June 10 Is privacy becoming decentralized?
Today we explore recent developments in the Bitcoin privacy landscape, particularly in response to increasing regulatory scrutiny. With the closure of Wasabi Wallet's CoinJoin coordinator and the emergence of several community-run coordinators, the Bitcoin community is seeing a shift toward decentralized privacy solutions. This transition highlights the resilience of Bitcoin users in preserving privacy and fighting surveillance, raising crucial questions about the future of decentralized financial privacy in the face of regulatory challenges.
As Wasabi Wallet ceases operations, new CoinJoin coordinators increase
End of April 2024, Wasabi wallet announced that it would be ban US customers to participate in CoinJoins. The move came shortly after the arrests of individuals associated with Samourai Wallet, another Bitcoin privacy tool, highlighting the growing regulatory scrutiny of privacy-focused cryptocurrency services. Wasabi Wallet's move has raised concerns among Bitcoin users about the future of privacy and anonymity in the crypto space, as these tools are popular applications for maintaining user privacy.
Just days after the initial announcement, Wasabi Wallet's parent company, zkSNACKsannounced that it would be cessation of operations entirely. This ruling, which came into effect in the first week of June 2024, marked a significant change in the Bitcoin privacy landscape. The shutdown of zkSNACKs not only ended the CoinJoin coordination service provided by Wasabi Wallet, but also signaled a broader challenge for privacy-conscious Bitcoin users who want to store their coins privately.
A coinjoin coordinator is a server, entity or service that facilitates CoinJoin transactions, which are a method of combining multiple Bitcoin transactions from different users into a single transaction. This process helps mask the origins and destinations of the funds involved, thereby improving user privacy. The coordinator manages communication between participants, organizes inputs and outputs, and ensures that all parties provide the necessary signatures before broadcasting the final transaction to the Bitcoin network. The coordinator does not guard the funds but plays a crucial role in orchestrating the transaction in order to achieve the desired anonymity.
In response to these developments, the Bitcoin privacy community quickly mobilized to fill the void left by zkSNACKs. A few days after the shutdown, a new fork of Wasabi Wallet, called Ginger Wallethas been launched and is already perform CoinJoins. Ginger Wallet aimed to continue its mission of providing privacy-preserving tools to Bitcoin users by integrating CoinJoin's capabilities and maintaining a commitment to open source development. Additionally, Wasabi Wallet itself has released a latest software update allowing users to select custom coordinators directly from the wallet UI, significantly reducing the difficulty for users to find and use alternative CoinJoin services.
Up to nine new community-run projects coinjoin coordinators were launched shortly after zkSNACKs shut down. This rapid emergence of decentralized coordinators indicates a robust response from the Bitcoin privacy community. By decentralizing the coordination of CoinJoin, these efforts aim to ensure that users can continue to access privacy tools without relying on a single centralized service. This decentralized approach is considered a critical step in preserving Bitcoin's resistance to censorship, protecting against malicious forks, and maintaining the overall decentralization and security of the network.
Silent payment code Samourai and CoinJoins based on Nostr
In response to the recent shutdowns of privacy-focused wallets Wasabi and Samourai, Cake wallet launched support for Bitcoin Silent payments, aimed at protecting user privacy. Silent payments are a type of payment method that allows users to receive Bitcoin transactions at unique on-chain addresses, even if they provide a reusable off-chain address to senders. This approach mitigates the risks of address reuse, which can expose transaction histories and compromise user privacy. Using silent payments, recipients can generate a single silent payment address that senders use to create unique addresses for each transaction, improving privacy without requiring constant interaction between parties.
Silent payments work by having the sender and recipient use their respective secret keys and the recipient's public key to derive a shared secret, which is then used to generate the unique destination address. The recipient scans the blockchain for transactions matching their silent payment address, thereby performing a Diffie-Hellman elliptic curve (ECDH) to detect payments. Although this method increases computational load and synchronization times, it significantly improves privacy compared to traditional address reuse.
The introduction of Cake Wallet's silent Bitcoin payments comes at a crucial time of growing regulatory pressure against privacy tools in the crypto space. This feature, now out of beta, ensures that users can maintain their privacy through on-device transaction analysis, avoiding reliance on external servers that could compromise their anonymity. Users can enable silent payments in the wallet, which will automatically search for relevant transactions, providing a robust solution for those concerned about privacy.
Despite the legal proceedings faced by the founders of Samourai Wallet, the source code for their privacy-enhancing tools, including Whirlpool and Dojo CoinJoin, has been made public. This move underscores their commitment to maintaining and advancing Bitcoin privacy. Additionally, they released the code for Soroban, their decentralized implementation of CoinJoin, demonstrating their commitment to providing users with robust privacy solutions. By making these tools publicly available, Samourai Wallet ensures that its technology can continue to be used, developed and improved by the community.
In addition to silent payments starting to appear in wallets and the publication of Samurai code, the crypto community is witnessing the emergence of Joina decentralized implementation of CoinJoin leveraging Nostr protocol. Unlike traditional CoinJoin implementations which often rely on a centralized coordinator, Joinstr operates in a completely decentralized manner, improving user privacy. Participants record desired results using Nostr, create Partially signed Bitcoin transactions (PSBT), and combine them to complete the CoinJoin transaction. This decentralized approach mitigates the risks associated with centralized coordination and improves the overall security of the process.
Joinstr integrates seamlessly with electrum, providing a user-friendly way to access CoinJoin functionality. The platform prioritizes privacy and simplicity, making it accessible to a wide range of users without requiring a loyalty bond. By eliminating the need for centralized coordinators and leveraging Nostr for coordination, Joinstr ensures that the CoinJoin process remains private and secure. Its continued development includes improvements such as new Tor circuits for each request and encrypted channels to further protect user privacy.
The launch of Cake Wallet's silent payments and the upcoming Joinstr CoinJoin offering highlight the resilience and innovation of the crypto community. These developments signify a move toward decentralizing privacy services and preserving the privacy and autonomy of Bitcoin users.
What's behind the rise of resilient decentralized privacy?
The emergence of decentralized and resilient privacy tools in the cryptocurrency space can be seen as a response to the crackdown on privacy-focused wallets and transaction services. increasingly targeted, often due to concerns about illicit activities such as money laundering and terrorist financing. However, these actions have unintentionally spurred the development of more robust and decentralized privacy solutions, which are inherently more difficult to regulate and monitor. Shutdowns of centralized privacy services like Wasabi Wallet Coordinator and the confiscation of Samourai Wallet's server have only accelerated this trend, pushing the community to innovate in ways that preserve privacy and decentralization.
Decentralized privacy tools, such as community-run CoinJoin coordinators and Joinstr's Nostr-based CoinJoin implementation, represent significant advancements in this area. Silent payments allow users to receive transactions at unique on-chain addresses derived from a reusable off-chain address, effectively mitigating address reuse risks without requiring constant interaction. This method decentralizes the process of receiving payments. Likewise, Joinstr's decentralized coordination using the Nostr protocol eliminates the need for a central entity.
These innovations highlight a fundamental principle of the philosophy of cryptocurrencies: resistance to censorship and control. By decentralizing the infrastructure needed for privacy-preserving transactions, these tools ensure that users can maintain their anonymity even in the face of increasing regulatory scrutiny. The decentralized nature of these solutions means there is no single point of failure or control. This resilience not only protects individual users, but also strengthens the overall privacy infrastructure of the cryptocurrency ecosystem.
These tools embody the principles of privacy and autonomy, providing users with the means to protect their financial activities. The community's response has been to innovate and adapt, ensuring that privacy remains a fundamental principle of the cryptocurrency world.