Can Submarine Swaps in Lightning Wallet increase Bitcoin Privacy ?

[xett036]

Hi,

In this thread below, OP explains the details of 3 methods to increase bitcoin privacy

https://bitcointalk.org/index.php?topic=5464062.0

I've been using Lightning Wallet for a while, can their Submarine Swaps function increase bitcoin privacy as well ?

If they do, I can think of 2 ways, which would be the better one ?

1. BTC in exchange → Muun wallet (Swap from BTC to Lightning; Then Swap the Lightning coins back to BTC ) → BTC in Normal wallet

2. BTC in exchange → Muun wallet (Swap from BTC to Lightning) → Muun wallet 2 (Swap Lightning to BTC) → BTC in Normal wallet

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[Findingnemo]

Submarine swaps don't provide any additional privacy than what's already available in the Lightning Network and Bitcoin blockchain. So you can increase the privacy of your Lightning network by routing through multiple channels such as onion routing.

From the above two options, the 1 seems to be more privacy due to less exposure.

[Charles-Tim]

Know that if you use a lightning network to open a channel and later close the channel, the coin has been mixed already.

From the above two options, the 1 seems to be more privacy due to less exposure.

No differences between the two.

Edit:
@xett036
Use Electrum which is not a centralized means of using lightning payment.

[xett036]

Know that if you use a lightning network to open a channel and later close the channel, the coin has been mixed already.

A few points I haven't understood:

Do you mean that the process of Submarine Swaps does increase bitcoin privacy, similar to those 3 methods mentioned in the other thread ?

When I send BTC from exchange to Muun wallet, Muun wallet will open a channel. But then does this channel close itself automatedly after the transaction is done ? 

Additionally, there're also 2 ways to send BTC from exchange to Muun wallet, are there any differences ?

1. Send BTC directly to Muun wallet

2. Send BTC via exchange's Lightning network (Many exchanges now support it) to Muun wallet

[Charles-Tim]

I've been using Lightning Wallet for a while, can their Submarine Swaps function increase bitcoin privacy as well ?

Iightning network will help in having privacy as you open and close a channel. I do not know about Muun wallet, but you can use Electrum to open and close a channel.

When I send BTC from exchange to Muun wallet, Muun wallet will open a channel. But then does this channel close itself automatedly after the transaction is done ?

You have to open and close the channel manually. Likely Muun wallet do not have a decentralized lightning payment. Use Electrum for lightning network.

Know that if you want privacy, also learn about coin control and learn about having your own node or personal server, like your own electrum server.

[xett036]

Submarine swaps don't provide any additional privacy than what's already available in the Lightning Network and Bitcoin blockchain. So you can increase the privacy of your Lightning network by routing through multiple channels such as onion routing.

Right, but the Swap process enables on-chain BTC to become off-chain BTC, wouldn't this action get rid of traces ? Furthermore, I swap the off-chain coins back to on-chain coins again before spending it. Sounds that the BTC got mixed enough

Regarding the 'routing' you mentioned, I use Muun wallet, how do I route through multiple channels like onion routing ?

I do not know much about submarine swap, but lightning network will help in having privacy as you open and close a channel. I do not know about Muun wallet, but you can use Electrum to open and close a channel.

Right, so in order to have better privacy in Lightning Network, I would need to close the channel each time I finish a transaction ?  

Edit:
@xett036
Use Electrum which is not a centralized means of using lightning payment.

Yeah, I have Electrum for normal BTC transaction, but in terms of Lightning, Electrum seems more complicated to set up. I'm not too sure but do you need to send in BTC already in Lightning network, which doesn't increase the privacy Lightning already has. It's the Submarine Swaps that potentially make coins harder to track

Mod edit: Consecutive posts mergesd

[nc50lc]

If they do, I can think of 2 ways, which would be the better one ?
-snip-
2. BTC in exchange → Muun wallet (Swap from BTC to Lightning) → Muun wallet 2 (Swap Lightning to BTC) → BTC in Normal wallet

Although this sounds plausible, using a custodial client isn't really going to increase your privacy.
As per Moon's privacy policy, they keep logs on almost everything you do with their service "in case of an error".
More info here: muun.com/privacy_policy.html and muun.com/privacy_policy.html#service_providers

If you want privacy, use a non-custodial Lightning wallet which doesn't rely on third-party to manage your channels.
It's a plus if you can connect your own node to it and can connect through Tor.

[Cricktor]

I haven't used Muun in the past and therefore can't contribute to specific properties of this wallet.

I will try to add my opinion in a hopefully more generalized Lightning context.

When you open a Lightning channel there's a funding on-chain transaction that has ties to your wallet's past transactions and the privacy largely depends on how you used and combined past UTXOs in your wallet. This funding transaction defines the amount of coins that can move back and forth in the Lightning channel. At first your channel has almost 100% outgoing capacity but no incoming capacity.

A Submarine swap-out (LN-->on-chain BTC) to my knowledge, please correct if I'm wrong, now breaks the connection from the funding transaction to the receiving bitcoin address. All that's visible is an on-chain transaction from the Submarine swap provider to your receiving address. The received amount of course can't be greater than the channel's sending capacity.

After the Submarine swap-out your channel has some incoming capacity and less outgoing capacity. This can come handy to break the connection of another transaction to your wallet.

Via Lightning or Submarine swap-in (on-chain BTC-->LN) you could now receive coins up to the amount of incoming capacity of your channel whereever those originate from. When you perform another Submarine swap-out to another address of your wallet there would be no visible on-chain transaction connection of the coin flow (the swap-out would be again some possible merged multi-client on-chain transaction into a new address of your wallet).

With Taproot the channel's funding on-chain transaction would not appear as a Lightning channel funding transaction, which is a welcome privacy feature to hide the opening of channels on-chain.

When you close the Lightning channel there will be an on-chain transaction that has a connection to your funding transaction and it will be visible how the channel partners settled their end result of intermediate coin flow of the channel.

Submarine swap-out and swap-in don't come for free as the Submarine swap provider takes it's fees for the service.

[BlackHatCoiner]

Lightning custodials don't portray themselves as privacy protectors, so I wouldn't expect from Muun to be a mixer with submarine swaps. If you're having coins in your channels (without using someone's hub), then the privacy you gain is noteworthy. If you don't have a lightning node, and depend on someone else's hubs / channels, then maybe converting them to XMR, and then back to BTC is a safe alternative? Sounds like a lot of trouble, as you're supposed to keep small amounts in lightning.