A privacy-enhancing protocol on Bitcoin Cash that obfuscates transaction trails to enhance user privacy without requiring trusted setup.
CashFusion is a privacy-enhancing protocol implemented on the Bitcoin Cash (BCH) network. It aims to improve transaction privacy by making the trail of transactions untraceable while maintaining the network's security and auditability features.
At a high level, CashFusion works by creating a transaction with an arbitrary number of inputs and outputs from multiple participants. These transactions are coordinated over the Tor network, which provides additional privacy by hiding users' IP addresses. The protocol uses a client-server architecture where multiple participants can join fusion rounds without exposing their identity.
The complexity of these transactions makes it extremely difficult, if not mathematically impossible, to determine which outputs are associated with which inputs, thereby obfuscating the transaction trail. Unlike other privacy solutions, CashFusion doesn't rely on a trusted setup, making it more resistant to potential vulnerabilities.
For instance, if Alice, Bob, and Charlie participate in a CashFusion transaction, the resulting transaction could have inputs from all three participants and outputs that cannot be definitively traced back to any of them, creating plausible deniability about the origin of funds.
Unlike other privacy-enhancing UTXO (Unspent Transaction Output) management techniques, CashFusion has the ability to either break apart or fuse coins together. This reduces the total number of UTXOs within a wallet, which can improve efficiency and reduce transaction costs.
The protocol also addresses a critical weakness of previous coin-mixing technologies by eliminating the requirement that all participants must contribute equal amounts. This was a significant limitation in other privacy protocols, as equal-amount requirements created a "fingerprint" that could be used for transaction analysis.
If Alice has a single UTXO worth 10 BCH, she could use CashFusion to break it into smaller UTXOs, such as two UTXOs worth 5 BCH each. Conversely, if she has many small UTXOs, she could use CashFusion to fuse them into a larger UTXO, improving her wallet's efficiency.
A merchant accepting Bitcoin Cash can integrate CashFusion into their payment processing system to enhance the privacy of their business transactions, making their cash flow patterns less visible to competitors or other outside observers.
CashFusion has effectively replaced the earlier CashShuffle protocol as the primary method for enhancing transaction privacy on the Bitcoin Cash network. While both protocols improve privacy, CashFusion provides greater flexibility and efficiency due to its ability to handle transactions with an arbitrary number of inputs and outputs.
The protocol was implemented in the Electron Cash wallet in 2020 after extensive testing and security auditing. Since then, it has processed millions of dollars worth of BCH transactions, demonstrating its robustness as a privacy solution.
Unlike some other blockchain privacy solutions, CashFusion achieves its goals without modifying the underlying blockchain structure or requiring special cryptographic primitives, making it a particularly elegant solution that maintains compatibility with the existing BCH ecosystem.
From a technical perspective, CashFusion leverages the basic properties of Bitcoin Cash's transaction model while introducing sophisticated coordination mechanisms. The privacy guarantees come from combinatorial explosion – as the number of inputs and outputs increases, the number of possible ways they could be connected grows exponentially, making analysis computationally infeasible.
Research has shown that with sufficient transaction volume, CashFusion provides privacy guarantees comparable to more complex cryptographic solutions, while maintaining the auditability and scalability advantages of the UTXO model.
While CashFusion is most prominently used on Bitcoin Cash, the principles behind it could theoretically be applied to other UTXO-based cryptocurrencies, though BCH's low fees make it particularly well-suited for the frequent transactions that privacy protocols often require.
All terms and definitions may update as the Cryptionary improves.