How do you scale a blockchain? You don’t. Block space is inherently limited, and everyone making Bitcoin transactions competes for it. RBF and CPFP are some of the most prominent tools in the toolbox of a user for the block space scarcity competition.

Wallets

I have compiled a list of non-custodial Bitcoin wallets for desktops that are actively being developed and are open source. Please note that I have excluded those that require a hardware wallet since I don’t have access to them in my current location (Ledger Live, Specter, Trezor Suite.)

RBF

RBF, stands for Replace By Fee and is a feature that allows modification of an unconfirmed Bitcoin transaction to include a higher fee, thus confirming sooner. While it is less well-known, this feature also allows for the cancellation of unconfirmed Bitcoin transactions.

CPFP

CPFP, short for Child Pays For Parent, is also a handy feature that accelerates a transaction by spending one of its outputs with a high fee. This results in a child transaction, paying for the parent transaction. CPFP is especially helpful when we cannot use RBF, such as when receiving a transaction and not owning all the inputs involved.

Speed Up Receiving Transaction

Bitcoin Core

N/A

Electrum

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Nunchuk

N/A (They claim it’s available on their blog, but I couldn’t find it, so it seems it is only the case with their mobile version.)

Sparrow

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Wasabi Wallet

Step 1

Step 2

Step 3

Step 4

Speed Up Sending Transaction

Bitcoin Core

Step 1

Step 2

Step 3

Electrum

Step 1

Step 2

Step 3

Step 4

Nunchuk

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Sparrow

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Wasabi Wallet

Step 1

Step 2

Step 3

Step 4

Cancel Transaction

Bitcoin Core

N/A? The option appears to be greyed out for me.

Electrum

Step 1

Step 2

Step 3

Step 4

Nunchuk

N/A

Sparrow

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Wasabi Wallet

Step 1

Step 2

Step 3

Step 4

The post RBF and CPFP: UX Survey with Screenshots appeared first on Wasabi Wallet - Blog.

Account Model

I have 7 Hufflepuff on my account and you have 3 Hufflepuff on your account. Then I send you 1 Hufflepuff.

You’re already familiar with the account model, this is how the banking system works, this is how Ethereum works, but this isn’t how Bitcoin works. Bitcoin uses UTXO model instead. Why? That’s an interesting topic, but it isn’t relevant for this article, so just take it as is.

UTXO Model

I have 7 bitcoins in my wallet and you have 3 bitcoins in your wallet. Then I send you 1 BTC.

I built a transaction that has one input: 7 BTC, and two outputs: 1 BTC, which is yours and 6 BTC, which is a change coming back to me.
Now you have two coins: 3 BTC and 1 BTC. Let’s call these coins Transaction Outputs — TXOs. In fact these coins are unspent, so we may be more specific and call them Unspent Transaction Outputs: UTXOs.

Coinjoin

Coinjoins are collaborative Bitcoin transactions. Multiple people are participating with inputs in a transaction and that’s what we call a coinjoin. Let’s make one!

But there’s a problem. It’s trivial to tell the sub-transactions by correlating the amounts:

6 -> 6
3,1   -> 4

Chaumian Coinjoin

Chaumian Coinjoins, specified and implemented by the author of this article defend against amount correlation by pre-agreeing upon a common denomination: 3 BTC.

This way nobody can tell where the 3 BTC UTXOs are coming from. Although we have privacy now, this is still not perfect. This suffers from three main problems.

1. Change Creation: With amount correlations, passive observers can tell that the 1 BTC change output comes from the 1 BTC input.
2. Blockspace Efficiency: Chaumian Coinjoin algorithms create a lot of outputs.
3. Limited Transaction Structure: Because of design limitations, the coordinating party of Chaumian Coinjoins can also tell that the 3 BTC and 1 BTC inputs were owned by the same user.

WabiSabi

To tackle the coordination issue, we came up with a new research, called WabiSabi, which enables us to create any kind of coinjoins without privacy leaks. We can now add as many inputs and create as many outputs as we want to and we don’t even need to agree upon common denominations. At least not for coordination reasons.

This is far from trivial. Two years of bloody cryptographic research went into solving this problem: how to create trustless coinjoins with arbitrary amounts? In the beginning I didn’t think it’s even possible, but one thing followed another and viola, it’s solved! Now we have complete flexibility regarding coinjoin amount organization, so what do we do with such great power?

Recap

So far we worked on well-defined problems. Centralized mixers were stealing user funds and can deanonymize them…so here comes coinjoins to the rescue. Coinjoins are deanonymizable by amount correlations…so here comes Chaumian Coinjoins to the rescue. Chaumian Coinjoins are cryptographically limiting the coinjoin transaction structure…so here comes WabiSabi to the rescue.

And now we bumped into the unfathomable complexity of the real world. Countless variables lead to ill-defined problems. There was no logical way to progress forward from the bottom up, so a strategy change was needed. We decided to apply the oldest tool humans have: intuition, to come up with many intuitive algorithms to structure coinjoins and see which one yields the best results.

Dynadenomination Coinjoins

Dynadenomination Coinjoins utilize not only multiple denominations, but also multiple denomination systems, randomly and dynamically. I expect this scheme to be improved until Wasabi 2.0 release, ideas and feedback is very much encouraged! I think this already has all the techniques which we’ll apply, so it’s developed enough to talk about. First let me describe the algorithm, then proceed further with analyzing it.

Simulation

We created a simulation of our dynadenomination coinjoins in the following way:

1. First we took a few months of real world Wasabi Wallet fresh coinjoin inputs. Fresh signifies these have never been mixed before. These are the amounts users come into mixes in the real world.
2. We continued our preparation by randomly grouping these fresh amounts together and called these groups users, then executed our mixing algorithm.
3. Then we did the same grouping again, but only 70% of the simulated inputs came from fresh amounts, the rest came from the result of the first coinjoin simulation. This is how remixes were simulated. 30% is also based on real world Wasabi Wallet remix statistics.
4. Finally executed the mix and wrote out the results.

We can see, in our simulation 100 user participated with 300 inputs altogether. Some user participated with less than 3 inputs, some did with more. In the real world we cannot tell the number of users, but this is a simulation, the simulation created these groupings, so we know exactly the links because of that. This coinjoin resulted in 404 outputs, with the exception of two outputs, all of them gained a mathematically verifiable anonymity set. In average an output has 5 anonymity set. This would be already cool by itself, but the privacy guarantees don’t stop with naïve anonymity set calculations. But first, let me describe the above algorithm.

Algorithm

Imagine you’re a user. You know the group of input amounts you’re participating in the coinjoin and you know the input amounts of others.
You also create a big list of denominations from multiple denomination systems. In this case we’re working with powers of 2 (1, 2, 4…), powers of 3 (1, 3, 9…), powers of 3×2 (2, 6, 18…), powers of 10 (1, 10, 100…) and preferred value series (1, 2, 5, 10, 20, 50…)
To finish the setup, let’s create a big list to be our possible denominations: 1,2,3,4,5,6,8,9,10,16,18,20,27,30,32,…

In order to decide what outputs you want to create, first create a frequency table by greedily breaking down each and every input amount with our multidenomination system. For example, the inputs 28 and 29 would be broken down into 27, 1 and 27, 2 respectively. In that case our frequency table holds the following elements: 1:1 , 2:1 and 27:2 . Let’s agree that the current coinjoin round’s denomination will be those denominations that have occurred at least twice in the breakdown. In our example it’d be only 27, which not only shows that the example is too simple, but also that this algorithm doesn’t work for very few inputs, it only starts to make sense from about 50 inputs.
Finally, take the sum of your inputs and break it down into the selected frequent denominations, but this time not greedily, but rather somewhat randomly. For example if we found frequent denominations 1, 4, 6 and the sum of our inputs is 8 then greedily you’d break it down to 6, 1, 1. But with some optimization, you could find that breaking down your sum into 4, 4 would be better, because it creates less outputs and that’s highly desirable, because blockspace is scarce. However finding optimal breakdowns is an exponentially complex problem, so we can only use heuristics here and these heuristics should be spiced with some randomness for privacy reasons.

Privacy Guarantees Of Wasabi Wallet 2.0

Inherited Guarantees

Wasabi 2.0 inherits the security and privacy guarantees of Wasabi 1.0, which is: nobody can steal your coins, the coordinator cannot correlate your inputs with your outputs and the naïve anonymity set guarantee, which is what you can see on the blockchain, with your own eyes, you can count the number of equal outputs that nobody can tell apart.

Sub-Transaction Privacy Guarantee

However Wasabi 2.0 seems to weaken the anonymity set privacy guarantee by creating smaller equal amount outputs. Wasabi 1.0 ideally creates 100 equal outputs, Wasabi 2.0 does much less. At first it may seem like a privacy tradeoff to avoid change creation and inflating outputs, which it was intended to be that at first. But upon a deeper look we observed the privacy guarantees are much larger, because of the huge number of sub-transactions. Take an output from the following output group:

There are 7 occurrences of 0.01 BTC output.

You may think the anonymity set of the chosen output is 7, but in reality it’s just a minimum estimation. It’s much higher than that! It could potentially come from many different inputs, not just 7 of them.
To get a sense of this, take the following transaction: 1, 1, 2, 4 -> 2, 2, 4
4 only appears once on the output side. It’s naïve anonymity set is 1. But it could also be that 1, 1, 2 came from the same user. Therefore its anonymity set is 2, because there are 2 different groupings of the inputs where the output could have come from.
The Dynadenomination Coinjoin algorithm started by breaking down each and every input into denominations and took the most frequent ones. This was not only helpful in achieving probabilistic equalities on the output side, but these are also great numbers to increase their combinations such as they add up to many input combinations. In other words the final outputs end up adding up to more valid sub-mappings (sub-transactions) than if they were to be chosen randomly. Furthermore I’m talking in exponentials here. The combinations of inputs and the combinations of outputs are huge numbers.

Computational Privacy “Guarantee”

Fully analyzing Wasabi 2.0 coinjoins is computationally hard and will probably be impossible for decades to come because a combinatorial complexity explosion is happening when we try to find all the sub-transactions of a Wasabi 2.0 coinjoin.

A brute force algorithm would have to

1. Take all the possible combinations of how inputs can be grouped together: 2^number of inputs .
2. Take all the possible combinations of how outputs can be grouped together: 2^number of outputs .
3. Finally check for equality of every combination to find a sub-transaction. This would take 2^number of inputs * 2^number of outputs iterations.

In the case of our example transaction: 100 inputs, 300 outputs, it’d be:

In a 2017 research paper, Anonymous CoinJoin Transactions with Arbitrary Value, the authors measured the processing time it took them to find all valid mappings of coinjoin transactions: forever. Later, but independently, the guys working on CashFusion observed the same.

That’s all I note here, because our cryptographers will kick my ass if I try to make any claims on Wasabi relying on computational privacy. Nevertheless I still consider this a spicy addition.

In Summary

Wasabi 2.0 provides decently verifiable privacy based on naïve anonymity set calculations and a huge probabilistic privacy based on the inflation of sub-transactions. But this is unanalyzable because of the spicy third guarantee: computational privacy, which is theoretically unsound, but practically relevant.

The post Privacy Guarantees Of Wasabi Wallet 2.0 appeared first on Wasabi Wallet - Blog.

Even though Bitcoin is the worst privacy system ever, everyone in the community strongly values privacy [src]

This isn’t unique to us, Bitcoin developers. This is a well-known and well-researched phenomenon called the privacy paradox. People claim to highly regard their privacy, yet they are observed to neglect it instead.
However profound it may be, the privacy paradox is just the tip of the iceberg. Deeper reflections on personality and society await us when setting out to dive into the ocean of nyms and identities.
Privacy is an essential ingredient for self-development. Global privacy trends will revolutionize governments. And fungibility of the world’s next reserve currency will shape humanity’s progress forward.
In this essay, I’ll discuss the concepts of anonymity, fungibility and privacy; and examine some surprising psychological, geopolitical and economic implications of the technological advancements those are about to sway the future of privacy.

Anonymity

Let’s start our in-depth exploration of privacy in the land of mathematics, because that’s where the concept of anonymity lives.
Anonymity was first formalized in a 1998 research paper titled Protecting Privacy when Disclosing Information: k-Anonymity.
The authors presented two methods — generalization and suppression — to k-anonymize data. What does the k stand for? You are k-anonymous if there are k-1 others who could have also done the same action you did, thereby hiding you in a k sized crowd. This crowd is formally called your anonymity set. The larger the k is, the more anonymous you are. And k = 1 represents a unique identity. Consequently, anonymity is teamwork. Anonymity loves company.

We can use anonymization through generalization in Bitcoin by creating collaborative transactions.
For example, Wasabi Wallet often brings together 100 individuals to make collaborative and shared transactions, namely coinjoins. A Bitcoin transaction comprises inputs and outputs, where the role of inputs is to spend unspent transaction outputs (UTXOs) and the outputs are anew UTXOs.
Wasabi users k-anonymize their unique UTXOs such that the result of the coinjoin is ideally 100 distinct, yet k-anonymous, outputs, where k = 100. These k-anonymized UTXOs are indistinguishable from each other. This is how anonymization, a mathematical tool, realizes the indistinguishability — also known as homogeneity or fungibility — property of a currency.

Fungibility

Money is the most successful story ever told. It has no objective value… but then you have these master storytellers: the big bankers, the finance ministers… and they come, and they tell a very convincing story — Yuval Noah Harari [src]

For humanity to thrive, it is paramount to improve the technology of money. Advancements in human cooperation — pointing, speech, storytelling, writing, money — are a major reason for our success as a species.
Leaving the trees behind, our ancestors learned to point to the same target. Later, they learned to point with their mouth. Then, they realized it’d be a shame if these hunting stories remained untold and unwritten. At last, they found the holy grail of human cooperation: Money. It allowed us, for the first time in history… Hey hey hey, slow down!
Stories are prevalent in every area of our lives. They aren’t only in books, movies, and games, they also come up when you think, talk, write, or code. They even make their way into the most logical and rigorous scientific research papers. We’re biologically hard-wired for stories because knowledge and wisdom were passed down through generations using storytelling. The invention of stories scaled human cooperation over one’s lifespan.

Then money came along: “the most successful story ever told.” Harari identifies money as the only story that everyone believes in. We share no belief in God, we share no belief in Democracy, we share no belief in Human Rights, but we all share a belief in money. Why?

Money allowed us, for the first time in human history, to abstract away the fruit of our labor — the point of our stories — to its purest form: value. Then, we could preserve it and even exchange it for other goods and services. The more securely stored our worth is and the less friction is required to exchange it, the better the quality of the money. Therefore, it’s crucial for the progress of humanity to build increasingly improving money technologies.

What is the best money we might conceptualize?
Thousands of years ago, an Athenian gentleman, Aristotle, identified the Properties of Good Money. Although economists are still debating the details, the basic idea is this: money must be durable, divisible, scarce, stable, acceptable, portable, and fungible.
Bitcoin — or another cryptocurrency, but most likely Bitcoin — will flippen the USD and become the most valuable currency. With the exceptions of stability, acceptability, portability and fungibility, Bitcoin fulfils the properties of good money. I regard stability and acceptability as meta properties. As the market capitalization of a currency grows, these properties get satisfied. Portability is also something well incentivized to be taken care of, although the challenges of making Bitcoin cheap and fast are far from trivial, the brainpower directed towards achieving these goals is extraordinary.
This leaves us with fungibility as the primary property to focus. The most important thing one can choose to work on is Bitcoin’s fungibility.

Money in its various guises derives its usefulness from the fact that one can be relatively certain that a dollar received is a dollar able to be spent without friction or uncertainty — Alastair Berg [src]

Fungibility contributes to the quality of money.
Fungibility is a scale. It tells how interchangeable and indistinguishable individual units of a money are. In his 2019 paper, economist Alastair Berg states “That the fungibility of money reduces the costs of exchange is well explored (Brunner and Meltzer, 1971; see also Banerjee and Maskin, 1996, p.958; Menger, 1892)”.
This does not come as a surprise as contravening fungibility violates the fundamentals of money. It introduces friction in exchanges and makes people question their belief in the money itself. Berg continues, “Fiat currency derives its usefulness from the likelihood that it will be acceptable in some future exchange, rather than having any intrinsic value or secondary uses.”

Privacy

Fungibility of a currency ensures the privacy of the individual.
Privacy is the individual’s ability to reveal themselves selectively to the world. The adjective private is often used synonymously with the adjective secret. However, the latter’s noun form, secrecy, fails to capture the meaning of privacy, which leads to confusion over the terminology. A more legal strand of definitions emerged in 1890, when privacy was first proposed to be a fundamental human right and defined as “the right to be let alone.”

A currency lacking fungibility takes away the individual’s freedom to keep their financial matters personal and define the boundaries of their financial life; therefore, lack of financial privacy is a direct consequence of inferior fungibility.

Privacy isn’t only a toy for lawyers or philosophers, since it encompasses an individual’s ability, it also has profound psychological relevance.

We all begin life by having zero privacy. Then, as we grow, we learn to define our boundaries; learn who we let close and who not. Studies on children illustrate this: as they grow, they develop their Self concept.

Studies of prison populations show that the opposite of privacy development occurs in these spaces. In such circumstances, the Self concept of inmates shrinks down significantly to their body, some immediate actions, and a few belongings.

It’s unfortunate when our privacy is taken away by force, but it’s more productive to concentrate on situations when we’re giving it up voluntarily, because this seems to occur frequently, too. In reality, we aren’t giving up our privacy for nothing: we’re trading it for something. It’s simply that the something we are trading it for is often so insignificant that it looks like we’re just giving away our personal information to whomever. This is also the explanation for the privacy paradox: poor cost-benefit analysis and risk assessment.

Although there is nothing inherently wrong with trading our selves for money or other benefits, it’s important to know that if we aren’t making these decisions consciously, then our Self concept isn’t developed enough. We don’t have a good idea of where our own boundaries are. We don’t know our Selves well enough to decide what personal information we want to trade in exchange for using Facebook or for one of its third party application that can magically tell us what house we’d belong to in Hogwarts.

The fundamental political difference between people is: how many walls should there be around your stuff? The ultimate liberal answer is zero and the ultimate conservative answer is: “Bring on those walls!” — Jordan Peterson [src]

Currently, society is undergoing rapid developments due to accelerating scientific advancements. How will our privacy — our liberty, our individualism — be affected by these changes? What does the future hold? According to economist David Friedman, technological trends are pointing towards a world of strong privacy but not the way one might expect.

Technologies of anonymous communication, anonymous currency, and reputation systems have been invented. They cannot be un-invented. These are all the ingredients needed to build a circular economy with strong privacy in cyber-space. Simultaneously, in meat-space our privacy is eroding. How long will doors and curtains — which are currently cutting-edge meat-space privacy technologies — hold against the advancements of mass surveillance?

Technology extends human power. Maybe the only way to avoid catastrophes, where humans wrongly exercise their newly gained divine powers — like releasing deadly viruses to the world — is if everyone surveils everyone all the time? Maybe a transparent society in meat-space is necessary to balance the power that technology gives us after all?

But all this will be irrelevant. As cyber-space grows — including Virtual Reality, which is increasingly becoming more immersive — meat-space is losing its relevance, and for many it already has. Therefore, it won’t matter that we’ll be surveilled in meat-space because we’ll be just doing fine where it matters: in cyber-space.

Friedman’s speculation goes even further: in a world where the bulk of the economic activity happens outside of the control of governments — online — governments will become the equivalent of landlords. They’ll compete for citizens to maximize tax revenues, and sovereign individuals will be free to choose where they want to live.

Economic activity hidden by strong privacy cannot be taxed. If you think that the world would be a better place if government had more access to other people’s money, then you think it’s a bug, otherwise it’s a feature — David Friedman [src]

In Conclusion

Anonymity is a mathematical tool used to realize other values like privacy of the individual or the fungibility of a currency. In economics, fungibility contributes to the quality of money, which facilitates privacy of the individual. Privacy is essential for the development of the Self. This notion of the field of psychology is especially important, because our privacy — our ability to define our boundaries — has changed in the past, continues to change in the present, and is expected to undergo more radical changes in the future.

The privacy challenges of the future will not be the same as those of the past. I predict that we’ll have strong privacy in cyber-space and weak privacy in meat-space. As economic activity moves from the offline to the online world, the relevance of meat-space will shrink; simultaneously, the relevance of the cyber-space will grow; therefore, we’re looking ahead to a world of strong privacy.

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Even though we have our own preferences at Wasabi, we will prioritize what’s best for our users.

Wasabi Wallet will support both sides of any meaningful bitcoin fork. We will not withdraw our support until we are sure our users are given enough time to sell the less successful side of the fork without compromising their security or privacy.

The post Wasabi Wallet Chain Split Policy appeared first on Wasabi Wallet - Blog.

Wasabi Wallet has enabled light wallet users to preserve their privacy without a trusted third party. Wasabi 2.0 takes things to the next level by not only making Bitcoin privacy faster and cheaper, but also as effortless as eating over your calorie limit for the day.

Mass Bitcoin adoption is just around the corner.

If this is true, Bitcoin will quickly scale up to fulfill fiat currency’s current obligations. And there is only one way for this rapid scaling to happen: with centralized Bitcoin banks.

Bitcoin’s sudden improvement in acceptability is detrimental to its portability, fungibility and temporarily to its scarcity properties.

Therefore, our goal cannot be anything else but to make Bitcoin ready for mass adoption. To achieve this, we must start with its weakest link: privacy. Wasabi 2.0 may be Bitcoin’s last chance to scale gracefully.

Wasabi 2.0 is a next-generation Bitcoin privacy wallet that will finally bring confidentiality within reach of any Bitcoin user, not just the technically inclined. Wasabi 2.0 may be Bitcoin’s last stand in the fight for becoming “good money.”

In a nutshell…

Wasabi 2.0 is a combination of user interface (UI), user experience (UX) and coinjoin (CJ) improvements.

• Wasabi 2.0 gets a complete UI rewrite with modern, fluent design principles without taking away from the pre-existing feature set of the current software.
• Regarding UX, manual coinjoining will be a thing of the past or for power users only.
• On the CJ front, the long awaited WabiSabi will also make its debut. It will facilitate faster, more cost-efficient collaborative transactions without waste, lay the foundation for payments within coinjoins and open the door for combinations with other technologies.

ETA?

ETA stands for Estimated Time of Arrival. Our estimations are:

• Best case: 3 months – 95% chance of missing.
• Most likely case: 9 months – 50% chance of missing.
• Worst case: 14 months – 5% chance of missing.
• Standard deviation: (worst - best) / 6 = 1.8 months
• Mean: (best + worst + 4 * nominal) / 6 = 8.8 months

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