Madeamaze - the advanced method of ensuring privacy within Bitcoin blockchain
The true anonymity has never been something that Bitcoin offers despite the common beliefs. Users’ addresses are, indeed, not tied to their personal information, but that doesn’t mean those two cannot be linked. Various analysis techniques combined with KYC & AML policies can reveal Bitcoin users’ identities.
This imposes inconveniences for individual network participants, as well as businesses. These people often use Bitcoin so that to hide their earnings, what they buy, etc. Moreover, being able to track down Bitcoin flows may endanger even its main purpose of acting like a currency, since some coins may eventually be considered cheaper than the others, depending on their origin.
There are several ways to counter an arising number of deanonymization attracts towards the network. They help users to feel safe and private while transacting. Two of the most common services provided in this field are CoinJoin and Bitcoin mixers. The intensified combination of these two tools that have recently been created is Madeamaze.
CoinJoin was created in 2013 by Gregory Maxwell, who took part in the development of Bitcoin Core and Blockstream so that to enhance the privacy of the network. Gregory was concerned that all the transactions broadcasted to the ledger can be viewed by anyone and at any time, which can potentially mean that due to some sensitive data leakage identities of some users will be uncovered. He also didn’t like that because of the presence of multiple inputs, users’ personal data is vulnerable to clustering, meaning that even if one input was compromised, all the other inputs would be too.
The principle of how CoinJoin works is rather simple. Instead of putting all the inputs from a single person to a transaction, the service lets a number of users to combine their inputs, the same happens with the outputs. Hence, there is no connection between any specific input and any specific output.
During the creation of such a transaction, the inputs’ owners list inputs and outputs that they want to be included and provide special signature if everything is added correctly. The transaction is only broadcasted when all the signatures are committed and there is no way to change the transaction once it’s written on the ledger. Thanks to CoinJoin, there is no way of knowing which inputs transacted to which outputs, so the flow is properly masked and private.
An indirect effect of using this tool is in the fact that since now it’s possible to include a number of people in a single transaction, clustering becomes harder to perform, as there is no certainty that all the addresses belong to one person.
Another means of arranging privacy when using Bitcoin is ‘mixers’. In case you were using Bitcoin for quite some time, you probably have seen some of them.
The main principle of mixing is to break the link between a sender and a receiver of a transaction via a specialized third party. Using this tool, a person sends their Bitcoins to the mixer and receives the same amount of different coins, which have been previously sent to the service provider’s reserve. This way, there will be no connection between the sender and the receiver, since the mixer becomes a new sender.
In some way, Bitcoin mixers resemble hiding IP addresses via Tor Browser. The connected computers’ IP addresses in the Tor network are also interchanged and mixed. You may be using your laptop in Thailand, but other people will think you are located in China. Similarly, investigators will see you sending 2 Bitcoins to some wallet address in the public blockchain and then receive 4 halves of a Bitcoin from random addresses.
Madeamaze has been recently introduced by the Blender (https://blender.io/) team. The newly offered services utilize a unique algorithm, originated from a combination of CoinJoin technology, gaps in blockchain and improved mechanism of mix code, which tags both the funds received and the change that is returned to the service. The outcome of using this method is the complete inability of people using blockchain explorers and specialized software to track your Bitcoin activity. The developers of this technique recommend using mix code for repeated transactions.
Using solely CoinJoin is not enough for conducting private transactions within the Bitcoin network, while many services aren't even offering this option. Transactions with multiple inputs and outputs do not link any particular sender with any particular receiver. However, in case investigators use more scrutinized chain analysis and find any suspicious funds in at least one input of CoinJoin transaction, all its outputs will be considered suspicious as well. Hence, even if your funds weren't questionable in terms of an ongoing investigation, they might gain such status after the transaction is completed and you as a receiver might come under suspicion. Thus, it's important both how a transaction is formed and how mixer determines appropriate inputs for it.
The madeamaze algorithm maintains not only the formation stage of a transaction but also the input selection stage, ensuring that the transaction doesn't contain Bitcoins that are in any way associated with a sender, given that he/she follows the server's recommendation and use a mixing-code. The code tags the user's fund's and the transaction's change in a way that breaks the connection between the funds and the receiver to make any analytical software ineffective for as long as it's required. This approach lessens the available amount of Bitcoins for mixing on the service, which is why only a few services with large reserves can afford to utilize it.
For instance, in case a user sends 120 Bitcoins to the service with the balance of 220 Bitcoins, he/she will be able to mix only maximum of 100 Bitcoins moving forward until his/her funds will go through the full mixing cycle within the service. During this time, this user's Bitcoins will be available for including in other transactions, not associated with him/her. After 24-48 hours the mix codes will be removed from the system, restoring the maximum available limit of this user back to 220 Bitcoins.
The service contains no Java Scripts, which makes it more resistant to hacking and deanonymizing attacks.
Keeping your privacy while transacting is important and it needs to be done right. Bitcoin has given us an advantage of being free on the Internet and we should use it responsibly. Knowing the proper tools to do so is essential and reliable services like Blender are must-have in today's blockchain space.