The default Wasabi Wallet coordinator will start censoring "illegal" UTXOs

[PrimeNumber7]

If they are willing to ban certain inputs, then it won't be long before they are willing to cooperate with blockchain analysis and de-anonymize transactions altogether. Yet another good entity which has sold out its principles and its users. What a shame.

Still, it seems that Wasabi has never been as safe as we all think:

Using a capability that is being disclosed here for the first time, Chainalysis de-mixed the Wasabi transactions and tracked their output to four exchanges.

As you note, it appears that Wasabi transactions can already be tracked by blockchain analysis companies. Most likely, Chainanalysis did not need information from Wasabi to trace their transactions -- they only needed to use the service to see how it works.

This will push more people to centralized mixing services.

Ehh, probably not. A centralized mixing service can do the same thing.

Pardon my ignorance — but how hard is it to run such coordinators in a private manner? At the very least private enough for the authorities to have a very hard time in finding you if it's the case that you didn't comply.

Probably very difficult, if not impossible. Even if you are running a tor hidden service, the authorities will attempt to find ways to get your hidden service to leak information about the "real" IP address of your server. Pretty much every darknet site has been shut down this way.

Obviously running a coordinator is not the same as running a darknet site, so law enforcement may not put as much effort into finding the person behind it. But you never know.

[BlackHatCoiner]

So what's the solution here? Every user running their own coordinator, all of which communicate with everyone else's coordinator in a decentralized manner, much like the bitcoin network itself?

It could work, at least to those who're willing to run their own, otherwise we'll fall back into trust problems. Practically, it should be very easy to make it work, and even if you didn't run your own node, and it'd provide you the same level of privacy. (Assuming you're doing everything through Tor)

A coordinator's server implementation could come pre-installed in one of these Bitcoin node OSes as well, to make it easier for the masses. Just as Lightning's peer discovery.

[PrimeNumber7]

If "everyone" is a "coordinator" you are going to potentially have less privacy because you would need to tell other coordinators your inputs and outputs. I think "spy" coordinators could be used that don't (need to) actually participate in transactions, but say that they will to get the inputs and outputs. Obviously, with the status quo, there is the potential that the centralized coordinators are keeping track of this information.

[BlackHatCoiner]

If "everyone" is a "coordinator" you are going to potentially have less privacy because you would need to tell other coordinators your inputs and outputs.

You'd only need to advertise the amount of money you want to mix. Your outputs would be created once you found a user who'd also want to mix their funds. Your inputs and outputs and their inputs and outputs would be known only to you and them. In fact, that sounds better with more people (such as with triangular connections) as the coordinators would just exchange signatures, but there would be none would know every input's destination, in contrast with Wasabi.

You could also choose a reputable coordinator and do this traditionally, same as with mixers.

[PrimeNumber7]

If "everyone" is a "coordinator" you are going to potentially have less privacy because you would need to tell other coordinators your inputs and outputs.

You'd only need to advertise the amount of money you want to mix. Your outputs would be created once you found a user who'd also want to mix their funds. Your inputs and outputs and their inputs and outputs would be known only to you and them. In fact, that sounds better with more people (such as with triangular connections) as the coordinators would just exchange signatures, but there would be none would know every input's destination, in contrast with Wasabi.

If you are telling the coordinators that you want to mix x BTC, the coordinator will know that an output of that same amount belongs to you. A spy coordinator could agree to mix coin and end up not providing their signed portion of the transaction.

You could also choose a reputable coordinator and do this traditionally, same as with mixers.

The reputation that mixers have tends to be that their customers will actually receive the proper amount of money, not that the mixer actually provides any kind of privacy (even though they advertise they do). It is not possible to know if a mixer keeps logs or not, and it is well documented that transactions can be traced through most mixers (with chip mixer being the exception).

[BlackHatCoiner]

If you are telling the coordinators that you want to mix x BTC, the coordinator will know that an output of that same amount belongs to you. A spy coordinator could agree to mix coin and end up not providing their signed portion of the transaction.

But, that would only reveal them my inputs. What I want to obfuscate is my outputs. Therefore, they have to mix with me to find that out. Same goes for Wasabi: Honeypots must have used CoinJoin just to deanonymize those who mix.

[PrimeNumber7]

If you are telling the coordinators that you want to mix x BTC, the coordinator will know that an output of that same amount belongs to you. A spy coordinator could agree to mix coin and end up not providing their signed portion of the transaction.

But, that would only reveal them my inputs. What I want to obfuscate is my outputs. Therefore, they have to mix with me to find that out. Same goes for Wasabi: Honeypots must have used CoinJoin just to deanonymize those who mix.

Knowing the input amounts is a lot of information to have. There are a very limited number of transactions in each block, and there are only so many transactions of x size (and so many groups of transactions that add up to x size).

[BlackHatCoiner]

Knowing the input amounts is a lot of information to have.

But, the inputs' amounts are already publicly known.

[witcher_sense]

If you are telling the coordinators that you want to mix x BTC, the coordinator will know that an output of that same amount belongs to you.

I don't know about input amounts since blockchain is anyway transparent and accessible to everyone, but it definitely makes sense to not share with a coordinator the information that is not visible on the blockchain. For example, you have two outputs in your wallet, one of which came from your verified account on Binance, and the other came from a mixing service such as Chipmixer. These outputs have no connection with each other, except that their private keys were derived from the same seed words. When you register these outputs for a CoinJoin transaction, a coordinator may learn the fact that these outputs are linked to each other, and also he will know that some of Binance customers used a mixing service. A coordinator keeps records of all inputs and hands over this information to a blockchain surveillance firm or law enforcing agencies directly. Another example is when you're merging your coinjoined output with non-coinjoined output or with toxic change. In this case, it also becomes trivial to deanonymize you because by merging with unmixed outputs you make the whole process of mixing worthless.

A spy coordinator could agree to mix coin and end up not providing their signed portion of the transaction.

It is economically irrational to selectively provide services because such a coordinator would be getting less or even no income from fees. If their only goal is to spy on users, it won't be long before everyone finds out this.

[Slottie]

Seems like Wasabi will die in a few years. It was too good to last forever.

[pooya87]

Seems like Wasabi will die in a few years. It was too good to last forever.

It's still not too late for them to undo the damage to their reputation. They have to first publicly apologize then start moving towards making their application truly decentralized by removing coordinators completely by finding a way for users to connect to each other and mix coins P2P. But that also means giving up on the money they were earning!

[witcher_sense]

It's still not too late for them to undo the damage to their reputation. They have to first publicly apologize then start moving towards making their application truly decentralized by removing coordinators completely by finding a way for users to connect to each other and mix coins P2P. But that also means giving up on the money they were earning!

They need more money. They literally do not care what regular users think about them: they introduced blacklisting so that large institutional investors, not plebs, which they call "criminals," can mix their money without fear of being questioned by regulators.

But one other thing is that: if you, as a CoinJoin coordinator, if you want to work with institutional clients, hedge funds, insurance funds, Michael Saylor, and all these people, well, even if ZKSnacks were not to be regulated, those customers might very well be, maybe because they’re custodians of other people’s money or whatnot. And then these regulated entities can only become users of a coordinator—arguably, I’m not sure—if such a blacklisting is involved. Again, the major feedback that I got from institutionals regarding CoinJoin adoption was, I don’t want to mix with criminals—my compliance team is gonna take me apart on that one. Now, I don’t know if there is an actual concern here or if this is just, again, some preemptive speculative compliance, but arguably there is. So we might see this world where ZKSnacks specifically has a bunch of liquidity from institutionals that are just not comfortable to CoinJoin with another coordinator which has the Anyone can join policy, including criminals.

"I don't want to mix with criminals' dirty money" - says institutional as if their money are always "clean" by default.

[o_e_l_e_o]

-snip-

As if working hand-in-hand with blockchain analysis companies wasn't bad enough, it now becomes clear that the whole point they are doing it is so they can get in to bed with centralized entities and make more sweet, sweet profits for themselves.

Just another project to add to the ever growing list of projects which started out so promisingly and then completely sold out all their users and the very principles of bitcoin to make sure they could keep lining their own pockets.

You are insane if you keep using Wasabi at this point.

[n0nce]

They need more money. They literally do not care what regular users think about them: they introduced blacklisting so that large institutional investors, not plebs, which they call "criminals," can mix their money without fear of being questioned by regulators.

I think this quote that you dug up really puts the nail in the coffin.

I also like your usage of the word 'plebs' ('plebeians' would be more correct as plural - actually plebs refers to the whole group of plebeians as one); quite similarly to the Roman empire, some people always seem to think they're in a sort of 'upper class' as opposed to the 'plebeian working class'. And in this case they deem the working class criminal and fear to be confused with this presumed 'lower class'.

But honestly; if they really wish, let them play with their little UTXO set of 'upper class clean incest coins' and they'll soon realize that it just dramatically reduces the anonymity set they're in and they're cutting themselves off the whole Bitcoin ecosystem. As o_e_l_e_o said, the most stupid thing for 'plebeians' would now be to use the 'patricians' tools and comply with their arbitrary and subjective rules without any real benefit.

[JL0]

Could the Sparrow wallet be an alternative?

[n0nce]

Could the Sparrow wallet be an alternative?

Sparrow includes an implementation of Whirlpool. As far as I know, Whirlpool by Samourai is a way better option, however you need your own node or 'RoninDojo' (a full node) to use it 100% privately.
'Sparrow Whirlpool' is not any different from 'Samourai Whirlpool', as far as I know.

I'd be interested if anyone can point to any similar flaws or vulnerabilities in Samourai wallet?

How about this?

Unless you're connecting to Whirlpool via RoninDojo, Samourai Wallet devs can deanonymize you because they will know your main wallet xpub, your pre-mix xpub, your post-mix xpub and toxic change xpub.

[dkbit98]

Could the Sparrow wallet be an alternative?

I tested Sparrow wallet few years ago and I wrote more about that in one of my topics from 2020.
I am not sure it can replace Wasabi that was simple plug'n'play wallet, and you need to do some setting up in combination with other tools to make it work.
Sparrow is using Samourai Whirlpool and many bitcoiners who know much more about privacy then me, don't like mixing with Whirpool.

[nopara73]

Sparrow is using Samourai Whirlpool and many bitcoiners who know much more about privacy tell me, don't like mixing with Whirpool.

Yes, because it's a scam. No privacy, just marketing. Whirlpool is not on the same level. Unlike Wasabi or JoinMarket, it isn't trustless. Using them you trust a third party with your privacy.

Samourai Wallet by default collects the xpubs of their users (past, present and future financial transactions) thus they provide zero privacy against themselves (and hackers and governments.) For this they say "use dojo" which is a Bitcoin full node that fixes this network level privacy disaster, however you'll still be mixing with other xpub leakers. If you're the only one who uses a full node, then the links between your inputs and outputs in the mix is trivially deanonymized by exclusion. This is a fundamental privacy leak, which just makes the two wallet not even comparable. However the problems did not end here, I think they can be deanonymized by other means, too, but any discussion comparing the two should.

[dkbit98]

Yes, because it's a scam. No privacy, just marketing. Whirlpool is not on the same level. Unlike Wasabi or JoinMarket, it isn't trustless. Using them you trust a third party with your privacy.

I never said it's a scam, for saying that you would need to show some proof, and I didn't hear a single case of anyone in forum getting scammed by using Samourai wallet.
Should I also consider Wasabi wallet to be a scam just because it's ignoring to mix some coins?

This is a fundamental privacy leak, which just makes the two wallet not even comparable. However the problems did not end here, I think they can be deanonymized by other means, too, but any discussion comparing the two should.

I never uses Samourai, and I know they have some privacy issues, but at least they are not blocking any addresses from mixing.
Attacking each other in current situation is just waste of time in my opinion.

[BlackHatCoiner]

Samourai Wallet by default collects the xpubs of their users (past, present and future financial transactions) thus they provide zero privacy against themselves (and hackers and governments.)

In contrast with Wasabi, wherein to mix, you need to pass the legal-UTXO test? Disgrace. At least in Samourai you can run your own node and avoid handing out your master public key if that's the only problem; you're sure you're having your outputs mixed.

Should I also consider Wasabi wallet to be a scam just because it's ignoring to mix some coins?

Beyond that, they're working with chain analysis companies, treating bitcoin as non-fungible while that's the promising point of their project. It's confirmed that they did this voluntarily to protect their operation to make money. Whoever mixes with their coordinator pays for their monitoring. Completely untrustworthy individuals.