Two new wallets, one for Bitcoin and the other for Bitcoin Cash, implement enhanced privacy features similar to those implemented by Dash.
Wasabi Wallet 1.0 was recently released, which offers a privacy coin mixing process for Bitcoin much like CashSuffle offers the same service for Bitcoin Cash. On the Wasabi wallet github page, it says that “at the Blockchain level Wasabi currently helps its users achieve the desired level of privacy in three main ways: mixing, coin control and intra-wallet clustering”. The description continues by saying “coin mixing happens through Chaumian CoinJoin, as described in the ZeroLink protocol”. Then “Wasabi users register their transaction inputs and desired outputs with a coordinator, and the cooperation of these users results in a large coinjoin transaction: and “the coordinator cannot steal from, nor deanonymize the users.”
CashShuffle describes itself as “both a protocol and an implementation for Bitcoin Cash privacy-enhanced transactions, based on the CoinShuffle protocol.” They differentiate from coin mixing, which “commonly refers to the use of services that allow a user to replace his or her coins with a different set of coins.” They highlight that “Cash Shuffle uses a client-server model. The servers coordinate which users are shuffling.”
Both solutions bring their own unique implementation of privacy, but still vary from Dash’s PrivateSend. Pasta, a Dash Core Group developer and creator of DashBoost, explained that both are likely to be sound approaches, that “due to cryptography used, there are no major privacy risks of the centralized server, assuming the implementation is without error.”
Both approach Dash’s privacy, though in a limited, less decentralized way
While these services resemble Dash’s privacy offerings in some ways, several distinct differences remain. Dash PrivateSend allows users to mix transactions autonomously with other users through a decentralized Masternode network. This better enables privacy since there is no centralized servers that shine as a honey pot to hackers or inspectors that want to track the transactions. Dash Core UX/UI engineer Joshua Seigler explained that “all three solutions are based on CoinJoin,” adding that that “in all cases, the wallets prepare mixing transactions, coordinated by central servers which match up participants (and probably relay their mixing transactions) without taking custody of their funds or broadcasting transactions (that is done by the participants).”
However, Pasta highlighted one of the biggest differences between the services:
“Both CashShuffle and Wasabi rely on a single central server (although a number of servers are available for CashShuffle). This has down sides regarding uptime and availability. On the contrary, Dash relies on the distributed set of 4000+ masternodes”.
Pasta further outlined how Dash’s solution involves a more rigorous approach, resulting in stronger privacy:
“Dash PrivateSend uses multiple rounds of mixing which should result in better privacy… CashShuffle and Wasabi use an enhanced version of CoinJoin which allows for enhanced single round privacy compared to Dash, however, Dash’s multiple round, multiple masternode based approach likely provides better overall privacy.”
Additionally, both Bitcoin-based approaches rely on external services to power privacy, which may eventually go offline or become compromised at some point in the future (or have performance issues), while Dash implements its proprietary masternode network, which is forever an integral part of the system. Finally, Dash is working on increasing the speed of PrivateSend and reducing the fee by adding additional mixing denominations. This will make PrivateSend more accessible to everyday users, which is part of Dash’s strategy to be digital cash in everyday transactions. These features of PrivateSend helps make it more decentralized and anonymous than its peers without sacrificing its usability and scalability.
Importance of maintaining privacy, balanced with transparency
Coin mixing is becoming increasingly popular as it is realized that most cryptocurrencies, including Bitcoin, are only pseudo-anonymous because normal transactions and wallet addresses can be traced through chain analysis of the publicly available blockchain. However, privacy is becoming increasingly at risk as researchers are finding ways to link wallet addresses to real life identities, which destroys the whole pseudo-anonymous and privacy concept of cryptocurrencies. Mixing transactions is one attempt to find a solution by making the transactions too difficult to trace back to the original spender.
PrivateSend and other mixing services also differentiate themselves from other encryption-based coins like Zcash or Monero by making all transactions still appear on the blockchain. This transparency helps the network maintain public trust in its ease of auditing, while still allowing for transactions to be obfuscated when desired.