Bitcoin Privacy & Address reuse

[apogio]

Hello.

I have a multisig vault. In order to achieve the highest privacy:

1. I generate an address per incoming transaction.
2. My wallet (co-signers) has been created using airgapped devices.
3. I have imported my xpubs to my personal electrum server on my node.

But, I have sent some coins from addresses to which I had originally sent directly from Binance.

Have I lost all of my privacy because of this mistake?

Please feel free to let me know whether you  think that I exaggerate. I am not a privacy maniac. I just want to know the best practices.e

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[Charles-Tim]

To have privacy, first mix the coin you sent from Binance using a mixer or coinjoin before sending it to your full client wallet address. Mixing it will make it easy for you.

Or you can first convert it to a privacy coin like monero on a decentralized exchange and then convert it back to bitcoin.

Do not reuse address.

[hosseinimr93]

You have a (multi-sig) HD wallet and you spent the fund that you had received from binance. Am I getting you correctly?
Did you use coin control? If you didn't use coin control and you used multiple UTXOs in a single transaction, now all those coins are linked together.

[apogio]

To have privacy, first mix the coin you send from Binance using a mixer or coinjoin before sending it to your full client wallet address. Mixing it will make it easy for you.
Do not reuse address.

I don't reuse address but for the first thing you mention, how would you go about doing that from scratch?

Could I send it from Binance to another wallet and then use a mixer (like whirlpool) to send it to my multisig vault ?

Finally, since I haven't done that, what are the risks that may occur now ?

You have a (multi-sig) HD wallet and you spent the fund that you had received from binance. Am I getting you correctly?
Did you use coin control? If you didn't use coin control and you used multiple UTXOs in a single transaction, now all those coins are linked together.

Hi! No, I have sent from Binance to another wallet. Then from my other wallet into my multisig vault (not in a single transaction) but in several transactions, in order to create larger UTXOs.

[Charles-Tim]

I don't reuse address but for the first thing you mention, how would you go about doing that from scratch?

Could I send it from Binance to another wallet and then use a mixer (like whirlpool) to send it to my multisig vault ?

Finally, since I haven't done that, what are the risks that may occur now ?

Send it to an address that you own, not an address on your privacy wallet. Use another wallet for it and name it 'centralized exchange wallet'. Send the coin from Binance to one of the addresses. Use a coinjoin for it like whirlpool, or use a mixer like Whirlwind to send it to your privacy wallet.

For whirlwind mixer. Download Tor browser and open Whirlwind site on it: http://whirlwct7ertqae6i7ivsm475kgia6v67zzxevgzkilykknrjke33cqd.onion/

Hi! No, I have sent from Binance to another wallet. Then from my other wallet into my multisig vault (not in a single transaction) but in several transactions, in order to create larger UTXOs.

Make use of coin control, send the coin to a mixer or coinjoin it. Freeze the address and do not use it anymore. But I will recommend you to create a new wallet.

[apogio]

Send it to an address that you own, not an address on your privacy wallet. Use another wallet for it and name it 'centralized exchange wallet'. Send the coin from Binance to one of the addresses. Use a coinjoin for it like whirlpool, or use a mixer like Whirlwind to send it to your privacy wallet.

For whirlwind mixer. Download Tor browser and open Whirlwind site on it: http://whirlwct7ertqae6i7ivsm475kgia6v67zzxevgzkilykknrjke33cqd.onion/

That's great, but doesn't it apply only to new "coins"? I mean can I do the same with the "coins" that I already own?

[satscraper]

Hello.

I have a multisig vault. In order to achieve the highest privacy:

1. I generate an address per incoming transaction.
2. My wallet (co-signers) has been created using airgapped devices.
3. I have imported my xpubs to my personal electrum server on my node.

But, I have sent some coins from addresses to which I had originally sent directly from Binance.

Have I lost all of my privacy because of this mistake?

Please feel free to let me know whether you  think that I exaggerate. I am not a privacy maniac. I just want to know the best practices.e

It seems like you have completed  KYC procedure on Binance which implies that  the address to which you have sent from this exchange is linked to your identity. Consequently, any transactions from this address will also be linked to you.

If I where in your position  I would use mixer and  shuffle the associated  UTXOs.

I recommend that you  read the following guide ( divided into four sections ^{[1] , [2],[3] and[4]}.) to gain a deeper  understanding on   how you can maintain privacy  when making your transactions.

::::::::::::::::::::::::::   ::::::::::::::::::::::::::::  ::::::::::::::::::::::::::::::

[1]. Understanding Bitcoin Privacy with OXT — Part 1/4
[2]. Understanding Bitcoin Privacy with OXT — Part 2/4
[3]. Understanding Bitcoin Privacy with OXT — Part 3/4
[4]. Understanding Bitcoin Privacy with OXT — Part 4/4

[apogio]

It seems like you have completed  KYC procedure on Binance which implies that  the address to which you have sent from this exchange is linked to your identity. Consequently, any transactions from this address will also be linked to you.

If I where in your position  I would use mixer and  shuffle the associated  UTXOs.

I recommend that you  read the following guide ( divided into four sections ^{[1] , [2],[3] and[4]}.) to gain a deeper  understanding on   how you can maintain privacy  when making your transactions.

::::::::::::::::::::::::::   ::::::::::::::::::::::::::::  ::::::::::::::::::::::::::::::

[1]. Understanding Bitcoin Privacy with OXT — Part 1/4
[2]. Understanding Bitcoin Privacy with OXT — Part 2/4
[3]. Understanding Bitcoin Privacy with OXT — Part 3/4
[4]. Understanding Bitcoin Privacy with OXT — Part 4/4

That's great, thanks! Yes I have completed KYC. I am curious to see whether I can use the mixer to mix my UTXOs and send them to the same vault.

[Z-tight]

That's great, but doesn't it apply only to new "coins"? I mean can I do the same with the "coins" that I already own?

Do you mean the coins that are already in your multi-sig set up where you maintain your privacy? If that is it, then you said you do not reuse addresses, so if you want to spend from a particular address you should use coin control to make sure there is no link between the sending address and your other addresses. Nevertheless if you are sending from your multi-sig set up wallet to another different address that you own, you should first send the funds to Whirlwind mixer and from the mixer to the address, or you use CoinJoin.

[satscraper]

It seems like you have completed  KYC procedure on Binance which implies that  the address to which you have sent from this exchange is linked to your identity. Consequently, any transactions from this address will also be linked to you.

If I where in your position  I would use mixer and  shuffle the associated  UTXOs.

I recommend that you  read the following guide ( divided into four sections ^{[1] , [2],[3] and[4]}.) to gain a deeper  understanding on   how you can maintain privacy  when making your transactions.

::::::::::::::::::::::::::   ::::::::::::::::::::::::::::  ::::::::::::::::::::::::::::::

[1]. Understanding Bitcoin Privacy with OXT — Part 1/4
[2]. Understanding Bitcoin Privacy with OXT — Part 2/4
[3]. Understanding Bitcoin Privacy with OXT — Part 3/4
[4]. Understanding Bitcoin Privacy with OXT — Part 4/4

That's great, thanks! Yes I have completed KYC. I am curious to see whether I can use the mixer to mix my UTXOs and send them to the same vault.

Mixer is capable of  sending funds back  to any address  you choose  but it's not recommended to reuse the same vault. Create a new vault instead of using existing  one repeatedly.

I have shared my personal   experience of using  Mixy service. Perhaps my post will be helpful to you.

[un_rank]

That's great, thanks! Yes I have completed KYC. I am curious to see whether I can use the mixer to mix my UTXOs and send them to the same vault.

That does not repair the privacy issue you are trying to fix, also privacy cannot be "fixed" in the direct sense.

The proof of transactions from your binance address to you current address will always be on the blockchain and anyone with basic analytic skills can link the dots.
What you can do is to create a different set of addresses and send (coinjoin or mix) all the coins into these new sets. This will break the link between your current set of addresses and the new one.

- Jay -

[apogio]

That does not repair the privacy issue you are trying to fix, also privacy cannot be "fixed" in the direct sense.

The proof of transactions from your binance address to you current address will always be on the blockchain and anyone with basic analytic skills can link the dots.
What you can do is to create a different set of addresses and send (coinjoin or mix) all the coins into these new sets. This will break the link between your current set of addresses and the new one.

- Jay -

Thanks Jay. Even if the word "fix" isn't the proper one to use, I believe what you said WILL fix my privacy issues.

Mixer is capable of  sending funds back  to any address  you choose  but it's not recommended to reuse the same vault. Create a new vault instead of using existing  one repeatedly.

I have shared my personal   experience of using  Mixy service. Perhaps my post will be helpful to you.

I am checking it right now. Thanks.

Nevertheless if you are sending from your multi-sig set up wallet to another different address that you own, you should first send the funds to Whirlwind mixer and from the mixer to the address, or you use CoinJoin.

That's exactly what I meant. Thanks

Unfortunately I don't have any merit to send you guys, but I thank you all!!!!

[witcher_sense]

Yes I have completed KYC. I am curious to see whether I can use the mixer to mix my UTXOs and send them to the same vault.

Keep in mind that what you do before sending to mixing services and what you do after the mixing was completed are equally important for preserving your privacy because any false move or mistake may compromise your identity or the safety of your funds. Let's call these "pre-mix and post-mix etiquette": pre-mix implies preparing your UTXOs for mixing with coin control and other techniques to prevent unnecessary merging of anonymous coins and coins connected to your real identity. On the other hand, post-mix implies the absence of interaction with any centralized services that may peer into the history of your transactions and freeze your account for suspicion of money laundering or other criminal activity.

[o_e_l_e_o]

As others have said, if you want to break the link between your KYCed coins from Binance and the coins in your multi-sig, then you should empty your current multi-sig, mix the coins or coinjoin them with Whirlpool or JoinMarket, and then return them to a fresh multi-sig wallet. It's better to do this over a couple of transactions and addresses and not consolidate everything in to a single UTXO to make it harder for any blockchain analysis firm which is tracking the total amounts.

This will give you coins which are no longer linked to your KYC data from Binance, but of course Binance will still have a record of you purchasing and withdrawing x amount of bitcoin. If you want to go for full privacy, then you would need to return the coins you have bought to Binance, sell them for fiat, withdraw that fiat, close your Binance account, and then buy fresh bitcoin using a non-KYC method such as Bisq.

[apogio]

As others have said, if you want to break the link between your KYCed coins from Binance and the coins in your multi-sig, then you should empty your current multi-sig, mix the coins with Whirlwind or coinjoin them with Whirlpool or JoinMarket, and then return them to a fresh multi-sig wallet. It's better to do this over a couple of transactions and addresses and not consolidate everything in to a single UTXO to make it harder for any blockchain analysis firm which is tracking the total amounts.

This will give you coins which are no longer linked to your KYC data from Binance, but of course Binance will still have a record of you purchasing and withdrawing x amount of bitcoin. If you want to go for full privacy, then you would need to return the coins you have bought to Binance, sell them for fiat, withdraw that fiat, close your Binance account, and then buy fresh bitcoin using a non-KYC method such as Bisq.

Actually I am buying BTC using RELAI at the moment which is non-KYC, but half of my stack is from Binance.

So, let me clarify the process once more, because I will do it any time soon.

1. I will send my coins to a fresh wallet that I have created in Sparrow.
2. Sparrow gives you the ability to mix UTXOs.
3. I will create a brand new multisig vault (fully airgapped).
4. I will send my coins to my new vault.

Is this ok?

[o_e_l_e_o]

-snip-

That will work, but a couple of points to be aware of.

If you choose to use Sparrow to Whirlpool, you will pay the Whirlpool entry fee, and some of your inputs will be segregated in to toxic change. You'll have to work out what to do with this change separately, since if you combine this change with any of your final outputs or address you will lose all your privacy.

Also, this method won't be quick. Putting 0.1 BTC in to Whirlpool (for example), coinjoining it once, and then withdrawing 0.1 BTC is still traceable. You will need to leave your coins in Sparrow for several weeks (assuming you are connected 24/7, if not then even longer than this) in order to get a good number of remixes in order to properly obfuscate things.

You will also need to make sure Sparrow is linked to your own full synced node and connecting to the Whirlpool coordinator over Tor.

[apogio]

-snip-

That will work, but a couple of points to be aware of.

If you choose to use Sparrow to Whirlpool, you will pay the Whirlpool entry fee, and some of your inputs will be segregated in to toxic change. You'll have to work out what to do with this change separately, since if you combine this change with any of your final outputs or address you will lose all your privacy.

Also, this method won't be quick. Putting 0.1 BTC in to Whirlpool (for example), coinjoining it once, and then withdrawing 0.1 BTC is still traceable. You will need to leave your coins in Sparrow for several weeks (assuming you are connected 24/7, if not then even longer than this) in order to get a good number of remixes in order to properly obfuscate things.

You will also need to make sure Sparrow is linked to your own full synced node and connecting to the Whirlpool coordinator over Tor.

I think this will work for me. Should I create smaller UTXOs to break the incoming amount into smaller?

In your example if I send 0.1BTC to my mixing wallet, should I send 0.1BTC to my vault in one transaction or multiple smaller?

[NotATether]

To highlight how the address privacy works:

Assuming you make all transactions with one address each, if you are transacting to exchanges and the link, those transactions can be tagged with your KYC info by blockchain analysis companies (who ask nicely for such data).

So that is one transaction "link" that is personally identifiable information.

When you use that address to pay somewhere else, that makes another "link" as in a correlation, in that the person who paid for the exchange and for the other service is the same person.

Your other transactions are made using disposable addresses so those transactions are still private. Also if you make more payments to the second service using different addresses, those will also be private, unless the second service is also a KYC service.

[o_e_l_e_o]

In your example if I send 0.1BTC to my mixing wallet, should I send 0.1BTC to my vault in one transaction or multiple smaller?

So let's say you deposit 0.1 BTC to Sparrow. You'll probably want to enroll that in the 0.01 BTC pool. So you'll end up creating 9 outputs of around 0.01005000 BTC, paying 50,000 sats in fees to the coordinator, and creating a toxic change output of around 0.009 BTC. Your 9 outputs will then pay for themselves to be coinjoined, and you'll end up with 9 coinjoined outputs of 0.01 BTC exactly. You will then need to leave these outputs alone for several weeks for them to benefit from free remixes.

Once you've done all that, you can start moving your 0.01 BTC outputs to your multi-sig wallet. I wouldn't combine all 9 in a single transaction to a single address, since anyone looking at your 9 inputs going in could also look for 9 inputs coming out and make the connection. Maybe consolidate 2 or 3 at a time to a new address each time.

[Smartvirus]

Make use of coin control, send the coin to a mixer or coinjoin it. Freeze the address and do not use it anymore. But I will recommend you to create a new wallet.

That’s some of the advantages you get from having wallets, that allows you the leverage of naming them other than leaving it with default. You could essentially label a wallet and accord it a use and this use would serve better but, having to use it only once would add to your layer of security as, when looked at there won’t be traces of a strain within the wallet.

Once you've done all that, you can start moving your 0.01 BTC outputs to your multi-sig wallet. I wouldn't combine all 9 in a single transaction to a single address, since anyone looking at your 9 inputs going in could also look for 9 inputs coming out and make the connection. Maybe consolidate 2 or 3 at a time to a new address each time.

Having to send them in batches would in no particular order and possibly not all at once would help but, aren’t they still getting into the same address? I get the idea that the dots could still be connected some how from the sun up value though, it still gives that extra stress to deduce.