Bitcoin is a profoundly useful and innovative privacy tool. There is enormous potential in the ways that Bitcoin can shift the power in digital financial transactions to individuals, rather than oppressive centralized institutions.
Inherent to the way Bitcoin works, however, is that when personally identifying information is attached to bitcoin transactions, it can be possible for external parties to track who is doing what with their bitcoin, which can have a negative impact on Bitcoin’s privacy-bolstering potential.
A coinjoin is a special kind of bitcoin transaction where two or more people’s transactions are combined, which breaks the link between transactions, improving each coinjoin participant’s privacy. When Bitcoin users have the ability to selectively reveal themselves to the world, everyone benefits.
Let’s take a closer look at how coinjoins work, how they can benefit you, and how Wasabi Wallet is making coinjoin transactions both more powerful and accessible to everyone.
Why use coinjoin?
One big benefit of coinjoin transactions is that they don’t necessitate any kind of modifications to Bitcoin’s protocol. They’re also trustless and can be easily implemented within privacy-minded bitcoin wallets like Wasabi Wallet.
Wasabi Wallet is open-source, trustless by design, and non-custodial, which means that it provides full transparency and sovereignty to users.
In a world where a lot of initiatives are hellbent on collecting as much information about you as possible, it’s imperative to seek out software that values your privacy and prioritizes its own transparency.
Coinjoin makes Bitcoin better
Coinjoin transactions remove the link between which outputs are being paid by which inputs. Since users’ bitcoins are mobilized in these transactions, users need the assurance that their bitcoins are secure through each step, which is facilitated through the trustless design of wallets like Wasabi.
Centralization is sometimes positioned as a necessary step in encouraging the kind of widespread adoption needed to facilitate Bitcoin’s ability to transform digital transactions globally. But this is a kind of paradox—modifying Bitcoin so that it more closely resembles existing financial infrastructure reduces its ability to disrupt existing financial infrastructure.
Rather, user-friendly Bitcoin tools that emerge from privacy-minded communities can pave the way for use of the Bitcoin network that makes it truly the currency for everyone, keeping users themselves in the driver’s seat, rather than centralizing forces.
Privacy issues inherent to Bitcoin
The importance of financial privacy is self-evident. Nobody wants everyone to know exactly where they spend their money. Freedom is found in choosing how we reveal ourselves, not through knowing everything about everyone.
The privacy of Bitcoin can be compromised in a few ways. Some Bitcoin privacy issues are related to how users spend or receive their coins, such as using the same address to receive payments from multiple sources. Other privacy issues are caused by how your wallet connects to the Bitcoin network, which can be improved by using Tor to disguise your interactions and by using your own Bitcoin node to find the balance of your addresses, for example.
Other areas of Bitcoin privacy concern come as a result of direct efforts by regulatory bodies to surveil bitcoin users and can be improved upon by avoiding unscrupulous exchanges. Invasive “know your customer” policies are in place at centralized cryptocurrency exchanges that require the collection of an array of users’ personal information. Many Bitcoin-based projects are under pressure to collect as much of users’ data as they can.
Improving bitcoin’s Fungibility
Fungibility is an important feature of successful currencies. If some bitcoins are valued more than others because of the history of the transactions they’ve been involved in, then bitcoin can’t be exchanged evenly, which limits functionality. When there’s a dichotomy between there being “clean” and “dirty” bitcoins, users don’t benefit.
Coinjoins are an effective solution when it comes to bitcoin’s fungibility. One erroneous sentiment holding back the adoption of coinjoin transactions is the idea that simply performing coinjoin transactions could be an indicator of evasive behaviour, and that fresh coins should be approached with skepticism.
When coinjoin transactions become the norm, it’s good for everyone who uses Bitcoin. The more coinjoin transactions are completed, the closer a world wherein worry about what transactions your bitcoin was associated with in the past is not a factor.
Coinjoining is customizable
Performing coinjoin transactions using Wasabi Wallet couldn’t be easier. Coinjoin transactions take place automatically in the background of Wasabi Wallet. By default, Wasabi’s coinjoin transactions start being built automatically when the value of non-private coins is above or equal to the auto-start coinjoin threshold. However, the coinjoin process can be set to begin manually, too.
When you use Wasabi Wallet, you can customize what kind of coinjoin strategy should be adhered to. Coinjoin transactions with Wasabi are always affordable, speedy, and private, but Wasabi coinjoins can be specifically set to keep costs at a minimum, to maximize speed, or to make privacy the highest priority, depending on your goals.
Coinjoins are affordable, or even free
With Wasabi Wallet’s customizable coinjoin behavior, users can instruct their wallet to wait in the background whenever transaction fees are high and only participate during the cheapest parts of the week.
There is an optional fee collected by the coinjoin coordinator. Newly received inputs larger than 0.01 BTC pay a 0.3% coordinator fee. For amounts smaller than 0.01 BTC, the coordinator does not charge a fee at all. Remixing private coins is free of coordinator fees, as well as coinjoining coins that are just one hop away from a coinjoin transaction, such as your change from making a payment, or even a payment received from another Wasabi Wallet user.
Wasabi Wallet offers both power and simplicity
Bitcoin’s development originally emerged out of the work of privacy-minded online communities that had a vision for a decentralized currency that didn’t require interference from centralized banks or other intermediaries.
As Bitcoin awareness and use have become more integrated into mainstream society, there has been a slow creep towards centralization and regulation that runs counter to the ideals that Bitcoin was created in accordance with.
Wasabi Wallet offers users the ability to use Bitcoin the way it was originally envisioned—private, secure, and efficient. Importantly, Wasabi is easy to use, offering users the ability to take control of their own privacy without advanced knowledge of transactions or protocols. The best way to unearth the powerful simplicity of Wasabi Wallet is by taking it for a spin yourself.