Now You Can Try ‘Teleporting’ Bitcoin for Greater Privacy With CoinSwaps

Developers have long been working on making Bitcoin more private because every bitcoin (BTC) transaction ever sent is stored in the blockchain, which anyone can see. Last week, Bitcoin privacy programmer Chris Belcher released an alpha version of Teleport, an implementation of privacy technique “CoinSwap,” in an effort to improve bitcoin privacy by making transactions “invisible.”

The first version of the open-source project is not ready for real funds because it needs more testing, Belcher said in the announcement on the Bitcoin developer email list. It’s also missing the key features needed to fully make transactions invisible. But the release shows CoinSwap, a long-standing idea – first described by cryptographer Gregory Maxwell on the Bitcointalk forum in 2013 – finally coming to life.

Belcher believes Teleport’s CoinSwap has advantages over CoinJoins, the main privacy-preserving mechanism used today by projects Wasabi, Samourai and JoinMarket. “Imagine a new privacy tech for bitcoin, like CoinJoin, but can’t be blocked [because] the [transactions] look exactly the same as regular [transactions],” Belcher wrote on Twitter.

Today, privacy-conscious users take advantage of the wallets Wasabi and Samourai to execute CoinJoins, which scramble a user’s bitcoin with many other users’ bitcoins, obscuring the coins’ tracks.

The problem is that even if CoinJoins obscure where a user’s bitcoin is sent, fooling blockchain surveillers, it’s still obvious from a glance at the bitcoin blockchain that a CoinJoin has taken place.

If done the right way, CoinSwap transactions, on the other hand, can’t be detected on the blockchain. They look just like normal transactions.

“Imagine a future where a user, Alice, has bitcoins and wants to send them with maximal privacy, so she creates a special kind of transaction. For anyone looking at the blockchain her transaction appears completely normal with her coins seemingly going from address A to address B. But in reality her coins end up in address Z, which is entirely unconnected to either A or B,” Belcher writes. In a sense, the transaction is being “teleported” elsewhere, hence the project’s name “Teleport.”

Even users who don’t use CoinSwap can benefit from it.

“If even a small percentage of transactions were actually created by this software, anybody doing analysis on the blockchain would always have a niggle in the back of their mind: ‘What if this transaction I’m looking at was actually a CoinSwap? How would I know? What if these coins have actually disappeared into the mist?”” Belcher writes.

“The doubt and uncertainty added to every transaction would greatly boost the fungibility of bitcoin and so make it a better form of money,” Belcher added.

“Fungibility” is an important property of money, meaning that each unit can be exchanged for any other unit for exactly the same value. We take for granted that a dollar is worth just as much as any other dollar, for instance. Privacy is crucial to preserving fungibility because without it some bitcoins can become “tainted” if they are used as part of criminal activity, for example. Then, there’s a possibility that an unwitting, non-criminal user receives the tainted coins, only to discover they are harder to trade (and therefore worth less) because of their historical association with a criminal or sanctioned event.

While it’s now possible to execute CoinSwaps using Teleport, the software doesn’t make the CoinSwap transactions look like normal transactions just yet.

That’s the next “really big task” on Belcher’s to-do list. The cryptographic technique ECDSA-2P can be used to make these transactions look like normal “single-sig” addresses, which are “overwhelmingly common out there and so provide an enormous anonymity set,” he writes.

When it comes to Taproot implementation, however, Teleport will have to wait. The Taproot upgrade to Bitcoin, which happened in November 2021, adds Schnorr signatures as an option beyond ECDSA signatures, which are how most transactions are signed today.

While Schnorr signatures can do the same thing as ECDSA-2P in an easier way, Belcher argues that Schnorr isn’t suitable for CoinSwap. “This is because the anonymity set for ECDSA would be much greater. All addresses today are ECDSA and none are Schnorr,” Belcher explained when he originally announced the project in 2020. As such, Belcher suggested it might take years before there would be enough of a dataset to make the use of Schnorr in CoinSwaps practicable. But Bitcoin users need privacy much sooner than that.

This alpha release isn’t ready for prime time, but developers are invited to test the open-source software if they want to help battle-test it, by using dummy coins on the test and signet networks. “It is possible to run it on mainnet, but only the brave will attempt that, and only with small amounts,” Belcher writes.

Longer term, when the project is ready for real funds, he hopes users and wallets will take advantage of the improved privacy it provides.

“My aim is that the Teleport project will develop into a practical and secure project on the bitcoin mainnet, usable either standalone as a kind of bitcoin mixing app, or as a library that existing wallets will implement allowing their users with the touch of a button to send bitcoin CoinSwap transactions with much greater privacy than was possible before,” he said.