It is the first-generation confidentiality measure that protects bitcoin user’s privacy through deniability
Cryptocurrencies have taken the world by storm, particularly the young, However often while discussing cryptocurrencies we have found a lot of lobbyists arguing on whether or not to eliminate concepts like coin joining due to its dark web roots and social implications.
But is it really that bad? Or just a Hoax created by traditional investors. Let’s try and understand.
One major challenge of blockchain technology, which all cryptocurrencies are based on, are the open source public ledgers this means dealings are open for anyone on the chain to see. On the other hand, traditional centralized financial services provide its customers with good amount of privacy and security. Not even a person’s closest family member can have an access to one’s expenses and income.
Enhancing Bitcoin Privacy with CoinJoin: A Comprehensive Guide
CoinJoining solves this major privacy drawback bitcoin has over current banking system.
CoinJoin, is the first-generation confidentiality measure that protects bitcoin user’s privacy through deniability. It is an anonymization strategy to introduce a layer of concealment to an otherwise openly accessible bitcoin transaction which is easily traceable. This term was first coined by Mr. Gregory Maxwell, a bitcoin developer on the announcement thread of bitcoin forum.
Coin joining is a mechanism in which a third party in exchange of some fees ensures that all the parties in a cryptocurrency exchange transaction remain unidentified by combining multiple user transactions. Usually these third parties charge percentage based commission which needs to be taken into account by consumers while calculating transaction costs.
The process of CoinJoin implementation involves a user who wants to anonymize its transactions by finding other users who also want to mix coins and together they initiate the transaction.
For example Ajay made a trade transaction with Bharti, and Charvi needs to send some money to Divya and Elena needs to borrow from Freya, this transaction without CoinJoin would be recorded as three distinguishable transactions, CoinJoin allows all these participants to come together and record this as one single transaction where identities of all the participants are masked and one can never be sure of which party did the transaction.
The CoinJoin strategy ensures that each user individually signs off their particular transaction. If and only when all users in the join have signed off, will all the transactions be grouped into one transaction and executed to be recorded on the blockchain as a single transaction.
CoinJoining is getting increasing popular day by day as many individuals and corporations are concerned regarding their anonymity while making big transactions. Despite its demand and features coin mixing is considered to be contentious as some people consider that it violates the very principle of non-anonymity on which cryptocurrencies were conceived and it is also believed that due to its intractability the funds can be used for illegal purposes like money laundering or worse to fund terrorism.
Not just that disparagers believe that these software’s and platforms can be easily hacked and scam its customers and pilfer their funds. Either ways despite its drawbacks it’s an important service which is for now available to the cryptocurrency customers.
Some of the CoinJoin solution providers offer a decentralized substitute to mixers but even though there is a coordinator involved, participants need not give them custody of their funds.
In conclusion, the CoinJoin process takes place in a manner that it does not reveal who is the actual owner of the coin. This strategy requires multiple participants on the chain to mix their transactions together by jointly signing a single digital contract which would in turn obscure details of individual transactions. Since, all the addresses get mixed, outside tracking becomes particularly difficult.
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