The CoinJoin coordinator is in charge of having every participant register their inputs and outputs, and sign the collaborative transaction before broadcasting it. Most CoinJoin implementations default on a central coordinator, which is a single point of failure. Up until now, this has been an accepted tradeoff in most bitcoin communities. Can a central CoinJoin coordinator fail? Absolutely. Other implementations allow anyone to be a coordinator for each different CoinJoin, though there are other sets of trade offs here that will be discussed later.
Coinjoins being non-custodial, no loss of funds could occur if any coordinator would fail. The coordinator should never know more than what everyone knows publicly on the bitcoin network. Why? If a coordinator knows more than what is publicly available, a CoinJoin coordinator becomes a honeypot with highly sensitive data that can be exploited against bitcoiners trusting the service.
You should never trust a CoinJoin coordinator. If a CoinJoin coordinator cannot be evil, good. If it can be evil, it will be eventually, out of errors, omissions, coercion or outright dishonesty.
An example of sensitive user data would be XPUBs, which undeniably leak all the information about a wallet, its addresses, including past, current and future bitcoin transactions. Another example would be the ratio between users running their own full nodes and users trusting the coordinator’s full node to broadcast CoinJoins, as it could de-anonymize users running their own nodes, and therefore deterministically know the links between their inputs and outputs. This is yet another nuanced topic, which would require further investigation and discussion.
Does the coordinator know more than what is publicly available on the bitcoin network?
Do users leak sensitive data to the coordinator, such as their XPUB or whether or not they run their own full nodes?
Does the coordinator claim that users should trust them using legal defense mechanisms? (i.e. warrant canaries, regulatory arbitrage, etc…)
Fees
Bottom line, who pays for what in CoinJoins? These bitcoin transactions can be expensive and sometimes fee structures are unclear for bitcoiners. It’s hard to know how much good privacy will cost you or even if you are getting any privacy out of it. Some CoinJoin implementations allow a single input to buy its privacy from other inputs who only participate for free to increase their own anonymity set. Getting paid to CoinJoin? With patience, yes.
Some models rely on shared fees where only some UTXOs pay fees while others don’t. Other models rely on inviting an ever growing number of new clear inputs (not mixed yet) to fund the existing CoinJoins for remixing inputs that do not have high enough anonymity levels. Some models seem unsustainable over the long term while others are naïve, or way too expensive for most users.
And what fees are we talking about? Well usually, inputs participating in CoinJoins pay both a coordinator fee or taker fee, (the service fee to get some level of anonymity) and the bitcoin network fees. In particular CoinJoin models, these fees get waived in certain circumstances. The economics of CoinJoins is a deep rabbit hole which requires further investigation for a much deeper understanding.
Who pays for what in a CoinJoin? What are all the fees?
What are the incentives of the CoinJoin coordinator?
Are all CoinJoin rounds paid for or is there any free remix?
Having read thus far, the hope is that bitcoiners shopping around for CoinJoins would not necessarily have all of the answers, but the right questions to ask. A mental model or framework to evaluate different CoinJoin implementations can be quite helpful for anyone who is considering using CoinJoins to reclaim their privacy on bitcoin. Sorting through the noise of social media requires intellectual honesty and the right evaluation system rigorously applied.
This is a guest post by Thibaud Maréchal. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
