The emergence of Bitcoin in 2008 introduced an interesting paradox: pseudonymity allows individuals to hide behind their transactions but open and publicly available transaction data, recorded irrevocably in a distributed ledger called a blockchain, gives more power to AML investigators.
To pay with Bitcoin you have to use a wallet. Most of these wallets are directly tied to a third-party server and every action you take is forwarded to them. If they decide to, it’d be very easy to spy on you and your actions. In many cases, these third-parties also hold your private keys.
Hence, to cater to the needs of the extremely privacy-conscious, softwares called “mixers” were created. A mixer uses obfuscation techniques to improve the anonymity of cryptocurrency transactions.
When it comes to mixers, there is no one-size-fits-all situation. There exist fully centralized mixers, fully decentralized mixers and also mixers that use privacy coins like Monero or DASH as in intermediate step in the mixing process.
One among these, is the Wasabi cryptocurrency wallet, which is an open-source, non-custodial Bitcoin wallet which implements trustless CoinJoin over the Tor anonymous network to help you mix your coins.
The founders of the Wasabi Wallet; Left: Gergely Hajdú — Center: Adam Ficsor — Right: Bálint Harmat Confused? Allow us to explain.
First, it is important to note that Wasabi is a 100% open-source software which means you do not have to place any “blind trust” in the developers. Anything fishy cannot remain hidden for too long.
Next, we need to understand what CoinJoin is.
CoinJoin is an anonymization strategy that protects the privacy of Bitcoin users when they conduct transactions with each other. Coinjoin requires multiple parties to jointly sign on an agreement to mix their coins when engaging in separate Bitcoin transactions.
This makes it harder for outside parties to determine who was making a particular transaction. Wasabi is just a wallet which makes it easy to CoinJoin your crypto. It mixes coins on all wallets users between each other and does it using the multisig script to completely eliminate the trust on the other party, which in this case is CoinJoin.
How you can use Wasabi
As a user, you’ll have to go through the following steps:
Install Wasabi wallet Generate wallet Backup your private key safely somewhere offline Generate a new BTC address from the “Receive” tab. Wasabi receive addresses always begin with BC1 Send yourself some BTC through the generated address Go to CoinJoin tab, select your transaction and “enqueue your coins” Your BTC will be loaded in the next round of CoinJoin. There are multiple rounds taking place daily.
That’s about all there is to it. Wasabi is also now revamping its protocol design which will allow users to CoinJoin with different values than their peers, a first for the privacy-minded technology that could lead to more flexible use cases.
The Road Ahead for Wasabi
Until now, each user in a CoinJoin transaction has to send a minimum amount of bitcoin to the mixing pool so as to ensure that they receive equal value paypouts as other users when the CoinJoin is complete. If recipients didn’t receive the same amount of Bitcoin at the end of a join as other users in the mix, the transactions could be easily deanonymized by blockchain surveillance.
However, once Wasabi 2.0 is successfully launched, CoinJoins would be done while the wallet is open (and even when it isn’t) so all the user would have to do is use its wallet like a normal bitcoin wallet. Users will be able to input different amounts of BTC, independent of what other participants are putting in.
This is a major step forward in protection privacy and the mass adoption of Bitcoin.
