Bitcoin privacy tool aims to ‘confuse’ surveillance companies

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Dan Gould, bitcoin developer and privacy veteran, has released a new privacy tool that aims to make it harder for bitcoin analytics companies to track who owns which bitcoin.

Bitcoin transactions are not very private; Seeing every bitcoin transaction ever made is as easy as launching any bitcoin block explorer. Bitcoin analytics companies like Chainalysis (which some call “monitoring” companies) use patterns they see among transactions to inform governments and corporations about where Bitcoins are being sent and who is sending them .

Gould released a software development kit (SDK) in late March that aims to make it easier to add support for “PayJoin,” a privacy technique invented in 2018, to any bitcoin wallet or service, providing a way simple to adopt private bitcoin payments. Additionally, the website he created, payjoin.org, aims to educate about PayJoin so that website or exchange builders can be better informed about it.

PayJoin isn’t widely supported yet, although it’s not terribly difficult to implement, Gould told Decrypt. The developer said it wanted to educate and raise awareness about the privacy method. Since the release of the SDK, the bitcoin wallet and browser extension BitMask have used it to adopt PayJoins. Foundation and BDK are also considering adopting it.

Gould focuses on Bitcoin’s privacy because he believes it goes hand-in-hand with Bitcoin’s main purpose: censorship resistance. I don’t think you can have [censorship resistance] without privacy. If someone can predict how you will behave, they can censor you. If they can control how you’re going to behave in any way, they can censor you,” Gould told Decrypt.

Breaking a hypothesis

One of the most popular privacy techniques used in Bitcoin today is known as CoinJoin, where a variety of Bitcoin users bundle their funds into a transaction, scrambling them so it’s hard to discern what bitcoin comes from where. Wallets like Wasabi and Samurai help organize CoinJoins between a group of users.

But there are some major downsides. On the one hand, this coordination takes some time. Second, it’s evident by scanning the Bitcoin blockchain when a CoinJoin takes place, as it has many more entries than the typical transaction, and they’re all obviously the same size.

PayJoins are different. It is a CoinJoin between only two users, the buyer and the merchant at the time of the sale. As such, PayJoins can be integrated into the process of buying anything with Bitcoin.

This upsets one of the main models that chain analytics companies look at: if a payment has two entries, those entries must both come from the same owner. “Surveillance companies use the hypothesis to crawl on Bitcoin users,” as the payjoin.org website puts it.

PayJoins potentially destroy this assumption, thereby “confusing” blockchain tracking services, as each entry in a PayJoin comes from a different user, the buyer and the merchant.

If PayJoins becomes more widely used, blockchain analytics companies will no longer be able to safely make this assumption.

Gould also argues that PayJoins are easier than CoinJoins. “The main reason [to use PayJoin over CoinJoin] is that it’s a lot less complicated,” Gould said, “Since PayJoin is just two parties, it’s a lot easier to set up the interaction.”

Additionally, unlike CoinJoins, Gould claims that there is also a financial incentive for businesses to use PayJoin. “Because a PayJoin combines consolidation for fee savings with privacy benefits, I think people are more inclined to incorporate it,” Gould said. Also, companies “don’t need to be nervous about doing a blending step. In reality, they’re just consolidating at the same time as they’re transferring and that doesn’t change their ledger view or their view of what their users are doing,” he said.

Future goals

That’s not to say PayJoins are all unicorns and rainbows. It’s easier to set up a PayJoin interaction because it only requires two parties. But here’s the catch: the PayJoin receiver has to set up a server endpoint, which your regular merchant doesn’t have time to deal with.

In January, Gould proposed a “serverless” implementation on the Bitcoin Developers mailing list, where users can forward this requirement to a third party, without revealing anything about their Bitcoin. It’s still a work in progress, although Gould has coded a proof of concept.

Another thing to keep in mind is that the PayJoin SDK is written in the Rust programming language, which not all developers know how to use. But he sees it potentially as a basic tool that people can plug into other programming languages ​​in the future. Gould said other developers are exploring writing “bindings” in other programming languages ​​to expand its reach.

But whether or not that specific SDK is used, Gould says he hopes to encourage more people to consider privatizing their Bitcoin transactions.

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