Dan Gould, a Boston-based Bitcoin developer obsessed with the privacy problem, has released a tool that is aimed at preventing analytics companies from tracking down Bitcoin investors.
How Bitcoin transactions are traced
The concept of cryptocurrencies implies a unique combination of transparency and complete anonymity. Any transaction can be easily traced, but it is difficult to find out who it was performed by — except for the wallet number there is no information about coin owners.
This privacy, however, is easily eliminated by KYC/AML rules. Centralized exchanges require their customers to de-anonymize their transactions. Moreover, there are companies such as Chainalysis that use mathematical models (including cluster analysis and quantitative analysis) to trace transactions for the purposes of government and law enforcement agencies.
SDK — a kit for supporting anonymous transactions
Payjoin is a payment method where a counterparty is included into one of its inputs to enhance the privacy of the sender, recipient, and Bitcoin holders. The concept is also known as Pay-to-EndPoint (P2EP) and Bustapay.
By including sender and recipient inputs simultaneously, PayJoin prevents analytics companies from being able to determine which inputs and outputs belong to each participant and the amounts each party owns.
At the end of March, Gould’s company released a Software Development Kit (SDK) in order to facilitate the support for PayJoin by any wallet or service.
PayJoin has not been widely implemented yet, although it is fairly easy to do so, according to the developer. Gould commented that he wanted to promote the new privacy method. So far, only BitMask has used it to adopt PayJoins. Foundation and BDK are also thinking about implementing the technology.
Gould is interested in the issue of Bitcoin privacy because he thinks that his work is in line with the main idea of crypto: resistance to censorship.
PayJoin is an alternative to CoinJoin
CoinJoin is one of the most widespread privacy tools. Coins from a number of users are combined into one transaction and mixed until it is almost impossible to tell which coins originated from which source. CoinJoins amongst a group of users are organized with the use of wallets like Wasabi and Samurai.
This tool has two significant drawbacks.
- First of all, it is time-consuming.
- Secondly, CoinJoin has significantly more input data than a typical transaction, and they’re the same size, which makes such transactions conspicuous.
There are various types of PayJoins for purchase and for sale, which helps to evade one of the main tracking mechanisms. According to the basic principle of analysis, if there are two inputs in a payment, they must originate from the same owner. PayJoin confuses analysis services, because the inputs are from different users — one from the buyer and another one from the seller.
How are cyberpunks trying to solve the Bitcoin privacy issue?
According to Gould, unlike CoinJoin, his tool also motivates companies using financial incentives and combining a consolidation for fee savings with privacy benefits. Moreover, he commented that businesses do not need to worry about the mixing procedure. “Really they’re just doing their consolidation at the same time that they’re doing a transfer and it doesn’t change their view into the ledger or their view into what their users are doing,” Gould added.
The problems with implementing PayJoin
The main problem with implementing PayJoin is the requirement to set up a server endpoint, and most sellers do not have the opportunity to make time for this procedure. The implementation process is not very simple either. The PayJoin SDK is developed using Rust — a programming language which is not used by many developers. This is why, the technology has not been widely implemented yet.
However, users need to ensure privacy right now. Regulators are cracking down on exchanges, forcing them to either introduce strict rules, or withdraw from the market. Not a single customer of centralized exchanges is protected from being blocked for having Bitcoins that have originated from sanctioned wallets or simply for conducting a transaction that exceeds the exchange’s limits.
This is why we recommend you to protect your assets using a Bitcoin mixer. Mixer.Money is a great way to make your transactions untraceable for most analysis algorithms.
The ‘Complete anonymity’ mode is resistant to quantitative and cluster analysis. Every customer is guaranteed to receive untainted Bitcoins as confirmed by the exchange.
Our platform also has a TOR mirror with disabled scripts, which makes it absolutely impossible to uncover the user’s identity.
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