How Does CoinJoin Work?

When Bitcoin was first introduced in 2009, many users were excited that it offered complete transaction privacy and value storage. Soon, however, it became clear that this was not always the case and that users’ transactions could become traceable. This led to significant efforts by cryptographers and developers to find ways to improve the privacy of Bitcoin transactions. One of these solutions was CoinJoin, a process that combines multiple transactions into a single one to hide the relationship between sender and receiver addresses.

With this, it becomes very difficult for surveillance firms to determine who sent what amount to whom. This helps protect users’ personal information from being exposed and can prevent them from falling victim to identity theft or financial espionage, as well as discrimination based on their personal data.

In practice, CoinJoin works by combining inputs and outputs from different users into a single transaction. These transactions are then signed by the participants and broadcast to the Bitcoin network for recording on the blockchain. It is important that the participating addresses are the same, so that no eavesdropper can match the outputs to their original senders and thus figure out who contributed what. This is why most CoinJoin services use only trusted software that has been vetted by security researchers. The downside is that this can sometimes take longer to process than a normal transaction, and can lead to extra fees. In addition, the success of a CoinJoin depends on all participating users following best practices after the mixing process is complete. This includes not using the same addresses for post-CoinJoin spending. CoinJoin

How Does CoinJoin Work?

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