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add "A private flow through JoinMarket" guide (#47)
* add "A private flow through JoinMarket" guide * formatting * fix a typo and style * improve the definition of sweep * add to the introduction and more about the Tumbler * add link to relevant discussion
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# A private flow through JoinMarket
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Bitcoin privacy starts on the base layer where cooperative transactions with equal amount outputs - known as coinjoins - are used.
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This document aims to provide an introduction to using JoinMarket, a decentralized, liquidity market based coinjoin implementation following basic good practices.
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## Common definitions
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### Mixdepth
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* One of the accounts in the JoinMarket wallet.
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* Abbreviated to m0 / m1 / m2 / m3 / m4
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* All are derived from the same BIP32 and BIP39 compatible HD seed.
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### Sweep
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* It means sending one or multiple utxos without creating change.
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* It is achieved by sending all utxos (except the ones frozen) from an account.
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* The amount is not fixed and fees come off the sum of the inputs.
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### Status labels
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* applied automatically by JoinMarket via a simple transaction analyses
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#### `deposit`: output of a simple transaction to new address
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#### `cj-out`: one of the equal amount outputs
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#### `change-out`: one of the unique amount outputs from a cj
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#### `non-cj-change`: output of a transaction without equal amounts
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#### `reused`: a utxo on an address which has been used previously
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### Orderbook
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* Any platform collecting the public orders of the peers.
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* General docs on the order book (including how to run without Bitcoin Core): https://github.com/JoinMarket-Org/joinmarket-clientserver/blob/master/docs/orderbook.md
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* A public example: <https://nixbitcoin.org/orderbook>
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### Minimum size to coinjoin
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* The default is 100k sats (+/-10%) so that is a safe choice.
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* On the example below offers start at 6 peers offering min 27300 sats.
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* Running the Tumbler would require to start with a higher amount as the fees can take up a significant portion.
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### Maximum size to coinjoin
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* The max amount offered is limited by the wallet of each Maker.
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* It is the highest amount in one single mixdepth (-0-10%).
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* Multiple bitcoin amounts are offered by several (10+) peers.
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* On the example below 21 peers offer 19+ BTC
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### Screenshots taken from <https://nixbitcoin.org/orderbook> in March 2022.
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* Click the top of the line to order by it's attribute
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<p align="left">
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<img width="147" src="../images/joinmarket_minsize.png">
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<img width="100">
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<img width="150" src="../images/joinmarket_maxsize.png">
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</p>
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## The flow of funds
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* First need to state that [one single coinjoin doesn't improve privacy much](https://github.com/JoinMarket-Org/joinmarket-clientserver/issues/1047#issuecomment-944995635).
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* Participating in more coinjoins is essential. Find below the two main ways to achieve this.
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## Running the Tumbler
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* Using the Tumbler is a higher time preference option and usually is the best tool to use if the funds are needed in the near future - it can take multiple hours, up to days.
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* Multiple coinjoins are sent through the accounts including sweeping transactions at the start and at the end.
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* Breaks up the deposited amounts and sends to at least 3 final addresses without leaving change behind.
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* For the best outcome avoid merging between the final addresses.
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* The initiator acts repeatedly as a Taker and [pays all the miner and coinjoin fees](https://github.com/JoinMarket-Org/joinmarket-clientserver/blob/master/docs/tumblerguide.md#a-note-on-fees);
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* It is implemented in the JoinMarket-QT GUI and in the command line as the `tumbler.py`.
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* For a detailed usage guide see:
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* https://github.com/JoinMarket-Org/joinmarket-clientserver/blob/master/docs/tumblerguide.md
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* Video demonstration of the Tumbler function in QT GUI:
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* https://www.youtube.com/watch?v=hwmvZVQ4C4M&t=827s
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* Discussed further in:
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* https://gist.github.com/chris-belcher/7e92810f07328fdfdef2ce444aad0968
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* https://joinmarket.me/blog/blog/the-445-btc-gridchain-case/
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## Sending transactions manually and running the Yield Generator
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### Deposit
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* Send to a new address in m0 - could be any of the accounts, but suggesting using the first one for simplicity.
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* Deposit a single or multiple coins from a single funding source at a time.
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* Select the newly deposited coin(s) with freeze/unfreeze if there are others in the account.
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### Sweep
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* Start with [detaching the deposited coins from their history](https://github.com/JoinMarket-Org/joinmarket-clientserver/issues/864#issuecomment-884540079).
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* Can send to a new address in the same account (could be any, but keep it simple).
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* There is no change created, so there is need to separate the `cj-out` from the `change-out`.
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### Send or participate in multiple coinjoins
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* Stretch out in time to avoid timing analyses.
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* The Taker acts as the coinjoin coordinator
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* has the most privacy benefits
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* pays the fees (miner and coinjoin fees)
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#### The Taker role
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* the Taker is the initiator and coordinator of the coinjoin - takes the liquidity on offer.
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* Send coinjoins to a new address in the next mixdepth.
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* In a coinjoin multiple coins can be merged by sending custom amounts or sweeping.
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#### The Maker role
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* The Makers are offering their coins to be used in coinjoins - market makers.
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* Being a Maker can be thought of as providing a service, but also comes with privacy benefits.
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* Activate the Yield Generator (Maker / Earn) to start.
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* To get selected more often it is best to have a a sizeable Fidelity Bond. See:
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* https://nixbitcoin.org/orderbook/fidelitybonds
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* https://github.com/JoinMarket-Org/joinmarket-clientserver/blob/master/docs/fidelity-bonds.md
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* As a Maker the coins will circle through the accounts automatically:
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... m0 -> m1 -> m2 -> m3 -> m4 -> m0 -> m1 -> m2 -> m3 -> m4 ...
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* Only the `cj-out` propagates to the next account.
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* The `change-out` stays behind in the same account where the funding utxo was.
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### Leaving the JoinMarket wallet
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#### When
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* The more coinjoins the funds were through the better.
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* Consider that the privacy benefit from coinjoins is breaking down with time as the peers are gradually exposed or clustered.
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* If deposited only to m0 and followed the steps above all coins in m4 must have been through at least 5 coinjoins.
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* In a long running, active Maker wallet some funds could have made multiple circles - there is no indication of this by default
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#### How
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##### Do
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* Can only send (merge coins) from one account at a time.
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* Send to multiple separate destinations (separate wallets with different purposes - not to be merged later).
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* Sweep whole accounts or coins and don't leave change behind.
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* Fund lightning nodes or send to cold storage via coinjoin(s).
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* Pay with Payjoin to [BIP78 compatible wallets](https://en.bitcoin.it/wiki/PayJoin_adoption) to obfuscate the amount sent.
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##### Don't
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* Avoid sending out the whole amount which entered the wallet a few transactions ago all at once.
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* Don't merge a change from a previous transaction when sending to a new destination.
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## More Reading
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* https://github.com/JoinMarket-Org/joinmarket-clientserver/tree/master/docs
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* https://en.bitcoin.it/Privacy
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## Questions and discussions:
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* IRC through Matrix: https://matrix.to/#/#joinmarket:libera.chat
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* Telegram: https://t.me/joinmarket.org
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