Consolidating UTXOs in wallets.

[satscraper]

Over time, a user's wallet may become cluttered with numerous UTXOs originating from various sources. At this point, the necessity arises to consolidate these UTXOs. I want to highlight a technique implemented in the Sparrow wallet that facilitates this process and, at the same time,  also preserving, and sometimes enhancing, user privacy. This technique is known as "fake conjoin."

Fake conjoin involves constructing a transaction within Sparrow wallet that imitates a typical batch transaction involving two parties. When consolidating funds in Sparrow, users should select a specific address to send funds, the value of which is slightly less than half the total sum of UTXOs held in the wallet. Then, by clicking the "Privacy" button located at the bottom-right corner of the Send window, Sparrow does the job.

Sparrow automates the creation of a "fake conjoin" transaction by grouping UTXOs into two sets, mimicking two independent parties. This transaction consists of five outputs: two with identical amounts (999,974 sats in example on below picture), individually directed to the user's chosen address and a decoy address. Additionally, two outputs simulate the change for each party involved in the transaction, while the fifth output represents the transaction fee.

 

The beauty of the "fake conjoin" UTXOs-consolidation-approach  with the use of Sparrow lies in its versatility; it can be applied to virtually any wallet. Personally, I have successfully utilized this technique to consolidate my holdings stored in Passport 2 hardware wallet, paired with Sparrow. Sparrow's intuitive interface guided me through the process effortlessly.

P.S. For above instance the testcoins were used.

Readings:
1. Spending Privately
2.Stonewall

UPD. People should never keep  questionable UTXOs with those ones that are not problematic in one wallet.

[1714673207]

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[albert0bsd]

Hi, I've using the wallet for some 3-4 months and it is really easy to use.
With excelent features like:

- RBF
- Integrated mixer
- Fake conjoin
- UTXO control

Along others, the only thing that the wallet is missing is the hability to import individual key, it only offer the option to sweep them.

[Kruw]

You'd be better off consolidating them in a real coinjoin using Wasabi Wallet, BTCPay Server, or Trezor instead.

[satscraper]

You'd be better off consolidating them in a real coinjoin using Wasabi Wallet, BTCPay Server, or Trezor instead.

I don't think the  real conjoin is the optimal choice if you are aimed solely to consolidate UTXOs.  For privacy improvement,  it is likely  Yes, but for single consolidation purpose it would be overkill. Besides the more relevant techniques are in your arsenal the better. BTW,  if you lean towards real conjoin , Sparrow offers this option via mixing with wirlpool.

[albert0bsd]

You'd be better off consolidating them in a real coinjoin using Wasabi Wallet, BTCPay Server, or Trezor instead.

About better or not that is suggestive no? The point of a fake coinjoin is that it looks like a real coinjoin and only the people who participate on it can spot it as a fake coinjoin, all outside just can see a real coinjoin transaction.

Or can you spot the difference between them and tell us what is a fake coinjoin and what is a real one?

[Kruw]

I don't think the  real conjoin is the optimal choice if you are aimed solely to consolidate UTXOs.  For privacy improvement,  it is likely  Yes, but for single consolidation purpose it would be overkill. Besides the more relevant techniques are in your arsenal the better. BTW,  if you lean towards real conjoin , Sparrow offers this option via mixing with wirlpool.

Fake coinjoins use the same amount of block space as regular coinjoins, there's no reason to limit the number of participants in your consolidation transactions to yourself.  Unfortunately, Sparrow's Whirlpool implementation does not offer private input consolidation like the WabiSabi coinjoin protocol does, so you reveal common input ownership when entering the pool: https://bitcointalk.org/index.php?topic=5286821.msg62072711#msg62072711

About better or not that is suggestive no?

No, it's literal: If you are trying to privately consolidate your inputs, each marginal input added to the transaction that doesn't belong to you increases your privacy.

The point of a fake coinjoin is that it looks like a real coinjoin and only the people who participate on it can spot it as a fake coinjoin, all outside just can see a real coinjoin transaction.

Or can you spot the difference between them and tell us what is a fake coinjoin and what is a real one?

It depends on your coin control.  If you merge your faked outputs in the future, then it doesn't help.

[albert0bsd]

It depends on your coin control.  If you merge your faked outputs in the future, then it doesn't help.

I totally agree, people need to know what they are doing, if they start to merge utxos without any coin control, then all the previous mixers and coin-join transaction become useless and a waste of fees.

[BlackHatCoiner]

I doubt a fake coinjoin provides beyond minimum privacy. It is relatively trivial for a chain analysis company to figure out you're faking the coinjoin when the time comes and you'll have to consolidate most of the outputs you created by the fake coinjoin.

You'd be better off consolidating them in a real coinjoin using Wasabi Wallet, BTCPay Server, or Trezor instead.

Yeah, guys. You better off use flawed software that merges outputs together and funds the operation of chain analysis. What a sham.

[Kruw]

You'd be better off consolidating them in a real coinjoin using Wasabi Wallet, BTCPay Server, or Trezor instead.

Yeah, guys. You better off use flawed software that merges outputs together and funds the operation of chain analysis. What a sham.

Where's the flaw?  All those outputs are private.

[BitcoinsGreat]

It depends on your coin control.  If you merge your faked outputs in the future, then it doesn't help.

I totally agree, people need to know what they are doing, if they start to merge utxos without any coin control, then all the previous mixers and coin-join transaction become useless and a waste of fees.

How is that even possible?

To help understand easily. let's suppose i have my Bitcoins in Wallet A, Wallet B and Wallet C and I created a new Wallet Wallet D.
I used mixers to mix my coins from Wallet A to Wallet D.  Also i mixed my coins from Wallet B and C into Wallet D.

Now Wallet D contains all my bitcoins with three UTXOs. Now I Consolidating UTXOs to a change address in my wallet. Since i have mixed my coins from three wallets to my new Wallet D, no one can know the source of these transactions. Now Consolidating UTXOs one can only see that these all bitcoin belongs to one person but they will not know that these coins were mixed before reaching the Wallet D.

[albert0bsd]

How is that even possible?

What you just explained is correct, if someone did exactly what you said there is no problem.

I suppose that @Kruw said if you merge some mixed or coin-join transaction with another transaction that hasn't been mixed before.

Let's say that you don't have enough experience with all this topic, but you want to enter in this (i am talking of a newbie user).

Example: you have some mix of sources in your UTXOs, some of them from mixing/coin-join and some other from a KYC source like some CEX.
In that case if the user mixes some of those KYC UTXOs with some coin-joined UTXO then all the previous work becomes useless.

I remember reading somewhere before that all the "chain analysis" that some companies do is not based on any reliable document or research. It is basically something like "I believe that those Utxos belong to the same person/entity" obviously there are some cases where there is no doubt, but there are also cases where there may be doubts

[witcher_sense]

It depends on your coin control.  If you merge your faked outputs in the future, then it doesn't help.

I totally agree, people need to know what they are doing, if they start to merge utxos without any coin control, then all the previous mixers and coin-join transaction become useless and a waste of fees.

How is that even possible?

To help understand easily. let's suppose i have my Bitcoins in Wallet A, Wallet B and Wallet C and I created a new Wallet Wallet D.
I used mixers to mix my coins from Wallet A to Wallet D.  Also i mixed my coins from Wallet B and C into Wallet D.

Now Wallet D contains all my bitcoins with three UTXOs. Now I Consolidating UTXOs to a change address in my wallet. Since i have mixed my coins from three wallets to my new Wallet D, no one can know the source of these transactions. Now Consolidating UTXOs one can only see that these all bitcoin belongs to one person but they will not know that these coins were mixed before reaching the Wallet D.

Don't forget that all transactions in the blockchain are permanently recorded and publicly available, meaning that an observer can know that someone used a mixer to create new anonymous output. When you create three of such outputs and send them one by one to separate addresses, it still looks like regular transfers from different people and can be considered relatively private transactions. But once these anonymous outputs appear in a single transaction, an observer concludes all those previous transactions were made by a single person, a person who used one or more mixers to anonymize his coins. Consolidation of coins almost always damages one's privacy and lowers the overall anonymity set, but this situation may change if we come up with a technology that will make multiparty transactions look like regular consolidations.

[satscraper]

How is that even possible?

What you just explained is correct, if someone did exactly what you said there is no problem.

I suppose that @Kruw said if you merge some mixed or coin-join transaction with another transaction that hasn't been mixed before.

Let's say that you don't have enough experience with all this topic, but you want to enter in this (i am talking of a newbie user).

Example: you have some mix of sources in your UTXOs, some of them from mixing/coin-join and some other from a KYC source like some CEX.
In that case if the user mixes some of those KYC UTXOs with some coin-joined UTXO then all the previous work becomes useless.

I remember reading somewhere before that all the "chain analysis" that some companies do is not based on any reliable document or research. It is basically something like "I believe that those Utxos belong to the same person/entity" obviously there are some cases where there is no doubt, but there are also cases where there may be doubts

People should never keep  questionable UTXOs with those ones that are not problematic in one wallet.

Isolate wallets differing by ether derivation paths or any other attribute suitable for given user must be used to separate UTXOs by their types.

Fake conjoin is exclusively for consolidation purpose with preserving privacy ( Sparrow traces UTXOs and make sure that those ones that were  in one of the previous transactions will never be separated between senders it mimics)  .

[NotATether]

Note that if you combine all of your UTXOs to one address using a single transaction, any blockchain analysis software will know that a single person owns all of the addresses.

It is probably better to leave them like that if the inputs are large enough, i.e. no 10000 sat outputs lying around, and to combine only the dust inputs (even better, send the consolidation transaction through through a mixer first)

[Kruw]

Note that if you combine all of your UTXOs to one address using a single transaction, any blockchain analysis software will know that a single person owns all of the addresses.

It is probably better to leave them like that if the inputs are large enough, i.e. no 10000 sat outputs lying around, and to combine only the dust inputs (even better, send the consolidation transaction through through a mixer first)

A mixer wouldn't provide you any privacy since they are a trusted third party, you would just end up having your coins stolen.

[BlackHatCoiner]

Where's the flaw?  All those outputs are private.

There are 262 input and 294 output collaborators, 5 coinjoin exit merges and 3 address reuses.

It is basically something like "I believe that those Utxos belong to the same person/entity" obviously there are some cases where there is no doubt, but there are also cases where there may be doubts

Their business model depends on the latter. It is utter guesswork. If a criminal mixes their coins with several individuals in a coinjoin, you can't seriously claim that every single output is now considered tainted, unless you broke the coinjoin (i.e., you were all the other participants).

A mixer wouldn't provide you any privacy since they are a trusted third party, you would just end up having your coins stolen.

A mixer is a service with sole purpose to increase on-chain privacy. The required trust doesn't change that fact, nor do the instances of mixers which were either scams or were confiscated by the authorities.

[Yamane_Keto]

I did not understand how this fake coinjoin could enhance privacy. All I see is an increase in fees and making your transaction resemble coinjoin (which is not a good thing, especially for those looking to hide their identity from their friends without using mixing services) without enhancing privacy.

How is that even possible?

To help understand easily. let's suppose i have my Bitcoins in Wallet A, Wallet B and Wallet C and I created a new Wallet Wallet D.
I used mixers to mix my coins from Wallet A to Wallet D.  Also i mixed my coins from Wallet B and C into Wallet D.

Blockchain analysis services give a piece of information, and the agencies collect the necessary information to link everything to an account or service to which you provided your personal data. In the previous case, there is a high probability that wallet A and D are connected because they have the same value and the starting and ending points were the same. Information like this with information Others may lead to your identity being revealed if you make a mistake, even if it is simple.

[Kruw]

Where's the flaw?  All those outputs are private.

There are 262 input and 294 output collaborators

That's called "remixing", those 262 inputs and 294 outputs gained even more privacy by participating in multiple coinjoin transactions.  It's not a flaw, it's an advantage, because someone trying to track the flow of someone's coins now have to consider inputs from previous transactions and spends from future transactions.

A mixer wouldn't provide you any privacy since they are a trusted third party, you would just end up having your coins stolen.

A mixer is a service with sole purpose to increase on-chain privacy. The required trust doesn't change that fact, nor do the instances of mixers which were either scams or were confiscated by the authorities.

You are wrong, a mixer is a trusted third party, they do not provide you privacy.  The instances of mixers stealing their users confirm this fact, with the end result of having their users' transaction history given to government agencies: https://bitcoinmagazine.com/technical/how-authorities-found-bitfinex-bitcoin

[satscraper]

Note that if you combine all of your UTXOs to one address using a single transaction, any blockchain analysis software will know that a single person owns all of the addresses.

It is probably better to leave them like that if the inputs are large enough, i.e. no 10000 sat outputs lying around, and to combine only the dust inputs (even better, send the consolidation transaction through through a mixer first)

As I have already mentioned  the consolidation via mixer is overkill.  Fake conjoin does its job perfectly and never consolidates into single address. To be true I think the  used "fake conjon" term for such  Sparow's transactions is unsuitable and misleading. I would rather  call them  "fake batch" transactions, but, unfortunately, what already exists can’t be changed.

I did not understand how this fake coinjoin could enhance privacy. All I see is an increase in fees and making your transaction resemble coinjoin (which is not a good thing, especially for those looking to hide their identity from their friends without using mixing services) without enhancing privacy.

Fake two person coinjoin

[Pmalek]

I prefer to just use multiple wallets for different things and not connect KYC coins with non-KYC coins, for example. Wallet creation is free, use a new one (and new addresses from it) only for a specific purpose. For instance, my Sinbad signature payments go into a new wallet that's got nothing to do with my non-public addresses, private investments or my other coins I am holding for whatever reason in completely different wallets. If I do consolidations and mixing, I will still not connect those "different-purpose" coins unless I have a reason why I am doing that or don't care.