Bitcoin is Surveillance if it does not have Privacy

Yuval Kogman, Builder (Nothingmuch).

Rust C# Go Python

Contribute(s/ed) To: rust-payjoin, WabiSabi/Wasabi 2.0, General Privacy Research

Spiral currently, ZkSNACKS previously

Yuval’s interest in Bitcoin began long before Bitcoin was born. As a lifetime technology and software enthusiast as well as an autist with a wide range of interests, Yuval first developed an interest in cryptography around 2002. 

Adi, the famous cryptographer, who invented the RSA Signature Scheme, gave a presentation on ecash to his father. Yuval and his father had a conversation and Yuval became aware of the linkable ring-signature, double-spending, and ecash. He began his journey through the rabbit-hole before Bitcoin had a single dirt shovel removed. In the early 2000s, he even used hashcash to run his mailserver. 

Yuval was one of many Bitcoiners who saw the first Bitcoin article published on Slashdot back in 2010. He dismissed it as a joke and unworkable. In 2013, Yuval realized Bitcoin had not disappeared. It was still chugging away and producing blocks roughly every 10 minutes. 

In 2015, he finally took someone up on an offer to buy him bitcoins. That was the final push he needed. The last push he required was to actually own some bitcoins himself. 

Noise Sifting

Yuval spent the first few months of his tenure in this area researching privacy coins. 

He said: “Realizing my silly impulse buys or poor choice of wallet software was being recorded on-chain for all to see, and possibly making me an easy target if Bitcoin was going to be outlawed one day.”

Even though privacy coins had been advancing in many different directions, he was not convinced that it would be a complete solution. 

“Even as I realized I only really believe in Bitcoin, impostor syndrome kept me trying to learn about all the things. By that point the rate at which new things to understand were being made up was orders of magnitude more than I could keep up with, but it took me a while to stop trying,” He said about this time period. 

After a time, he merely lurked around Reddit and Bitcoin Twitter to soak up what was happening but did not participate much beyond researching and learning. First community he joined was an open voicechat called Dragon’s Den which he had heard of on Block Digest, a Bitcoin podcast.Disclosure: The author operated both the chat server as well as co-hosted this podcast.). 

WabiSabi and Wasabi 2.0

Yuval was a designer of the WabiSabi protocols implemented in Wasabi Wallet 2.0. WabiSabi protocol was designed to allow coinjoins to have different amounts, rather than having each output to be identical. The protocol was designed to combine an element of confidentiality with anonymity, which Jonas Nick had already prototyped for an electronic cash implementation. 

WabiSabi, as you may have noticed, is a mechanism that replaces blind signatures to allow users to communicate with coordinators and build coinjoin transactions. However, this isn’t a feature of the way coinjoins are structured on chain or how they look. The system was designed to enable coinjoin transaction structures to have arbitrary amounts, without a failure point that would deanonymize the users who are trying to make such transactions. 

Wasabi 2.0 was implemented, however the team at zkSNACKs ignored most of Yuval’s work and research regarding the structure of coinjoin transactions of any amount. This was done to make sure that WabiSabi transactions were private and that no transaction structure or behavior could be implemented that would compromise user privacy. 

“Where it went wrong is death by a thousand cuts, with the primary cause of that being that nopara73 and molnard refused to learn anything about how to avoid the same mistakes that were already made in Wasabi [1.0.]” 

He said more about what he had just stated. “Everything from coin selection, to when the decisions about what output values to use, to when CoinJoins are done, to how Tor is utilized had corners cut and was implemented based on vibes with no understanding of the underlying mathematics. Even the game theoretical assumptions necessary for the denial of service concept to really work do not hold in any rigorous sense.” 

This is an example of incompetence at zkSNACKs that he observed. “A related ‘fun’ fact, even though for years zkSNACKS claimed they kept no logs, the unnecessary use of mostly default configuration nginx to serve the website using the same host as the coordinator service meant that logs were in fact being kept.”

He left the company because he disapproved of its practices and was unwilling to take part in them. 

Yuval’s opinion about Wasabi wallet, particularly in the context of many people managing Wasabi 2.0 coordinators at once, is that nobody should use coordinator servers unless they are confident that those servers will not deanonymize users by exploiting protocol and implementation flaws. 

State Of Things

“Privacy is a human right, but in Bitcoin it’s also a personal safety issue for more or less anyone on a long enough time horizon.”

Yuval isn’t the most optimistic about the state of Bitcoin security. Yuval has several concerns about the current state of Bitcoin privacy. Particularly, he is worried about exchanges that are overly adamant in refusing to communicate with users who use privacy tools. He does not see anything about privacy tools that would prevent you from revealing information selectively to exchanges when necessary. 

“There’s a difference between sharing your information with exchanges you trust and by extension regulators and broadcasting that for the entire world to see,” “He said” 

He is also concerned about the users’ apathy. Most users don’t care much about their privacy. Privacy is stigmatized in some circles. “…apathy compounds this stigmatization, effectively normalizing the absence of privacy[.] Exchanges don’t lose many customers if they refuse to serve customers that use privacy tech,” “He said” 

The current privacy tool state is not very pleasing to him either. 

“[R]ent seeking “Privacy wallets” snake oil peddlers have poisoned the well. Their zero-sum brainworm infestations led them to spend their time shit slinging in twitter feuds instead of god forbid opening a textbook or academic paper. This toxic discourse also alienated users, feeding into the apathy and the stigmatization.”

All of these issues are ultimately rooted in the social world, and how individuals or companies act. They also have to do with how they react to other people’s actions. It is only by solving them in this way that they will be resolved. 

“Without sufficient user demand for privacy tech and for the normalization of its use Bitcoin is one hell of a surveillance tool.”

Spiral

Yuval joined Spiral in September 2023 to focus on Bitcoin research and development. Yuval decided to concentrate his efforts on coinjoins that are decentralized, as many issues associated with the current implementations of coinjoins come from their dependency on a central coordinator server. 

At Spiral, he works on decentralizing coordination of coinjoins and optimizing multiparty transactions for privacy. 

“My long term goals are to see through my now more developed ideas for CoinJoin. Privacy should have close to 0 marginal cost, or high fees will deter its use. It should also not be a “You can buy products at any retailer.” that grifters can shill to make a quick buck by deceiving uninformed users. And finally it should be strong and robust, primarily against intersection attacks.” 

[An intersection attack is an attack taking advantage of mixed coins being spent in the same transaction(s) together improperly to deanonymize their history.]

His current contribution to the library rust-payjoin maintained by Dan Gould is a step towards his ultimate objective of a coinjoin protocol that’s decentralized.

“Payjoin is currently [specified] as a 2 party collaborative transaction construction protocol. Although this only achieves the first of these two goals, generalizing it to multiple parties provides the opportunity to do the third one properly, potentially in any wallet.”

Covenants

Yuval believes that covenants can be a great improvement for the Bitcoin protocol. However, he thinks the proposals are being made to appear more significant in the future than what they would actually be. 

Current favorites CTV+CSFS, seem like a significant step forward, but the way I see it wouldn’t suffice for the kind of long term scaling improvements we’d need for global adoption, even if CTV is generalized into TXHASH.”

He loves the Varops idea from Rusty Russel Great Script Restoration Proposal as a mechanism that can be used to limit more complex covenants and other opcodes, to avoid them making the block validation process too costly for users. 

“I’m sad to say I also find many of the discussions to be disappointingly tribal, with many words spent arguing in circles about why one’s preferred opcode is the best hammer because look how many problems look like a particular kind of nail if you squint hard enough and you’re such an idiot and on top of that clearly dishonest for not sharing my preferences.”

In general, he believes the discussion around covenants has been poorly managed. Instead of focusing too much on individual covenant proposals, it would be better to consider what types of use-cases we are looking to support and what we don’t want to facilitate, then work backwards to create appropriate proposals that service those use-cases. 

You can’t use it or you lose it

What can Bitcoiners do to protect their privacy? 

“Accept that there is no magical solution, we’re kind of stuck with the Bitcoin we’ve got as far as the transaction graph. Then critically assess what solutions are available, affordable, and safe to use, and use them. “

Ultimately, privacy is a shared responsibility. What do they do now? Lightning provides a higher level of privacy than Joinmarket or Wasabi, but both are still available (with their respective disclaimers). You should do what you can. Do what you possibly can. 

“Even if you don’t think you need privacy today, at least figure out what you could afford to use if you might need it tomorrow, so you don’t get caught off guard. Also consider that the people who do really need it today can’t have it without those who can live without it, so if you want to have that option tomorrow, you should exercise it today. Use it or lose it.”