CashShuffle is a privacy-enhancing protocol implemented on the Bitcoin Cash (BCH) network. It works by shuffling coins from multiple participants into uniform outputs, making it difficult to determine which outputs originate from which inputs.
At a high level, CashShuffle operates by coordinating a group of participants who wish to shuffle their coins. Each participant provides inputs and receives outputs of the same denomination, effectively shuffling their coins with the others.
For instance, if Alice, Bob, and Charlie each provide 1 BCH as input to a CashShuffle transaction, the resulting transaction will have three outputs of 1 BCH each. It would be difficult to determine which output belongs to which participant.
One limitation of CashShuffle is that the privacy it provides can be compromised if the shuffled coins (or UTXOs - Unspent Transaction Outputs) are later combined. Combining shuffled coins can create a transaction trail that could potentially be traced back to the original owners.
If Alice uses her shuffled 1 BCH to make a purchase of 1.5 BCH by combining it with another 0.5 BCH from her wallet, an observer could potentially link the shuffled coin back to Alice by tracing the transaction trail.
To address this limitation, the CashFusion protocol was developed as an improvement over CashShuffle. CashFusion allows for transactions with an arbitrary number of inputs and outputs, providing greater flexibility and potentially enhancing privacy even further.
Using CashFusion, Alice could combine her shuffled 1 BCH with another 0.5 BCH to make a purchase of 1.5 BCH, and the resulting transaction would be much more difficult to trace.
* All terms and definitions may update as the Cryptionary improves.