The white paper accepted that multi-input transactions reveal a common owner. In 2013 Gregory Maxwell showed how to turn that assumption against itself: let many people put their inputs into one transaction.
How it works
- Several participants each add one or more inputs.
- The outputs are mostly of equal size, for example ten outputs of the same amount.
- Each participant checks the transaction and signs only their own input. No one can take anyone else's coins; nothing is held in custody.
- Afterwards, an observer sees ten inputs and ten equal outputs, but cannot tell which output belongs to whom.
Limits
- Coordination: someone must bring participants together. Coordinators are possible points of pressure: zkSNACKs shut down Wasabi's coordinator in June 2024.
- Change and later habits: unequal leftovers ("change") stay linkable, and merging mixed and unmixed coins afterwards can undo the gain.
- Stigma: some exchanges question coins with coinjoin history.
- Legal risk for operators: see Privacy and the law and the Samourai case.
Why it still matters
CoinJoin shows that privacy can be built from ordinary Bitcoin transactions, without changing the protocol. Equal outputs, own-input signing and careful coin control afterwards are the key ingredients.