Lightning Network, CoinJoin Privacy Features Look to Improve Bitcoin Fungibility & Development
Bitcoin contributor Johnny Dilley joined Pierre Rochard and Michael Goldstein to discuss what they can accomplish together and how they can bring something positive to Bitcoin. The announcement was made through a podcast published by Noded.
Bitcoin's fungibility should be improved, says Dilley. He believes that usability and functionality are more important than scalability at the moment. Also seeks to make Lightning transactions, L2 transactions and strong federations work through CoinJoins.
CoinJoin is a method of anonymization for bitcoin transactions originally proposed by Gregory Maxwell. Now Johnny Dilley is betting that CoinJoins can empower users by adding an extra layer of privacy to their transactions.
Resistance to censorship of transactions by certain governments begins when they want to know the reasons why the money is spent and, in more extreme cases, what the money was previously used for.
Bitcoin's growing fame makes it the target of both fanatics and detractors alike. So some reluctant governments may also use Bitcoin's transaction history mediatically against adoption.
It's not uncommon to find some conservatives arguing against Bitcoin that it was once used for illegal activities in the past, so it could also be used against people again – but isn't this the same thing with ordinary money? Dilley and others point out that one only has to look at the government's war on cash, the main source of terrorist financing.
CoinJoins are special transactions that mix your transfers with others that have similar characteristics. As a result, the outgoing or incoming transactions no longer necessarily correspond to you or your wallet.
Part of the obstacles that CoinJoins has to face is that it requires a lot of effort from several sides. But at the same time you have to take it easy when it comes to a network that stores billions of dollars. Any minor mistake can have devastating repercussions. When it comes to Bitcoin you have to do better than any government because any mistake can be catastrophic.
CoinJoins, unlike Monero (XMR), shows its balance sheets, which are still public. For Dilley and the other members of her new team, one way to compensate for this is users to be able to create a channel at the same time and, all make a transaction of the same amount. The privacy feature increases linearly, the more people participate, the more expensive it would be for an adversary to monitor the channels to try to discover anonymity. The challenge here is for Lightning Network (LN) companies to find a way to encourage people to send exactly the same amount through a channel.
Graftroot and Taproot are superior Bitcoin scripting methodologies that support aggregate relationships. Together can make smart contracts easier to implement, i.e. more fee efficient and more private.
An additional advantage of these technologies is that they have support for Mimblewimble and higher-order scripts, which will be useful in the future as these other technologies are developed. The main plan is that you may be able to create, manage, add or subtract from current signature states that are live or you want to be live.
Graftroot can do something called “Splicing” where you can change the amount of funds in a channel. Originally with LN, you could not do this and you would first have to close the channel and then open a new one.
Another opportunity for CoinJoin is that there has been discussion about the cost of chain transactions and certain businesses having trouble surviving where there is fee pressure and a fee market. Pierre Rochard wants to see if LN and CoinJoin will be the first recourse for users when there is another fee peak in the main market.