Assuming your BTCs were bought using a vendor that enforce KYC, few thoughts on:
Bitcoin Transactions
  • Bitcoin transactions are, by design, pseudo anonymous, most people does not understand UTXOs management and spend and receive normally from the same address, making, even the pseudo anonymity, very weak.
  • Learning to manage your UTXOs is paramount for decent pseudo anonymous privacy, never reusing an address is paramount, most decent wallets nowadays do a good job changing the address every-time you receive, but do a very poor job while spending. Most alt-coiners are so used to address reuse as the norm, so is hard for them to wrap their heads about this important concept.
Bitcoin Mixers
  • Many will say that the best way to increase your privacy while transacting with Bitcoin, AFAIK, is mixing with a decent wallet, like Sparrow or Samourai Wallet (with your own node), using whirlpool, you need to understand it and do it right and it is not cheap, best practice is to leave the SATS mixing while you don't need them, once you do, you spend directly from the mixing pool, very clever...
For those thinking people mix or swap for tax evasion
  • If you are one of those that thinks this is made for tax evasion, you are still scrapping the surface of cyber security and most probably exposing your self in many other ways to cyber criminals on a daily basis.
  • When you pay in cash, Do you attach a ledger with all the transactions you have done before and you balance account? Clearly not. If you use the same address every time, anyone you pay to, can look up your address in the blockchain and check, your balance and every transaction you have done ever.. This, is less than ideal and a big no-no in cyber security, hence, the swaps or the mixing, nothing to do with tax evasion. Any abiding citizen.
Summary:
  • Mixers are interesting, but, they can be censored or made illegal, specially if the service is already known to be working with chain analysis companies, others are working on decentralizing further the service, but there are still components that are centralized, making it a no-no for some cyber security savvy people
  • A simple swap BTC to XMR to BTC does the job and anyone can wrap their head around it in a minute.
    • The ones that call themselves maximalists argue this is working with "shit coins", for me that is non sense, Monero is excellent tech for privacy and anonymity but not decentralized enough for my liking, therefore, swapping to it and back to Bitcoin seems only logical to me. Some say, use Bitcoin for saving and Monero to spending, I do not agree, I like to use BTC for both, how else will it become the internet of money if all we do is hold it? LN is doing a great job creating adoption for spending with an additional layer of pseudo anonymity.
I am open to hear you ideas, your strategies to improve your cyber security during the spending of your SATS paying for goods and services
And if you think there is a better way, by all means, please change my mind!
Skimmed writeup. Saw “shitcoins” and “maximalist” and decided not to read.
Change my mind.
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Spot on, brother. I once heard a well-known maxi say, "but XMR only has $2B market cap, so the demand for privacy coins clearly isn't that high"
Bruh... A coin only gets a market cap by not spending. One should look at transaction volume of a privacy coin to gauge the demand for transactional privacy. However, any decent privacy coin has confidential amounts so its not public how much is actually transacted.
Glad to see bitcoiners explore other protocols to gain superior privacy easier and cheaper than using BTC alone. It would obviously be ideal to not have any exposure to alternative assets, but like you say, with a swap the exposure can be minimized.
You can also swap between BTC and Liquid BTC to gain some privacy without exposure to non-BTC price volatility. However the number of swaps that support Liquid is far less than XMR or other privacy coins.
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I never heard about limitations in terms of number of swaps with BTC and Liquid and was thinking about using Liquid in the future. Could you explain further what you mean by number of swaps supported or give a link which explains that?
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Liquid is the same thing. Just don't withdraw immediately and do so in numerous transactions of different amounts than you put in.
Research Liquid well before hand so you know what is happening. It's lukewarm storage in a federated side chain ie: trust is involved. It's 0.1% fee.
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Let me know if you find out
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We have no idea how much volume of the token is transferred in those txns tho. Unlike LN, there are no liquidity issues for larger volume. Many coinjoin implementations require equal input size so there are liquidity pools (10M sat, 50M, sat etc. which also limit the "rate" at which the sats can be swapped for new utxos.
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There was a bounty to break Monero. They wanted you to think, oh this must be because they can't break Monero. The reality is that they can do it secretly. /conspiracy mode off. hey you asked me to change your mind. Trying my best 😂
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Ok, if we're going to make baseless claims with no evidence, mine is that "they" have a secret backdoor to Bitcoin's elliptic curve...Proof? Na bro, just trust me.
They don't even have to break anything with Bitcoin because it already has zero privacy.
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Hahah. Listen. You take your bounty money in Solana like a real man.
🥴😄
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*Any abiding citizen would like to pay for goods and services privately and securely. (for some reason didn't finish the sentence...)
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The reason to use a mixer is so misunderstood; the main actionable reason is to obfuscate the ability of someone you pay to look up your stash. This is a solid privacy reason, but with taproot, LN swaps, LN itself and many other novel ways of interacting with bitcoin, this is becoming an outmoded argument.
They had their time and place, folks should move on; Mixers are unnecessarily expensive and, for most people, unnecessary.
For the privacy zealots who may get triggered by this, know that I am one too—I’ve just come to realise that Whirlpool (in particular) is a waste of money. PayJoin I can see a little more use for, in a pinch, but I still question its value in the LN era.
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Yep, but the problem with LN is the capacity of the channels, currently most channels you are able to transact with as a pleb are limited to few hundred dollars. On chain transactions of thousands and millions of dollars require privacy and the LN is not there. A simple swap does the job easily independent of the amount
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Can you expand on Whirlpool ?
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Sure, I can try — what in particular are you wondering about?
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If there's any reasons other than the ones you already mentioned. Just interested in your pov.
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BTC -> L-BTC -> Lightning -> BTC change my mind
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L-BTC does not hide the transaction graph, so you are probably not achieving much by adding it as a step in the middle there.
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Do it with $100K in one TX, What about $1M? You can't since you are going through LN and the capacity is not there
Now if you are doing $300 dollars TX you can, and the only layer of privacy there is L-BTC, problem is, L-BTC is quite centralized , you will be trusting your BTC while on going the swap to a multi Sig wallet in the hands of several companies, not your keys, not your coins, hard pass
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I know what you mean. But aren't a lot of mixers hot wallets essentially? Where if they went poof, goodbye, everyone gets rugged?
Yes. Federated side chains are the epitome of trust. But there is no such thing as completely trustless. (Think about it). From the software kernels to the hardware devices to the Core and mempool interfaces, we're using some limited trust often.
Liquid is what I consider a lukewarm wallet. Adam Back IMO has been here since day 1 and has a good reputation for being all about the tech. He's low key and sticks around to build interesting stuff. Not a lot of ego. Just a computer and finance geek enjoying tinkering.
Blockstream makes good FOSS stuff too IMO.
Whereas, Sparrow, for example, when mixing, at some points is hot. Your coins and getting zipped around and you have to trust they'll come back.
IMO, Liquid has a good reputation and trusting them in small, measured doses is a point some of us can consider.
Fees to peg in and out are 0.1%. Lowest in the game for what's trying to be accomplished.
Caveat: no I don't work for them. I just went down the rabbit hole of how to clear ownership and literally came up with: liquid, coinjoins, or atomic swapping off chain with something like XMR.
In each scenario trust was involved at some level, as were fees.
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"I know what you mean. But aren't a lot of mixers hot wallets essentially? Where if they went poof, goodbye, everyone gets rugged?"
  • The only decent mixer I know of is whirlpool used by Sparrow Wallet and Samourai Wallet and you need to know what you are doing if you want to be fully private. But as I mentioned in the post, the fees are high for most
"Yes. Federated side chains are the epitome of trust. But there is no such thing as completely trustless. (Think about it). From the software kernels to the hardware devices to the Core and mempool interfaces, we're using some limited trust often."
  • IMO, one thing is to trust a group of corporations "good intentions" willingly another thing is to be a victim of a random bug or attack you didn't have control over.
"Liquid is what I consider a lukewarm wallet. Adam Back IMO has been here since day 1 and has a good reputation for being all about the tech. He's low key and sticks around to build interesting stuff. Not a lot of ego. Just a computer and finance geek enjoying tinkering. Blockstream makes good FOSS stuff too IMO."
  • Agree with you, Adam Back is one of my favorite persons in the ecosystem, however, L-BTC is not ideal, I would be trusting my BTC to a multisig wallet controlled by several companies which may or may not one day decide to put their hands inside of the cookie jar, nah, not for me, hard pass. not your keys, not your coins
"Whereas, Sparrow, for example, when mixing, at some points is hot. Your coins and getting zipped around and you have to trust they'll come back."
  • The code is open source, you are mixing in a pool, you are safe and sure you own that amount of coins as per the contract and proof of that is the transaction you signed. There are over 8600 coins currently in the mixer and the number keeps increasing, never an issue during the long time it has been working, I don't see the appeal, I rather do an atomic swap when needed.
"IMO, Liquid has a good reputation and trusting them in small, measured doses is a point some of us can consider."
  • I respect that, but not me, not your keys, not your coins, I like to sleep well knowing I am in complete control of my funds
Hey, thanks for taking the time to share your ideas, much appreciated!
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Is peg-in, peg-out and normal send distinguishable ?
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who is going to exchange 1M in monero? there is no liquidity there.
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I think you have not research XMR financials yet:
From coinmarketcap as of the time I posted this reply:
  • Market cap $2,584,101,603
  • Volume (24h) $59,543,938
  • Rank: #25
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Or,
** ** / -> BTC Cold Storage ** BTC -> L-BTC -> Lightning < ** \ -> LN Spending wallet
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L-BTC does not hide the transaction graph, so you are probably not achieving much by adding it as a step in the middle there.
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L-BTC only hides amounts. Senders and receivers are known. IP origin of transaction is not hidden by default. Also a permissioned network.
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This is the way. Although interesting you go from Liquid to Lightning and then back to BTC. Why the Lightning stop?
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LN I mean private LN node running over tor
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Why. What's the difference if you just go from Liquid to a new BTC address?
What is happening if you go from Liquid to a private Lightning Node first?
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More privacy I think
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100% agree. And this post is a very nice reminder of how stupid/limited maximalism is. By shouting "shitcoin" everytime something else than Bitcoin is involved, maxis sadly forget that many projects share the exact same ethos than Bitcoin and have been hard at work for years, trying to increase decentralization, provide alternative to fiat, and protect citizens money and privacy. Monero is one of them, but there are many others. Bitcoin (and bitcoiners) have everything to gain by opening up and using other chains/protocols.
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Just avoid CEX's, and follow basic data OPSEC, and 99.9% of your problems will disappear. I've looked over enough dockets prosecuting crimes involving BTC in some way (there are not many) to know the dominant recurring theme is that a CEX was used somewhere along the chain of custody—foreign or domestic–and OPSEC 101 rules were broken. These crimes BTW are very difficult to prosecute, time consuming, and expensive, even when someone does use a CEX, because it isn't enough, they still need access to a physical device (phone, computer, server), or access to an email, cloud, or wallet, preferably one of each. This is why they concentrate on major cases, ones that make the news.
BTC/XMR atomic swaps or BTC/XMR DEX's are great for small volumes. They're generally not viable options for those that need them the most—because there isn't enough volume, wether that's the ransomware hackers, the big darknet market vendors, Chinese producers of fentanyl precursors, or money launderers. Mixers have historically provided volume en route to Eastern exchanges that provide the ramps to sturdy tax havens. Lightning will eventually change all this, so will a circular economy, so will the data set of L1 when its global volume increases.
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No one uses monero and no one does this so your anon set would be very low.
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I think you have not research XMR financials yet:
  • From coinmarketcap as of the time I posted this reply:
    • Market cap $2,584,101,603
    • Volume (24h) $59,543,938
    • Rank: #25
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Trading voljme has no relevancy here
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Trading volume is one of the key performance finance indicators you will look at if you want to know if an asset is liquid enough to trade 100 thousand dollars or 1 million dollars.
You stated that no one uses monero, I am showing you data from a known site everyone can look at to show you that there are transactions on a daily basis between wallets for an ammount of 59 million dollars, and this is, IMO, a fraction of it.
XMR is highly censored in many countries and therefore CEXs like Coinbase won't trade it. A lot of the trading is done oin DEXs
If you do social research as well you will find active communities in Telegram in different languages with thousands of users, therefore, I disagree with you.
But please, show me your data, develop your counter point, if am missing something I would like to know
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Trading volume means nothing for privacy, if you're doing in chain swaps. You need actual onchain activity to hide amongst which there is very little. We can't get in chain volumes because of the blinded values but there's very small amount of txs every block
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I never stated that trading volume adds value to privacy, I stated that LN does not have channel capacity for large transactions.
Regarding few transactions per block, which will depend on the hour and day as with BTC, the very nature of XMR takes care of that, no one will ever be able to link on chain the entrance address of BTC with the exit one to BTC after passing through XMR, obviously, the user should use logic and split the output from XMR into BTC into at least three transactions of different values. A non savvy person may put 11.11 BTC in an atomic swap and in under 40 minutes exit XMR to BTC with 11.11, technically it will be impossible to link them, but logically, there is room for tagging the transaction as possible match...
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What good is a large crowd if anyone can observe who interacts with who and how much amounts were transfered? 99% of users don't even use Bitcoin in any "privacy" preserving manner.
You don't have to be THE biggest to have a good anon set. Cash anon set is bigger than Bitcoin. Dump Bitcoin? Of course not.
Monero amounts and receivers are completely hidden and don't appear on the blockchain. There is no transaction graph unlike Bitcoin. Even with btc coinjoins there is a transaction graph with all range of amounts are visible.
Monero transaction: ~6% Alice sent $[?] to [?]
Bitcoin transaction: 100% Alice sent $X to Bob
-Monero is the currency of choice for Freenet Markets -It is the most popular currency on Bisq. The most popular decentralized software to attain KYC free Bitcoin. Even larger than any fiat currency. -It is also often the most popular (or just behind) for privacy-oriented white market services and businesses like Mullvad, IVPN, Coincards, Silentlink, etc
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Why would i swap the ultimate apex asset for a shitcoin? XMR has better privacy BY DEFAULT, but it's still a shitcoin, it's not transparent, we have no way of knowing if there are inflation exploits. I think On-chain BTC → L2 Lightning → On-chain BTC is good, mixers aswells, we don't need XMR.
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I wouldn't personally mix using XMR, but I don't feel like the knowledge of whether there's inflation matters if you're purely using it for privacy and swapping back
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My choice always will be Bitcoin, but XMR is a tool with features we need in BTC,
Regarding a inflation bug... Did you know we had two on BTC, one exploit in 2010 but there has never been one exploited in XMR?, here the information:
BTC
  • 🔴 The CVE-2010–5139 bug on August 15th, 2010 resulted in 184 billion BTC being minted. On the heels of this event, core developers Gavin Andresen and Satoshi Nakamoto had to roll back the blockchain in order to purge this transaction from block 74638.
  • 🔴 More recently, on September 17th, 2018, the CVE-2018–17144 bug was discovered by a Bitcoin Cash (BCH) developer who selflessly took action before it could be exploited by a bad actor.
XMR
  • 🔴 2017-02-19: A member of the Monero Research Lab discovers a potential exploit, triggered by a detailed discussion of the XEdDSA signature schemes on the Curves mailing list
    • 🔴 2017-02-20: The Monero blockchain is scanned to see if this had ever been exploited; thankfully it had not and the blockchain is intact.
Regarding your idea BTC->LN>BTC, not ideal for privacy yet, if you are doing it right you own your own LN node and the receiver is exposed. Last but not least, if the transaction is for thousands of dollars or millions you won't have the capacity in the channels, on chain BTC>XMR->BTC does the trick with low risk and low cost. Yes doesn't feel great to be using an alt coin but for privacy reasons is worth it
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My research tells me otherwise, XMR code and development is more scrutinized nowadays than ever, additionally the development is crowdfunded, I do not hold it or transact with XMR, I am a BTC only person, but the research I have done depicts a strong community well organized and open source. I have done extensive research once I read a paper from Samourai Wallet explaining their reasoning for atomic swaps to gain privacy in BTC
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Mix into a LN unannounced channel
Spend as you please
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Better: BTC -> XMR -> spend XMR
Don't recommend BTC -> XMR -> BTC method because it is trivial to trace if you don't know what you're doing. And you are now involving a third party. But if you insist on doing it:
  1. Wait at least a day before swapping back into btc. The longer you wait the better. [to resist timing attacks]
  2. Break it up into several chunks. Do not send the same amount back into btc in one go. DO NOT consolidate after. [to resist amount analysis]
  3. Do the first swap (btc -> xmr) on exchange A. Do the second swap (xmr -> btc) on exchange B. [prevents single exchange from having a full view of both swaps]
  4. Do all this behind tor/i2p or at least a good VPN (mullvad or ivpn). Change your tor identity or vpn server for each swap.
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I don't use monero or ever owned it, but if its unique selling point is forward privacy it would compete with all the privacy options available like coinjoin onchain/statechain mixing based on fees right?
When you mix with Bitcoin you pay natively a fee depending on your method and thats your privacy premium, on XMR you're taking on other costs, like movement between the price of Monero and Bitcoin, depending on the settlement length you could stack fees because I assume its 1 BTC transaction, 1 XMR transaction, 1 BTC transaction.
It can work out cheaper it could not
Isn't Samurai Wallet offering these kinds of atomic swaps? Are there any stats on the adoption of this offering? I always say let the market decide, incentives are set and let it play out
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Yes. Samourai Wallet understand this problem and is probably the Dev team that has worked the most in improving the privacy of the Bitcoin transactions with clever features like running over TOR, StoneWall, Ricochet, PayNym, Batch Spending, Cahoots (a suite of tools to create and handle collaborative peer-to-peer CoinJoin transactions between two wallets) and Whirlpool, and as you mention, now working on atomic swaps, but the feature is still under development, they have posted in X few videos showing that a beta version is already being tested and functional but nothing for the public yet.
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Not bad thinking. But also not the most ideal IMO.
Monero is like... the most palatable shitcoin a Bitcoiner could like. And I get going to and from XMR seems plausible.
But there are alternatives better than atomic swaps.
Consider Liquid and Lightning more in depth.
And I'm not much a fan of coinjoins as they're hot wallets under the hood. I'd rather trust a federation.
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Lightning reciever privacy is bad and amounts can be inferred: https://arxiv.org/pdf/2003.12470.pdf
Liquid only hides amounts. Transaction graph is completely visible.
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LN -> Capacity issues, not for thousands of dollars txs L-BTC -> Federated, your coins are in a multisig wallet while snapping, hard pass, not your keys, not your coins. You are trusting a bunch of corporations to be "good guys".
For small amounts, LN seems a logical choice if you know what you are doing, hence, it is not for everyone
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this is an interesting idea.
:)
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Adding XMR into the mix adds exchange rate risk. The longer you hold it, the bigger the exchange rate risk. You also have to be careful when you swap back to BTC to use different addresses and different amounts than you used when swapping from BTC to XMR (and to not use a wallet that shares your addresses with a third party, or they could link your addresses together). If you accept these risks and manage them well then what you suggest may be an effective way to de-link your spending wallet from your KYC vendor. Though, if you are willing to take on the exchange rate risk of an altcoin you may as well use state of the art privacy technology i.e. shielded transactions -- as implemented in Zcash and its forks, Railgun, and quite a few other projects, DYOR. Monero's RingCT is outdated at this point. See: https://yewtu.be/watch?v=9s3EbSKDA3o
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Monero's Ring Signatures are only for sender privacy. 1 of 3 privacy layers.
Amounts and receivers are compeletly hidden by Confidential Transactions and Stealth Addresses.
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Thanks for sharing your thoughts
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If you swap then you need to be 100% sure that the "exchange" collects zero data. Everything would have to be done over tor. Using whirlpool is less risky if you know what you are doing
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Even simpler, what do you think of using Submarine swaps like this: KYC BTC -> Lightning -> Lightning 2 (Muun etc) -> Non-KYC BTC?
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Capacity is the issue here, and Muun is not self custody. Even if you use a self custody wallet like Phoenix or Brezz or Zeus running your own LN node and Electrum server, you are limited to few hundred dollars.
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I think $1000USD+ is totally possible on LN these days. You are only swapping in and out so no real risk from the Lightning providers. Is that not enough capacity? A much easier experience than trying to fuff around with a Coin Join IMO.
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$1000+, It will always depends with which LN nodes you are interacting, most will still have a cap around the $500 mark, but that is already an improvement, early 2022 was circa $300, is moving higher. You may have a channel with a $1000+ capacity (rare since you don't want to HOLD what you don't want to spend in a LN wallet and therefore you won't have large channels opened, nor the other parties unless there is constant usage) but the receiver most probably won't.
Paying for goods and services like a new car, an ASIC miner or a major repair at home with LN is currently not possible since it will be above the most common channel capacity, therefore we will end using on chain payments, that is where privacy is needed and we do not have it. If the buyer doesn't know what is doing will end up giving away the historic of all his/her transactions and the balance in the used wallet.
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For spending, I've been experimenting with BTC>LN>Ecash>LN Merchant. The ecash part is still a bit wonky sometimes but it's also quite new.
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There is only one way to lose your track in bitcoin blockchain. Exit to fiat kek
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I don't usually try to argue with shitcoiners, but I randomly came across the most perfect tweet to explain why Monero is a shitcoin.
"No, all assets are SoV, but not all of then are aquired to be spent later on (make a payment with it).
All MoE are assets/SoV, but not all assets/SoV are MoE" https://twitter.com/AaronSepulvedaC/status/1697768292717371695
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Fedimints will be a great place for swaps in the future.
It’s modular with the core being inputs and outputs for transactions and signature. These could be input:ecash and output:xmr. Or vice versa.
A natural exchange point with privacy as a core principle for the tech.
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I'm a few levels lower than you for understanding. But is what you described much different than Liquid? Please help...
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TBH, idk much about liquid. But my understanding is they’re similar in that they both have federated custody of users guns in exchange for some trade offs. In Fedimint, users get privacy via ecash and can get more if modules are implemented.
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idk, I think coinjoins work just fine for day-to-day privacy. If you've got a more intense threat model, an xmr swap wont save you anyways. FBI managed to chase a bunch of BTC->XMR->BTC swaps a couple years back
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Source please, Bear in mind, the purpose of the swap is not to hide from law enforcement, in fact the swap should be reported to tax authorities while filling your taxes if the amount applies in your country. The swap is for privacy purposes, you break the chain and therefore you are not giving away anymore to the person you pay for a good or service your historic transactions and your balance
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If you're so confident, put a million sat bounty (at least) on having your mind changed!
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