What is Coinjoin (Coin Mixing)?
Coinjoin is an anonymous strategy that protects the privacy of Bitcoin users when they conduct transactions with each other. Coinjoin requires multiple parties to jointly enter into an agreement to mix their funds when engaging in separate Bitcoin transactions. This makes it difficult for outside parties to determine which party or party is doing a particular transaction. Coinjoin is also known as Coin Mixing.
overview Coinjoin (Coin Mixing)
Advances in technology are introducing digital tools that companies can use to better interact with their customers. The growing shift from traditional to digital platforms also brings with it an abundant supply of data from sources such as social media, mobile devices, online retail platforms, etc. Technological advancements in the field of data collection, storage and sharing, large datasets are easily shared among companies of all sectors and countries without much cost. The widespread accessibility of data also brings concerns about the data privacy of individuals and their online transactions. Because every transaction or activity done online leaves a digital trace, individuals are choosing more anonymous ways to use the internet and conduct transactions online. The Bitcoin cryptocurrency was introduced to address privacy concerns.
While conducting transactions with Bitcoin is safe, it is not necessarily anonymous. Each Bitcoin transaction is recorded on a ledger known as the blockchain that is public. Each computer, called nodes, connected to the Bitcoin network has a copy of the blockchain. Blockchain records information such as users’ addresses and their balances. Due to the transparent nature of Bitcoin transactions, an entity can use information recorded in a public ledger such as an IP address to reveal a user’s identity in relation to the transaction and the type of transaction performed. presently.
Anonymization techniques like Coinjoin have been developed to obfuscate the identities of Bitcoin users in connection with digital transactions. A user who wants to implement coinjoin in his Bitcoin transaction will look for another user who also wants to mix coins and the two will start a joint transaction together. The address that the Bitcoin is sent from is called the input. An output refers to the address Bitcoin is sent to. An unsolicited monitor looking over the blockchain could identify a user from a recorded transaction using input. Coinjoin conceals a trace of a transaction by allowing multiple users to combine inputs and outputs from several transactions into a single transaction. In this way, the blockchain records a single transaction but has no deterministic way for outsiders to match the input with the output.
Consider the following transactions executed at the same time: A buys an item from B, C buys an item from D, and E buys an item from F. Without Coinjoin, the public blockchain ledger would record three separate transactions for each input-output match. With Coinjoin, only a single transaction is recorded. The ledger will show that bitcoins have been paid from addresses A, C and E to B, D and F. By masking the transactions made by all parties, an observer can, with full certainty, determining who sent bitcoins to whom.
Some of the digital tools that implement Coinjoin in their anonymous process include Dark Wallet, JoinMarket, and SharedCoins. These platforms provide an extra level of data obfuscation for users to transact in Bitcoin..
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