CoinSwap

A CoinSwap transaction involves multiple parties in a coordinated, trustless swap. Instead of a direct A-to-B trade, it creates a multi-hop path (e.g., Alice→Bob→Carol→Dave) where no single participant knows both the original source and final destination of the funds. This breaks the common-input-ownership heuristic used by blockchain analysts, making transaction graph analysis significantly more difficult.

The protocol's security relies on Hash Time-Locked Contracts (HTLCs). Each step in the swap is conditional on revealing a cryptographic secret within a set time window.

• Atomicity: The swap either completes entirely for all parties or refunds everyone, preventing theft.
• No Intermediary Custody: Funds are never held by a trusted third party; they are locked in smart contracts or script-enforced addresses.
• Timeout Protection: If a participant disappears, others can reclaim their funds after the contract expires.

While powerful, CoinSwap is not a perfect anonymity solution. Key limitations include:

• Timing Analysis: Coordinated transactions appearing in the same block can be correlated.
• Amount Correlation: Swaps of identical or similar amounts may be linked.
• Network-Level Privacy: IP addresses can be monitored during coordination unless using Tor or a VPN.
• Participant Collusion: If multiple participants in a route collude, they can reconstruct the payment path.

CoinSwap differs from other privacy tools:

• Vs. CoinJoin/Mixers: CoinJoin combines many users' inputs into a single transaction, which can still be analyzed. CoinSwap uses separate, chained transactions, creating a more complex graph.
• Vs. Confidential Assets (e.g., Zcash, Monero): These hide amount and asset type via cryptographic proofs (zk-SNARKs, RingCT). CoinSwap operates on transparent blockchains (like Bitcoin) and obfuscates the relationship between addresses, not the transaction data itself.

The privacy offered by CoinSwap interacts with regulatory frameworks:

• Travel Rule: Services in VASP jurisdictions may struggle to comply with sender/receiver identification requirements.
• Transaction Monitoring: It challenges standard blockchain surveillance tools, potentially raising flags for regulated exchanges receiving "mixed" funds.
• Design Philosophy: It represents a protocol-level privacy enhancement, contrasting with application-level KYC solutions common in DeFi.

CoinSwap is a trustless, non-custodial protocol where multiple parties coordinate to swap coins without revealing the link between their inputs and outputs. Unlike a simple atomic swap, it involves three or more participants in a coordinated, multi-hop transaction. This creates a complex transaction graph where the original sender's coins are sent to an unrelated third party, making blockchain analysis significantly more difficult.

While both enhance privacy, CoinSwap provides stronger guarantees than CoinJoin. Key differences:

• Transaction Graph: CoinJoin creates a single transaction with multiple inputs and outputs, which analysts can cluster. CoinSwap creates separate, chained transactions.
• Linkability: In CoinJoin, all participants are visible in one tx. In CoinSwap, the sender and final receiver never appear in the same transaction, breaking the direct on-chain link.
• Complexity: CoinSwap is more complex to coordinate but offers superior unlinkability.

The protocol relies on several cryptographic and Bitcoin-specific primitives:

• Adaptor Signatures & DLCs: Used to create the conditional payments that enforce the swap without a central party.
• Hash Time-Locked Contracts (HTLCs): A fallback mechanism to ensure funds can be refunded if a participant disappears.
• Onion Routing (Lightning-style): Can be used to privately route swap coordination messages between participants.

CoinSwap involves explicit trade-offs:

• Higher Fees: Requires multiple on-chain transactions (deposit, swap, payout), increasing cost versus a single payment.
• Coordination Latency: Finding counterparties and constructing transactions takes time, unlike an instant normal tx.
• Improved Fungibility: The primary benefit is creating uniformly private coins that are not tainted by their transaction history, enhancing Bitcoin's fungibility at the protocol level.

CoinSwap exists within a broader ecosystem of privacy and swap technologies:

• Atomic Swaps: Trustless cross-chain swaps, but without privacy guarantees.
• PayJoin: A variant of CoinJoin where one participant is the payment receiver, slightly improving privacy.
• Chaumian CoinJoin: The earlier model used by Wasabi 1.0, which relies on a centralized coordinator for batching.
• Dandelion++: A network-level transaction propagation protocol that can complement CoinSwap by obscuring the IP origin.

A peer-to-peer exchange of cryptocurrencies between two parties without a trusted intermediary, executed via hash timelock contracts (HTLCs). It is the foundational cryptographic primitive for trustless cross-chain or on-chain swaps.

• Key Mechanism: Uses cryptographic proofs and time-locks to ensure the swap either completes for both parties or funds are returned.
• Contrast with CoinSwap: Atomic swaps are typically direct and on-chain, creating a public link. CoinSwap builds upon this concept but adds obfuscation by involving additional, coordinated parties.

A Bitcoin privacy technique where multiple users combine their transaction inputs into a single, larger transaction with multiple outputs. This obscures which input corresponds to which output.

• Key Mechanism: Creates a shared transaction to break the common-input-ownership heuristic used by chain analysis.
• Contrast with CoinSwap: CoinJoin obfuscates ownership within a single transaction. CoinSwap is more complex, using a series of coordinated, trustless swaps across different transaction pairs to sever the link between a user's original and final coins entirely.

A service (often centralized) that pools and mixes user funds to obscure their transaction history before returning them.

• Centralized Risk: Users must trust the operator not to steal funds or keep logs.
• Contrast with CoinSwap: CoinSwap is a non-custodial, protocol-level solution. It achieves similar privacy goals without requiring users to give up control of their funds to a third party, eliminating the trust and single-point-of-failure risks of traditional mixers.

A cryptographic protocol, such as those used in Mimblewimble or as an option in other chains, that hides the transaction amount while still allowing the network to verify that no new coins were created.

• Key Mechanism: Uses Pedersen Commitments and range proofs.
• Relationship to CoinSwap: Confidential Transactions and CoinSwap address different aspects of privacy. Confidential Transactions hide amounts, while CoinSwap hides the transaction graph linking addresses. They are complementary and can be used together for stronger overall privacy.

Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge are cryptographic proofs that allow one party to prove possession of certain information without revealing it.

• Application: Used in zk-rollups for scaling and privacy, and in privacy-focused chains like Zcash.
• Relationship to CoinSwap: Both enhance privacy but through different means. zk-SNARKs provide cryptographic proof of valid state transitions while hiding details. CoinSwap is a coordination-based method for breaking linkability without necessarily requiring advanced cryptographic proofs for the core swap logic.

The property of a good or asset whose individual units are essentially interchangeable. For money, it means every unit (e.g., each dollar or bitcoin) has equal value and acceptability.

• Blockchain Challenge: Transparent ledgers can lead to tainted coins if certain addresses are associated with illicit activity, harming fungibility.
• CoinSwap's Role: By making the transaction history of a coin untraceable, CoinSwap directly enhances the fungibility of a cryptocurrency. It ensures coins are valued equally based solely on their monetary worth, not their provenance.