What Is CoinJoin?
CoinJoin is an anonymization strategy that protects the privacy of Bitcoin users when they conduct transactions with each other, obscuring the sources and destinations of BTC used in transactions.
CoinJoin requires multiple parties to jointly sign a digital smart contract to mix their coins in a new Bitcoin transaction, where the output of the transaction leaves the participants with the same number of coins, but the addresses have been mixed to make external tracking difficult.
The process is also known as coin mixing.
Key Takeaways
- CoinJoin is a process used to anonymize Bitcoin transactions online.
- CoinJoin involves a multi-party Bitcoin transaction where all parties to the transaction put in and get out the same amount of Bitcoin, but the addresses are mixed in the transaction making the origin of the coins difficult to trace.
- CoinJoin is typically performed automatically by dedicated services that carry it out. Performing a CoinJoin without such a tool is difficult and requires advanced coding skills.
How Does CoinJoin Work?
CoinJoin was developed to introduce a layer of privacy to otherwise public Bitcoin transactions. The phrase was coined by Bitcoin developer Gregory Maxwell in an announcement thread on the Bitcoin Forum.
Why Bitcoin Is Not Exactly Private
Though Bitcoin in its early days had a reputation for being anonymous and so was used for transactions on darknet sites such as Silk Road, the cryptocurrency actually provides very little privacy. Bitcoin addresses do not list users' names and addresses, but they are easily traceable and someone might be able to associate your IP address with your Bitcoin transaction.
Once one user has been identified, researchers can use common digital forensic methods to trace all the contacts in the network. This isn't a bug of Bitcoin, it is the foundation of its "trustless" system: all transactions are public to prevent user fraud.
Other coins have been developed to incorporate user privacy into the code of the coin. Monero, ZCash, and Dash are prominent examples. Monero's privacy technology is similar to CoinJoin, in that it uses ring signatures to mix the spender's signature with the signatures of other users to make tracing addresses nearly impossible.
CoinJoin Is the First-Generation Privacy Measure for Bitcoin
A user that wants to implement CoinJoin in their Bitcoin transaction needs to find another user who also wants to mix coins, and together they initiate a joint transaction. The address a bitcoin is sent from is referred to as an input.
Consider the following transactions made at the same time: A purchases an item from B, C purchases an item from D, and E purchases an item from F. Without CoinJoin, the public blockchain ledger would record three separate transactions for each input-output match. With CoinJoin, only one single transaction is recorded. The ledger would show that bitcoins were paid from A, C, and E addresses to B, D, and F. By masking the deals made by all parties, an observer cannot with full certainty determine who sent bitcoins to whom.
CoinJoin Tools
Though the process seems clear in theory, in practice joining transactions is hard for several reasons. In order for the participants in the joining to remain anonymous, they have to connect over a Tor network, they have to know quite a bit about coding, and they have to trust each other.
To overcome these hurdles, CoinJoin developers started early to create tools that would make the process automatic for most users. The first attempts at a CoinJoin tool were incorporated into wallets. The earliest examples were Dark Wallet, JoinMarket, and SharedCoins. These platforms aimed to provide an extra level of data masking for users transacting in Bitcoin.
Later efforts include Wasabi Wallet and Whirlpool from Samourai Wallet. There is some controversy, however, as to how trustworthy and secure these wallets are and how well they anonymize Bitcoin holdings.
FAQs
CoinJoin offers complete privacy
Despite the closure of the CoinJoin service, Hillebrand said that Wasabi's client-side filtering architecture, Tor integration and custom coin selection still provide significant privacy for users. However, the level of privacy afforded by CoinJoins remains unmatched going forward.
How does CoinJoin work? ›
How Does Coinjoin Work? Coinjoin is a privacy tool that allows users to mix their coins and send them anonymously to the recipient's address. By the end of the transaction, the recipient has the same number of coins as initiated. It is like a mismatching game where the coins get mixed, making it untraceable.
Is CoinJoin legal? ›
CoinJoin, while legal, can attract scrutiny in certain jurisdictions. Some regulatory bodies may view privacy-enhancing techniques with suspicion, potentially leading to increased monitoring of users who employ these methods.
What is the CoinJoin scheme? ›
CoinJoin is a process used to anonymize Bitcoin transactions online. CoinJoin involves a multi-party Bitcoin transaction where all parties to the transaction put in and get out the same amount of Bitcoin, but the addresses are mixed in the transaction making the origin of the coins difficult to trace.
What is the most secure private Bitcoin wallet? ›
Trezor Model T
Like all hardware wallets, it stores private keys offline—the key feature of a cold wallet that is essential to keep your crypto safe. It also offers a PIN code feature to prevent thieves from accessing your crypto with access to the physical device.
Are privacy coins really private? ›
Privacy coins are unique cryptocurrencies that allow a user to gain total anonymity when making blockchain transactions. The identity of users and the origins of their transactions are completely protected.
How does coin zoom work? ›
Select Bitcoin or any other crypto in your spend wallet on our app, swipe your card, and we instantly convert your crypto to USD at the point of sale. That's not all – depending on what card you select you'll earn 1-5% back in crypto on every single purchase. Spend crypto, earn crypto. It's that simple.
How much does CoinJoin cost? ›
Coinjoining coins with a value above 0.01 BTC costs 0.3% as a coordinator fee + mining fees.
What is an example of a CoinJoin? ›
As an example, you might be able to spot Alice and Bob entering a CoinJoin with 0.12 BTC and 0.13 BTC respectively. Looking at the outputs, two of them will have a value of exactly 0.1 BTC. Now, there is no way of knowing which of these outputs belong to whom, other than taking a guess.
What is the difference between CoinJoin and Bitcoin mixer? ›
A CoinJoin collects the inputs of many users, and broadcasts them into many outputs in a single transaction, whereas a mixer sends your bitcoins through a series of transactions with a variable number of inputs and outputs, before it is sent back to you in another address, or imported into a wallet as a private key.
Best Decentralized Exchange: Bisq
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- Kraken.
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Tumblers take a percentage transaction fee of the total coins mixed to turn a profit, typically 1–3%. Mixing helps protect privacy and can also be used for money laundering by mixing illegally obtained funds. Mixing large amounts of money may be illegal, being in violation of anti-structuring laws.
Is CoinJoin decentralized? ›
Bitcoins are mixed, and the transaction outputs distribute the mixed bitcoins to their right recipients. Decentralization and Trust: What sets CoinJoin apart is its decentralized nature.
How does coin cloud work? ›
Coin Cloud Bitcoin ATMs and Digital Currency Machines (DCM) provide the fastest and easiest way to buy and sell crypto with cash. An online exchange requires you to sign up for an account, submit your ID and personal information, connect your bank account or credit card, and wait for the approval.
Who owns the coin app? ›
COIN App is created by XY Labs, a company with a track record of innovative location-based technologies. Their commitment to user experience and the presence of numerous investors bolster the app's legitimacy.
Is Satoshi wallet private? ›
At Wallet of Satoshi (ACN 630 329 690), we are committed to protecting your privacy in accordance with the Privacy Act 1988 (Cth). This Privacy Policy describes our policies and practices in relation to how we collect, handle, use and disclose your personal information.
What is the difference between CoinJoin and mixer? ›
A CoinJoin collects the inputs of many users, and broadcasts them into many outputs in a single transaction, whereas a mixer sends your bitcoins through a series of transactions with a variable number of inputs and outputs, before it is sent back to you in another address, or imported into a wallet as a private key.
How private is Coinbase? ›
Nobody, including Coinbase, can access your tokens or NFTs without your recovery phrase. Additional security options, including biometrics, passwords and security locks, providing you with more ways to keep your crypto safe and secure on all your devices.
