Privacy: How should I handle UTXO's?

Bitcoin Asked on January 6, 2022

We know that, for security and anonymity, we shouldn’t reuse addresses. Also, there is the idea of change avoidance to protect ourselves from any number of change detection heuristics.

But I find that unspent change addresses (“UTXO’s”) are often unavoidable. Especially when using other privacy-enhancing techniques, such as equal-output CoinJoins, where you end up with many source addresses.

Is there a good technique to be able to spend these UTXO’s without compromising privacy?

2 Answers

Is there a good technique to be able to spend these UTXO's without compromising privacy?

  1. Never consolidate UTXOs after coinjoin.
  2. Spend and use them separately.
  3. Use payjoin.
  4. Avoid sending directly to any KYC exchange. Bisq is one of the DEX which can be used.
  5. Never share them on social media or any public groups which could result in associating your identity with UTXO.

Answered by Prayank on January 6, 2022

I don't see the problem, or what compromises privacy exactly?

Say you have UTXO A1 and B1 of 0.001, (I've never used Coinjoin so i'm just assuming here.)

Now you put both A1 and B1 through Coinjoin, Now you have A2 and B2.

How would combining the outputs of A2 and B2 compromise the privacy of outputs A1 and B1? You used CoinJoin to break exactly that chain right?

Put the balance of the change adresses all individually through coinjoin mixing sessions and then combine the outputs? That way the chain is broken, and due to them being linked only after the chain was broken, privacy isn't compromised?

If they're too low of an amount to be send to Coinjoin, i'm afraid it's just dust, and they should be frozen to prevent them from accidently being spent in the future when tx fees might be lower again.

Answered by Philips Kuyper on January 6, 2022

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