Wasabi Wallet’s CoinJoin Will Not Serve Blacklisted UTXOs. Samourai Responds

The rivalry between Wasabi and Samourai wallets rages on. That shouldn’t be the headline, though. This story is about privacy, censorship, and regulatory pressure. It all started with Wasabi’s simple announcement, “The zkSNACKs coordinator will start refusing certain UTXOs from registering to coinjoins.” Translation: the company that runs the centralized coordinator that organizes CoinJoin transactions will not let tainted bitcoin participate in the service. 

Every time someone spends bitcoin, the network creates a UTXO. The acronym stands for Unspent Transaction Output. Some of them are blacklisted, suspected to be tied to illegal activities. However, this seems more Russia-related, even though none of the participants ever mentioned the embargo. The thing is, some UTXOs are tainted.

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In the replies, a pseudonymous user asked them if they were going to report suspicious UTXOs. A Wasabi developer answered, “No. We are trying to protect the company and the project by minimizing the amount of these hackers and scammers using the coordinator and getting us in trouble. This should be in the rights of the company to do but believe me, none of us are happy about this.” Nevertheless, they did it.

Later on, the same developer elaborated, “I think we all knew it’s just a matter of time when we get forced to do these choices and get punished. There’s still too much work to do and even though I know it’s a slippery slope, I think it’s an understandable decision from the company at this point.” Bitcoin power users don’t agree. And neither does Wasabi’s rival, Samourai Wallet.

What Did The Samourai Said To The Wasabi?

This story leaves several unanswered questions. What organization was pressuring zkSNACKs and Wasabi? Who decides what UTXOs are tainted? Where is the blacklist? None of that matters in Samourai’s eyes. They compared their Whirpool service and Wasabi’s CoinJoin to ISPs and VPNs. They move packages of data around, but they’re not legally responsible for users’ behavior.

“CoinJoin coordinators are simply message passers. This is true of Wasabi & Whirlpool. They are not money transmitters, they are not facilitators they simply pass data packets to connected clients,” the company tweeted. “By bending the knee to regulatory overreach instead of fiercely fighting, especially when you have the resources to do so effectively, you tacitly accept and endorse that overreach and the next one. Give an inch and they’ll take several miles.”

According to Samourai, the fact that Wasabi agreed to refuse blacklisted UTXOs sets a dangerous precedent. They should’ve fought tooth and nail, because “blacklists are an affront to everything that is supposed to make bitcoin special.” Samourai makes the case for censorship resistance failing at bitcoin’s protocol layer and social layer. That only leaves Samourai and others at the application layer to keep on fighting for privacy.

“Privacy tech is always niche, generally passion project by small teams, and largely ignored by most, until suddenly it isn’t,” Samourai continued.  “We’re starting to get to that suddenly part. More and more people globally are starting to recognize the incredible amount of power they have ceded to the State and the sting of the iron fist when it flexes and uses that power. We hope privacy takes a front seat once again.”

BTC price chart for 03/15/2022 on Bitfinex | Source: BTC/USD on TradingView.com

Matt Odell’s Message To The Wasabi Team

Privacy expert and Tales From The Crypt host Matt Odell cleared up some of the confusion around the subject. For example, according to him, CoinJoin is not a mixing service. It’s “a native bitcoin send transaction that includes multiple users in a non custodial transaction that attempts to break the probability analysis chain surveillance firms use.”

https://twitter.com/ODELL/status/1503385595418132485

He also explains that “wasabi defaults to a coordinator that is run by a company called zkSNACKs,” and that company is the one rejecting tainted UTXOs. However, “anyone can run a competing coordinator that does not do this blacklisting and users can switch to it.” Also, “there are coinjoin tools that do not use centralized coordinators, including samourai stonewall, stowaway, and joinmarket.”

https://twitter.com/ODELL/status/1503385605400637445

Related Reading | Millions in Bitcoin are Changing Hands on this Anonymous Network

It’s worth noting that Twitter is actively and admittedly shadowbanning Matt Odell, so the thread we’re referencing might be hard to access. Luckily, the Thread Reader App is here to help. There’s a lot of valuable information in there, for the people who want to dig deeper.

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