This stems from my original post #1015766
It is a simple, but good enough approach in my estimation. But, I am clearly open to hearing others thoughts on it. I primarly made this for myself as I currently use a Blockstream Jade, but this can apply to other cold storage devices.
My goal is to hopefully help others with a clear guide on the path to better privacy, but keeping it simple and extracting the high level stuff.
Bitcoin Privacy & Coin Control Reference Guide
Core Privacy Strategy
The 3-Wallet System
- Old Wallet (Jade) - Contains traceable coins from exchanges, P2P, Alby, etc.
- Mixing Wallet (Sparrow Hot Wallet) - Temporary wallet for privacy operations
- Clean Wallet (New Hardware/Cold Storage) - Final destination, never connected to your identity
Initial Cleanup Process
Steps:
- Create new seed phrase for clean wallet (completely separate from Jade)
- Install Sparrow, create new hot wallet (different seed from both other wallets)
- Transfer coins from Jade to Sparrow mixing wallet
- Use Sparrow's "Privacy" toggle (Stonewall transactions) when sending
- Send from Sparrow to clean wallet using private transactions
- Wait days between each step - don't rush the process
- Use different amounts - avoid round numbers
- Send in batches rather than all at once
- Wipe Sparrow mixing wallet when done
Ongoing Acquisition Strategies
New Bitcoin Purchases
From KYC Sources (Exchanges)
- Never send directly from exchange to clean wallet
- Wait several days between exchange withdrawal and mixing
- Jade (old coins) → Sparrow (mixing) → New Clean Wallet
- Exchange → Wait → Sparrow mixing → Wait → Clean wallet
- Use Stonewall transactions in Sparrow
From P2P Sources (Bisq, RoboSats, Local Meetups)
- Can send directly to clean wallet
- No prior connection to your identity
- No mixing required (but can add for extra privacy)
Lightning Network Payments
Option 1: Direct Withdrawal
- Lightning already provides privacy benefits
- Can withdraw directly to clean wallet
- Optional: run through Sparrow mixing for extra privacy
Option 2: Enhanced Privacy via Boltz
- Let Lightning payments accumulate
- Vary swap amounts (don't swap exact received amounts)
- Use different timing patterns (daily/weekly variations)
- Batch multiple Lightning payments into single swaps
Tools & Their Uses
Sparrow Wallet
- Primary mixing tool
- Stonewall transactions (fake coinjoins)
- Works with hardware wallets
- Privacy toggle for automatic private transactions
- P2P Source → Clean wallet (direct)
- Lightning payment → Your channel → Clean wallet
- Lightning payment → Your channel → Boltz.exchange → Sparrow mixing → Clean wallet
- Best for: Most privacy operations
Boltz.exchange
- Lightning ↔ Bitcoin swaps
- Submarine swaps look like normal transactions
- Minimal record keeping
- Best for: Breaking Lightning→on-chain connections
Hardware Wallets
- Jade: Current wallet with traceable history
- New hardware wallet: Clean destination storage
- Best for: Secure storage of cleaned coins
Key Rules & Best Practices
Golden Rules
- Never mix clean and dirty coins in the same wallet
- Never reuse addresses in your clean wallet
- Anything traceable to your identity goes through mixing first
- Wait between steps - don't create timing patterns
- Vary amounts - avoid round numbers and exact transfers
Things to NEVER Do
❌ Send directly from exchange to clean wallet
❌ Mix coinjoined and non-coinjoined funds
❌ Immediately spend coinjoined outputs
❌ Create obvious timing patterns
❌ Reuse the mixing wallet for final storage
Privacy Hierarchy (Best to Worst)
- P2P purchases → Clean wallet (direct)
- Lightning payments → Boltz → Sparrow → Clean wallet
- Lightning payments → Clean wallet (direct)
- KYC purchases → Sparrow → Clean wallet
- Old coins → Sparrow → Clean wallet
Specific Scenarios
"I just bought Bitcoin on Coinbase"
- Wait 3-7 days after purchase
- Withdraw to Sparrow mixing wallet
- Wait another few days
- Use Privacy toggle, send to clean wallet
"Someone paid me via Lightning"
- Option A: Close channel, send directly to clean wallet
- Option B: Accumulate payments, swap via Boltz, mix in Sparrow, send to clean wallet
"I want to buy Bitcoin privately"
- Use Bisq, RoboSats, or local meetups
- Send directly to clean wallet
- No mixing required
"I have old coins on my Jade"
- Follow initial cleanup process
- Never use Jade addresses again after cleanup
- Generate new clean wallet
"I made a mistake and mixed funds"
- Consider those coins compromised
- Start fresh with new clean wallet
- Be more careful going forward
Technical Details
Stonewall Transactions
- Creates fake coinjoin appearance
- Requires no coordination with others
- Works with hardware wallets
- Sufficient for most privacy needs
- Automatically enabled with Sparrow's Privacy toggle
Why This Approach Works
- Breaks obvious transaction links
- Creates plausible deniability
- Reasonable complexity for non-technical users
- Doesn't require advanced tools or coordination
Maintenance & Future Considerations
Ongoing Habits
- Always use different addresses
- Batch similar sources together
- Maintain minimal records
- Stay informed about privacy tools
- Test with small amounts first
Wallet Hygiene
- Keep acquisition sources separate
- Don't create predictable patterns
- Regular privacy audits of your practices
- Update tools as privacy landscape evolves
Spending From Your Clean Wallet
The Golden Rule for Spending
Always use privacy tools when spending - don't let one careless transaction undo all your privacy work.
Best Spending Practices
Option 1: Sparrow Privacy Toggle (Simplest)
- When sending from your clean wallet, always enable the Privacy toggle in Sparrow
- This creates Stonewall transactions automatically
- Works for most day-to-day spending
Option 2: Lightning Network (Most Private)
- Open Lightning channel from your clean wallet
- Spend via Lightning (naturally private)
- Use wrapped invoices for receiving change back
Option 3: PayNym/Payment Codes
- Set up PayNym in Sparrow for regular recipients
- Creates unique addresses for each transaction
- Recipient can't track your other transactions
Spending Workflows by Scenario
Small, Frequent Purchases
- Best for: Coffee, small online purchases, regular payments
- Why: Natural privacy, lower fees for small amounts
Large, Infrequent Purchases
- Best for: Major purchases, one-time payments
- Why: Stonewall transactions provide sufficient privacy
Regular Bills/Payments
- Best for: Recurring payments to same recipient
- Why: Prevents address reuse and transaction linking
Key Spending Rules
- Clean wallet → Lightning channel → Lightning payment
- Clean wallet → (Privacy toggle ON) → Merchant
- Clean wallet → PayNym setup → Ongoing private payments
Always Do:
✅ Use Privacy toggle for all on-chain transactions
✅ Generate new addresses for receiving change
✅ Vary transaction timing and amounts
✅ Let Sparrow handle change management automatically
Never Do:
❌ Send directly without privacy tools
❌ Reuse addresses for receiving payments
❌ Create obvious spending patterns
❌ Immediately spend change outputs
❌ Consolidate all UTXOs in one transaction
Change Management
- Don't immediately spend change outputs from private transactions
- Mix change with other UTXOs before spending again
- Use Sparrow's coin control features to select appropriate UTXOs
Emergency Procedures
If You Accidentally Mix Funds
- Consider that wallet compromised
- Create new clean wallet
- Move clean coins to new wallet
- Start fresh with better practices
If Tools Stop Working
- Sparrow alternatives: Electrum with privacy plugins
- Boltz alternatives: Other submarine swap services
- Always have backup privacy methods
Remember: Perfect privacy is impossible, but this approach provides meaningful privacy improvements for most threat models while remaining practical for non-technical users.