Here’s how CoinJoin typically works:
- Participants: Several users who want to make transactions join together to create a single, combined transaction.
- Combining Transactions: Each participant creates a transaction indicating the amount they want to send and the recipient’s address.
- Merging Transactions: These individual transactions are combined into a single transaction with multiple inputs and outputs.
- Output Allocation: The combined transaction creates multiple outputs, each corresponding to the amount designated by a participant. However, it’s not obvious which output corresponds to which input.
- Signing: All participants sign the combined transaction to verify their agreement to the transaction details.
- Broadcasting: The signed transaction is then broadcast to the blockchain network and confirmed by miners, just like any other transaction.
By combining multiple transactions into one, CoinJoin makes it difficult for outside observers to determine which inputs correspond to which outputs, thus enhancing privacy and anonymity. This makes it harder to trace the flow of funds and link specific transactions to individual users.
CoinJoin and Ring Confidential Transactions RingCT are both techniques aimed at enhancing privacy and anonymity in cryptocurrency transactions, but they operate in different ways and have different characteristics.
CoinJoin:
- Transaction Mixing: CoinJoin mixes multiple transactions from different users into one transaction. Each participant’s input is combined with inputs from other participants, making it difficult to trace the flow of funds.
- Decentralized: CoinJoin is typically implemented in a decentralised manner, where participants voluntarily join together to create a combined transaction without relying on a central authority.
- Transaction Size: CoinJoin transactions can be larger in size compared to regular transactions because they involve combining multiple inputs and outputs into a single transaction.
- Optional: Participation in CoinJoin transactions is usually optional. Users can choose to participate in CoinJoin transactions to enhance their privacy, but they are not required to do so.
Ring Confidential Transactions RingCT:
- Ring Signatures: RingCT uses a cryptographic technique called ring signatures to obfuscate the origin of funds. When a user sends a transaction, it appears as if it could have been sent by any member of a group of users (the “ring”), making it difficult to determine the actual sender.
- Amount Confidentiality: Besides hiding the sender’s identity, RingCT also hides the transaction amount. This is achieved through cryptographic commitments, allowing the transaction amount to be verified without revealing the exact value.
- Built into the Protocol: RingCT is typically built directly into the cryptocurrency protocol, meaning all transactions benefit from its privacy features by default.
- Reduced Transaction Size: RingCT transactions can be smaller in size than CoinJoin transactions because they do not combine multiple inputs and outputs into a single transaction. In summary, CoinJoin and RingCTare both privacy-enhancing techniques, but they operate differently and offer different levels of privacy and anonymity. CoinJoin focuses on mixing transactions to obscure the flow of funds, while RingCT uses ring signatures and cryptographic commitments to hide both the sender’s identity and the transaction amount.