at the individual level can enhance users’ online privacy, there are policies at the institutional level that can make it difficult to avoid the collection and sharing of personal data. In these cases, simply learning about policies and programs that involve your personal data is a way of being more aware of circumstances when your data could be collected, and of knowing how it could be used.

Mass Surveillance

Signing up for any new online account or app often involves agreeing to a range of terms and conditions wherein users permit organizations to collect agreed-upon information in exchange for the use of the application. Whether it’s on computers or phones and whether or not users are aware of what information is being collected, government bodies and private organizations alike are able to create detailed profiles of people based on data they willingly provide to websites. Often, users don’t even read the terms and conditions when signing up for a new service.

Controlling the amount your private data is collected may be increasingly relevant as smart cities that adopt surveillance technologies become more prevalent. Mindful online conduct may include making a list of each of the accounts and online services you subscribe to and determining whether the information you knowingly provide to each of these entities is worth the benefits of each service.

Online Privacy Regulations

Data breaches affecting companies as large as Facebook have sparked conversations as to the degree of involvement government policies should have regarding the collection and use of personal data. While government regulation is often necessary to lay the foundation for public market participation, the excess of such is also a risk factor that commonly limits progress.

As whistleblower disclosures have shown, government bodies themselves may also collect and use data in ways that average internet users could not have anticipated or foreseen. In the United States, for instance, all phone and internet data has been monitored by Federal law enforcement since the ‘90s. This data is unfathomably vast, so agencies including the NSA and the FBI create systems that analyze this data for use by intelligence and local law enforcement agencies.

Software Vulnerabilities and Secure Protocols

There are a number of security risks associated with typical internet usage. Free, public Wi-Fi is becoming increasingly available—which is a boon for those who work on the go and those with limited data plans—but these free, public Wi-Fi networks can be easy targets for those seeking access to users’ personal data for nefarious purposes.

Adversaries can access unsecured devices on public networks, which can provide unfettered access to important personal information including credit card data, passwords and personal documents. When users’ privacy settings allow for file-sharing across a network, it’s an opportunity for hackers to implant malware on users’ devices, further compromising their online privacy.

There are steps diligent users can take to make themselves less vulnerable when using unsecured networks. A VPN (virtual private network) creates a private network on top of an existing public network, improving security. VPNs also often include encryption, making stolen data less useful to hackers.

HTTPS is a protocol that helps to protect data by preventing access from parties aside from the primary user and the server they’re accessing, using encryption and a series of communication exchanges referred to as a “handshake.” Other security-minded steps include turning off sharing on devices on public networks and keeping Wi-Ffi off, aside from when it’s being used as devices are known to transmit some data even to networks users aren’t connected to.

Online Privacy and Bitcoin

Bitcoin is seen by many as being a new frontier for digital privacy. Its potential for decentralization means that users have more ability to control their own data and to have more agency in controlling decisions that relate to their privacy.

However, Bitcoin transactions are, by design, not confidential. Transactions on the block chain are secure, but their details are publicly viewable. When bitcoin is obtained in a way that is linked in some way to a user’s identity, and when information about transactions is shared, its pseudonymity in future transactions is easily negated. For example, if a user makes an online purchase using bitcoin, but does so through a regulated exchange which requires the completion of KYC processes, then pseudonymity can easily be compromised.

There are inherent issues associated with many bitcoin exchanges and users may be left with a sense of uncertainty with regards to how their personal data is being used. Developers may be able to collect sensitive personal information and the exchanges themselves are vulnerable to hacks, as seen in the Mt. Gox debacle and many since.

Wasabi 2.0

Initiatives like Wasabi Wallet—which offer anonymous communication using the Tor network, coin mixing and non-custodial personal control over private keys—can go a long way towards putting users in control of their bitcoin and retaining their privacy online.

The anonymization strategy employed by Wasabi Wallet and other Bitcoin privacy solutions is called coinjoin. Coinjoins are a collaborative bitcoin transaction. Users send their bitcoins to themselves with other users at the same time to reclaim their privacy. When the transaction occurs, everyone’s bitcoins are mixed with one another to make it much harder, if not impossible, to trace their transaction history.

As technology continues to grow into nearly every aspect of our lives, privacy as a resource is growing more scarce. We recommend the use of privacy tools, like Wasabi Wallet, to maintain your right to privacy. Consider taking control of your personal information to defend yourself from the intended (and unintended) repercussions of our increasingly digitised society.

The post Why Privacy appeared first on Wasabi Wallet - Blog.

Bitcoin can be anonymous, but it is not private by default. Every transaction and address balance is publicly visible to everyone on the distributed ledger known as the blockchain. While this is good for decentralized auditability, it is bad for privacy.

There are two types of financial privacy within the scope of this article: transaction privacy: concealing the source or destination and balance privacy, concealing someone’s net worth. The equivalent of privacy on Bitcoin was originally intended to be achieved through the assumption that bitcoin addresses are not associated with any identity. But in reality, bitcoin addresses are commonly or easily associated with identities. Many people get bitcoins from a source that complies with overreaching government regulations known as KYC (know your customer) requirements. Bitcoins that are obtained from a KYC source are tagged to your identity.

Even if you obtain your bitcoin from an anonymous source, it can be tied to your identity the moment you purchase something from a business that needs to collect your information for something as simple as shipping information or email address. If the business you are paying is using a 3rd party payment processing service that complies with KYC, then your bitcoin can no longer be considered anonymous. Even if the business you are paying is using a self-hosted payment system, your information could still be leaked if the business gives up your data intentionally, unintentionally, or via government coercion. Even if you do achieve transaction privacy, you still have to worry about balance privacy. You might not want people you do business with to know your entire net worth.

Various Solutions to Bitcoin Privacy

Fortunately, there are ways to use Bitcoin privately. The methods to use bitcoin with privacy include coinjoins, coinswaps, The Lightning Network, state chains, off-chain physical transactions (such as opendimes) and WabiSabi, A method recently introduced in Wasabi Wallet 2.0.

Explanation of Coinjoins

For transaction privacy, a coinjoin conceals a bitcoin’s future post-coinjoin activity from the past and conceals the past pre-coinjoin activity from the future. The coinjoin acts as an opaque wall in a timeline that transactions pass through. If a sender of bitcoin coinjoins, the recipient is unable to determine how the sender obtained the funds. If a recipient of the bitcoin coinjoins, the sender is unable to determine what the recipient does with the funds.

There are what I consider two types of common coinjoins, a mixing coinjoin and a spending coinjoin. A “mixing coinjoin” is used for the sole purpose of making bitcoin anonymous for future use. A “spending coinjoin” is when a coinjoin is used at the time of making a transaction to someone else, in which a recipient receives bitcoin from a sender directly as an output of a coinjoin.

For balance privacy, a coinjoin can also conceal someone’s full net worth. One way to do so is for a sender to pay a recipient directly from a coinjoin, via a “spending coinjoin”. Another way is to use a coinjoin to break up someone’s balance spread across multiple addresses that are not associated with each other. This is how it is often done with a “mixing coinjoin”.

The post How CoinJoins Fix Bitcoin Privacy appeared first on Wasabi Wallet - Blog.

Presently, using intermediaries in financial transactions always sacrifice privacy; as such, there’s a growing need for decentralized peer-to-peer technology to facilitate money transfers. Bitcoin comes with some drawbacks in terms of privacy. The application of distributed ledger technology is fundamental to allowing bitcoin to work without “middle-men,” but the transparency affects Bitcoin’s ability to be used as currency. Consequently, bitcoin has had to evolve to meet the advances in technology used in deanonymizing public ledgers and degrading privacy.

The advancement in Bitcoin privacy will be most visible on the following fronts:

1. Wallets
2. Exchanges
3. Coinjoins
4. The Lightning Network
5. Open Source Development
6. Awareness and public sentiment

Wallets

The big question about wallets is, who keeps your private keys? If your wallet allows someone else to store your private keys, then the amount of privacy you have is controlled by the party trusted with your private keys. Giving away your private keys means that you trust the other party to always serve your interests over theirs, which is not always the case. A good wallet allows you to store your private keys. The wallets we use in the future will directly influence the amount of privacy we have while using bitcoin. The other feature of wallets that directly affects privacy is address generation. Working with a single unchangeable address is detrimental to a user’s privacy as it builds a strong association with one address. The future of privacy will have more wallets allowing users to generate addresses on the fly whenever needed.

There will also be a more significant shift in the number of users running full node wallets. A node in bitcoin is software that allows a computer to have its record of the public ledger that other computers on the network can read or write. A full node also provides computation power when it participates in validating transactions before transmitting them throughout the network. Running a full node may be technical, but it gives the user more security and privacy when they know what they are doing.

With a growing number of novice users joining bitcoin, it will be critical for future wallets to be straightforward to use for everyone. This will directly affect fast advancements in user interface design to improve usability and user experience. The simplicity of the wallet does a lot to protect users from avoidable mistakes that may affect users transacting with privacy in mind. The trend for future wallets will likely sway in the direction of wallets that preserve privacy while being easy to use all at the same time.

The least private wallets in the future will be wallets that lack network-level protection from network deanonymization attacks. Such wallets will always reveal more network information about the users transacting with the wallets rendering them porous. To counteract this, the future will see more and more bitcoin wallets using Tor. The most private wallets will likely be Desktop wallets since they allow users to run better software than mobile phones. Wallets are at the center of the mass adoption of Bitcoin and privacy. There will always be a direct correlation between the wallet used to transact and the privacy of the user.

Exchanges

Bitcoin may be the future financial system, but it’s unlikely that it can exist independent of the traditional financial system. The fact that bitcoin is a global currency means that users in different countries still need to convert their existing currencies into bitcoin and then back to local currencies. This is a role exchanges play. Centralized exchanges cannot exist outside the regulation that necessitates having all their customers fill KYC forms, degrading privacy. Central exchanges propagate the lack of privacy existing in the current financial system onto bitcoin. The biggest win for the future of privacy will be the growth of decentralized exchanges. Unlike centralized exchanges, decentralized exchanges enable Bitcoin transfer in exchange for other currencies without giving away private information. The development of decentralized exchanges is likely to grow further with the growing interest in Non-Fungible Tokens and other cryptocurrencies. Users will easily exchange Bitcoin for other valuable assets with decentralized exchanges without giving up privacy. The near future will also see a more significant rise in the acceptability of bitcoin as a mode of payment, resulting in less need for exchanging bitcoin on central exchanges for local currencies.

CoinJoins All the Way

Coinjoins are probably a magic pill in the quest for bitcoin privacy. In a coinjoin, multiple users combine their coins and the output to every user is the same value of coins they put in the transaction, except that all the coins cannot be distinguishable from each other.  Soon, trustless coinjoins will be more common because apart from improving privacy, they allow for fungibility. It will be noticeable that coinjoins will be more and more popular and their frequency will increase. For future wallets, conjoins will be one of the main features that make a wallet attractive to new users. Coinjoins will also see a shift to the type of coinjoins that do not allow third-parties access to users’ wallet information. This is useful as it will enable users to preserve any private information they don’t wish to give away in a coinjoin. With the increase in the number of coinjoins, the public ledger will be more obscure enabling greater privacy.

The Lightning Network

The development of the lightning network has the potential to revolutionize Bitcoin privacy and payments. By performing transactions off the main ledger, the lightning network allows for more private transactions. Already there exist implementations of the lightning network on bitcoin wallets but they haven’t been widely adopted yet. Wallets incorporating the Lightning Network will come with more development and advancements.

Open Source Technologies

Truth has to be verifiable. Open-source software allows us to inspect the software we use so that there is no fishy business. Privacy concerns make it important that the software we use really does what it says it does and not anything else. To establish trust, the trend of open source privacy tools is likely to pick up pace.

Public Sentiment about Bitcoin Privacy

Bitcoin hasn’t been free from misconceptions. Probably the most pervasive relates to the usage of its privacy features in crime. Such claims have stopped others from leveraging bitcoin’s privacy features to protect their financial information. Regardless of any held opinions, bitcoin has kept going because it’s desirable that a decentralized currency should exist and like all inventions, it is a driving force for both good and bad. The privacy features on bitcoin give users power that other tools can’t afford, but we cannot assume that it is to be used entirely for bad. Future bitcoin users will understand that taking control of our financial privacy is necessary and that a future where our private worlds are constantly encroached upon isn’t worth living in.

The post The Future Vision of Bitcoin Privacy in 5 Years appeared first on Wasabi Wallet - Blog.