Samourai has sent shockwaves through the Bitcoin community by revealing a new feature for BTC to XMR atomic swaps that solves  “doxxic” change. Doxxic change refers to tainted unspent transaction outputs (UTXOs) left over from Whirlpool CoinJoins. This could be a quantum leap forward for on-chain privacy in Bitcoin.

Is the Cypherpunk Element in Bitcoin Alive and Well?

The Bitcoin privacy community has been in a fervour over the past several days with the recent announcement from the Samourai wallet team and Mysu wallet developer, Pokkst, as they announced their joint work on BTC to XMR Atomic Swaps which will soon be added to Samourai wallet. By allowing for atomic swaps from Bitcoin to Monero and leveraging its “privacy by default” blockchain, Samourai users will soon be able to safely deal with doxxic change resulting from participating in Whirlpool CoinJoins. Whirlpool is Samourai’s implementation of the Zerolink CoinJoin protocol, which mixes a user’s UTXOs with others, obfuscating the sources.

Atomic swaps, refer to a technology that enables the exchange of one cryptocurrency for another without the need for a centralised intermediary, like an exchange. The term “atomic” here implies that the swap process is indivisible; it either happens in its entirety or doesn’t happen at all. This ensures that one party can’t cheat the other by receiving funds without sending their own in return. Atomic swaps offer a way to ensure that doxxic change is not mismanaged in a way that can compromise personal or financial privacy.

Why do atomic swaps matter? Atomic swaps allow users to exchange cryptocurrencies peer-to-peer (P2P) without relying on trusted third parties. As there’s no intermediary, users can potentially save on fees associated with trading by conventional methods. Since there is no intermediary, users also don’t have to entrust their funds to a third party, reducing the risk of hacks, fraud, theft, or malfeasance. Atomic swaps facilitate permissionless, trustless, P2P trading, directly between coin holders themselves.

If atomic swaps weren’t epic enough, Samourai also recently added a JoinBot feature which lets users send a STONEWALLx2 transaction using an always-online bot to aid in constructing the transaction. STONEWALLx2 allows users to collaborate in cahoots transactions to create decoy outputs. This makes it significantly harder for observers to make accurate interpretations of the transaction graph.

Samourai also added the ability to sweep funds from JoinMarket Timelocked Fidelity Bonds. If a user has Bitcoin in a JoinMarket timelocked fidelity bond address, they can now sweep the private key into their Samourai Wallet after the bond expires.

The pace at which the Samourai team is releasing new privacy tools for cypherpunks is actually quite remarkable and commendable. By thinking outside of the box and using the best tools available for specific privacy use cases they have delivered exactly what privacy advocates are looking for. The cypherpunk element in Bitcoin appears to be alive and well, even though some naysayers are still to be heard.

Has the Doxxic Change Problem Been Solved?

Anyone who is serious about Bitcoin privacy has eventually stumbled across the term “CoinJoin” as a technique to obscure the ownership history over UTXOs. 

When a user participates in a CoinJoin, they combine their inputs with other participants to create a transaction where all the outputs are of equal value, making it difficult to determine which output corresponds to which input. However, if the inputs are not exact multiples of the desired mixed output amount, there will be a change output returned to the user. This change output is not of the same value as the mixed outputs and can potentially be linked back to the original input.

CoinJoin is the virtual equivalent of everyone throwing the same amount of money denominated in bills into a hat, shaking it all up, and everyone withdrawing the amount they threw in. The bills received will be of the same value but most likely will be the bills thrown in by another participant, and not the same bills placed in, originally. With Bitcoin’s transparent, immutable ledger, this technique is good enough to give a decent level of privacy over UTXOs, the only problem is the resulting doxxic change.

The term “doxxic change” or “doxxed change” in the context of CoinJoin and Bitcoin privacy refers to the unmixed change outputs that result from a CoinJoin transaction. These change outputs can be a privacy concern because they are potentially linkable to the original inputs of the CoinJoin.

Doxxic change can be a problem for personal and financial privacy when using Bitcoin because improper UTXO management could result in:

Loss of Privacy: The whole point of CoinJoin is to increase privacy by breaking the deterministic links between inputs and outputs. If you later spend the doxxic change together with your mixed coins, you risk linking those mixed coins back to their original inputs.

Tainting Mixed Coins: If the change is spent in a manner that can be linked back to its owner or original inputs, it could taint other outputs and reduce the privacy gained from the CoinJoin.

Blockchain Analysis: Companies and entities that conduct blockchain analysis can flag or mark such doxxic change outputs, making it easier to build transaction graphs and reduce user privacy.

It’s important for users of CoinJoin and other mixing services to be aware of the potential risks associated with doxxic change and to use strategies to mitigate these risks. Samourai’s announcement of BTC to XMR atomic swaps as a way to deal with doxxic change could prove to be a game changer for Bitcoin privacy. Atomic swaps could be the optimal strategy to mitigate the risks associated with doxxic change.

While the feature still has not been implemented yet, it is being finalised and will be available to users very soon. Atomic swaps could be one of the best ways to deal with the doxxic change problem, which is a major stumbling block for user privacy, safety, and opsec. Without proper coin control and UTXO management, privacy and security can be at risk.

What is Samourai Wallet? A Bitcoin Wallet For the Streets

In the ever-evolving landscape of Bitcoin wallets, there’s a clear divide between those that prioritise usability and convenience and those that prioritise privacy. Samourai Wallet firmly stands in the latter camp, catering to users who value privacy above all else. 

Samourai Wallet is a mobile on-chain Bitcoin wallet available for Android devices, and is known for its commitment to user privacy and its impressive array of advanced features. Born out of dissatisfaction with the privacy shortcomings of traditional Bitcoin wallets, Samourai was designed for the preservation of transactional privacy. 

Samourai markets itself as a “Bitcoin wallet for the streets”. While many wallets make claims to privacy, Samourai Wallet proves its commitment through these advanced privacy features:

Stonewall: This feature increases the ambiguity of transactions by creating decoy inputs and outputs, making it significantly harder for observers to make accurate interpretations of the transaction graph.

Ricochet: To fend off blockchain spies and transaction blacklisting, Ricochet adds extra ‘hops’ to your transaction. This means when sending bitcoins, they’re routed through additional addresses before reaching the final destination.

PayNyms: Unlike conventional address formats that can be linked to a specific wallet, PayNyms offers a BIP47 reusable payment code which is private between the sender and receiver.

Whirlpool: This is Samourai’s implementation of the Zerolink CoinJoin protocol, which mixes a user’s UTXOs with others, obfuscating the sources.

Dojo: For users serious about self-sovereignty, Dojo is a personal Bitcoin full node, helping users validate their own transactions and increase their privacy.

Uncompromising focus on privacy: While many wallets provide privacy as a side feature, Samourai is built from the ground up with privacy in mind. Every function and design decision revolves around ensuring user privacy.

Privacy & Financial Freedom

While Bitcoin, in its essence, is a transparent ledger, the importance of transactional privacy is also high on many users’ agenda. With blockchain analysis tools increasingly available, tools like Samourai Wallet are not just conveniences but necessities.

Privacy is regarded as an essential element for financial freedom and financial privacy. While often underappreciated in societies with stable financial and political systems, the importance of financial privacy becomes glaringly evident in situations where it’s breached or non-existent. 

Without financial privacy, individuals, (especially Bitcoiners, as we have already seen on multiple occasions) could become targets for crimes such as theft, extortion, or fraud. If everyone can see how much money you have or what you spend it on, it exposes you to potential threats.

In oppressive regimes, governments can use financial transactions to track, punish, or marginalise political opponents. If an authoritarian government knows who is funding opposition groups, for example, they can take action against those groups or their supporters.

Financial transactions can be a form of expression. Donating to a particular cause, subscribing to certain media outlets, or purchasing specific books can all be expressions of personal beliefs. Financial privacy ensures that individuals can make these expressions privately.

Financial privacy allows individuals to participate in the economy without interference. This includes the ability to save, invest, and transact without being subject to unwarranted scrutiny, which can be essential for personal growth and prosperity.

As commerce continues to move online, trust in digital transactions becomes ever more crucial. Financial privacy safeguards that trust, ensuring individuals feel secure when participating in the global digital economy based on Bitcoin.

In essence, privacy is a protector of freedom. Without privacy in financial affairs, the autonomy and safety of individuals are jeopardised, hampering true financial freedom.