CoinJoin

Basics

• In response to the erosion of Bitcoin privacy, tumbler services, such as CoinJoin, were created to improve anonymity in Bitcoin. In CoinJoin, users jointly create transactions that permute ownership of their coins, making each user anonymous within a set. This process is then repeated among different users to grow the anonymity set.

• Yet CoinJoin has its flaws. The privacy of CoinJoin relies of the anonymity set being huge. But in practice there are only 2–4 participants on average per CoinJoin transaction, and thus researchers were able to deanonymize 67% of CoinJoin transactions. Later improvements upon CoinJoin inspired the design of better cryptocurrency tumblers such as TumbleBit, but TumbleBit has limitations as well.
• Is also used by Decred since 8-2019, where they use a mix of CoinJoin and CashShuffle.