A privacy protocol on Bitcoin Cash that enhances user privacy by shuffling coins into uniform denominations.
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. CashShuffle is based on the CoinShuffle protocol but specifically adapted for the Bitcoin Cash ecosystem.
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. The protocol uses strong cryptography to ensure that even the server facilitating the shuffle cannot determine which outputs belong to which participants.
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 for blockchain analysts to determine which output belongs to which participant, thus enhancing privacy for all three users.
CashShuffle is implemented as a lightweight protocol that can be integrated into Bitcoin Cash wallets. Popular wallets like Electron Cash offer built-in CashShuffle functionality, making privacy enhancement accessible to everyday users without requiring technical expertise.
CashShuffle improves privacy through a multi-party coin mixing protocol that uses a combination of encryption techniques to prevent both external observers and participating parties from linking inputs to outputs. The protocol operates in multiple phases including announcement, shuffling, and verification, all while maintaining security through layered encryption.
The implementation uses elliptic curve cryptography for secure communication between participants, and crucially, does not require participants to trust each other or the coordinating server. This trustless design is fundamental to maintaining the decentralized ethos of cryptocurrency while enhancing privacy.
In technical terms, CashShuffle implements a variant of the CoinJoin concept but adds cryptographic protections to prevent malicious participants from deanonymizing others. Each participant creates new addresses for receiving shuffled coins and communicates these addresses through encrypted channels that only the intended recipients can decrypt.
The Bitcoin Cash implementation of CashShuffle takes advantage of the network's relatively low fees to make privacy accessible without prohibitive costs. This stands in contrast to some other blockchain networks where high transaction fees can make similar privacy techniques economically impractical for everyday users.
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. This limitation stems from the requirement that all inputs and outputs must be of equal value.
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. This is sometimes called a "merger" problem in coin mixing protocols.
To maintain privacy with CashShuffle, users are advised to keep their shuffled coins separate from unshuffled coins and to avoid transactions that might link them together. This requires careful wallet management practices, which some users might find cumbersome for everyday use.
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 of non-uniform amounts, providing greater flexibility and potentially enhancing privacy even further. This innovation represents the continued evolution of privacy technology within the Bitcoin Cash ecosystem.
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. CashFusion accomplishes this by creating complex transactions with many inputs and outputs of varying amounts, creating substantial uncertainty for any observer trying to trace the flow of funds.
The development of CashFusion demonstrates how the Bitcoin Cash community continues to innovate on privacy solutions, building upon previous work to create more robust and user-friendly privacy tools that don't require changes to the underlying protocol.
While CashShuffle and CashFusion provide significant privacy enhancements for Bitcoin Cash users, they differ from privacy approaches used in other cryptocurrencies. Unlike privacy-focused cryptocurrencies that implement confidential transactions or zero-knowledge proofs at the protocol level, CashShuffle operates as an opt-in second layer solution.
This approach has both advantages and disadvantages. It allows for privacy enhancements without requiring consensus changes to the underlying blockchain, but it also means that privacy is not the default state and requires active user participation.
In contrast to Monero, which implements ring signatures and stealth addresses at the protocol level to make all transactions private by default, Bitcoin Cash with CashShuffle allows users to choose when to enhance their privacy through coin shuffling.
The opt-in nature of CashShuffle aligns with Bitcoin Cash's philosophy of maintaining transparent and auditable on-chain transactions while providing privacy tools for users who need them. This balance aims to satisfy both regulatory requirements and legitimate user privacy needs.
All terms and definitions may update as the Cryptionary improves.