CoinJoin – How Does CoinJoin Work?

CoinJoin enables users to mix their own tokens with those of other participants to make it harder for third parties to trace the origin and destination of transactions. This provides increased privacy and helps preserve the fungibility of Bitcoin (the ability for each token to hold the same value).

This mixing technique works by combining multiple input signatures and outputs before they are made into a new combined UTXO on the blockchain. The resulting transaction looks like a regular bitcoin one to the blockchain surveillance firms, so they cannot easily track or link any individual participants.

A user first joins a coinjoin by reaching consensus, contributing their tokens, and signing their part of the transaction with their private keys. The transaction is then broadcast to the Bitcoin network and recorded in the blockchain. A common problem is that the round can fail at this signing phase for various reasons (e.g. a bad internet connection or a user accidentally disconnecting their device). In these cases, the transaction will drop and restart. Then, the final result is shared with all participants, and the original users receive their own tokens at their destination addresses.

The process of using CoinJoin is relatively technical, and it requires the user to have a good understanding of cryptography. This can make adoption difficult for average users. Moreover, the performance of this method can be affected by the amount of data that needs to be mixed together and the size of the blockchain transaction. CoinJoin

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