A proposal for an improvement to darkwallet's coinjoin system.
 
Darkwallet's coinjoin works with two parties. One party will wait around with bitcoins they wish to mix. Another party will connect with them whenever they want to do a transactions and the two parties will do a coinjoin. By analogy with exchange matching engines, I will call the first party the coinjoin maker and the second the coinjoin taker.
 
The idea is that there will be people acting as makers who will slowly mix their coins for the benefit of the takers who want to immediately mix.
 
Here is an example of a darkwallet coinjoin transaction
https://blockchain.info/tx/c38aac9910f327700e0f199972eed8ea7c6b1920e965f9cb48a92973e7325046
 
As you can see, the change addresses can be linked with the inputs but the address with outputs of 0.01btc cannot be linked. Mixing is achieved.
The maker/taker model solves the problem of having to wait around for someone who wants to coinjoin exactly the same amount as you.
 
There are a few small problems with this. I will propose an improvement.
 
First, the only people motivated enough to mix will be people who already have desire privacy. So, for the example of someone wanting to privately buy contraception and hide the fact from their parents, mixing may result in their coins being mixed with drug money. It is easy to imagine this ecosystem being split between 'clean' coins mostly owned by investors and 'dirty' coins owned by 'undesirables' of society. It's easy to imagine a blacklist system being made which these two groups are seperated and cannot cross the barrier of blacklists, which would be highly damaging to bitcoin fungiblility.
 
Secondly, there is little incentive to act as a coinjoin maker when you could just be a coinjoin taker and get your mixing done without any waiting.
 
Thirdly, a small number of coinjoin makers leaves open the possiblity of three-letter agencies offering coinjoin making, and using that role to deanonymize darkwallet coinjoins.
 
Proposal: Pay the coinjoin makers. They will put up offers to do coinjoin along with a fee they ask. The coinjoin transaction would be built up in a similar way to the above example, with the coinjoin maker fee being added to the associated change address and taken away from the coinjoin taker's change address.
 
An implication of this is that darkwallet coinjoin mixing will become like an almost-riskless savings account. We already see that holders of bitcoin are willing to earn just 0.006% per day by lending btc on the bitfinex exchange, and that contains a substantial risk that bitfinex will go disappear or be hacked taking all the bitcoins with it.
Darkwallet coinjoin with a maker's fees would be far less risky, the bitcoin private keys would never leave the owner's computer. This would likely result in investors pouring in. The huge relative supply of bitcoins along with the drought of other worthy bitcoin investments is likely to drive down the fees of mixing as the investors bid each other down.
 
The coinjoin takers will have access to tens of thousands of clean, untainted bitcoins to mix with at a very low price. The makers will have access to a very low risk investment for their bitcoins. Bitcoin fungiblility as a whole will benefit because the entire economy and flow of money will be more interrelated, making blacklists completely unfeasable. The market for coinjoin makers may end up so deep and liquid that three-party or even four-party coinjoins may become managable to organise.
 
 
~Belcher
PGP fingerprint: 0A8B 038F 5E10 CC27 89BF  CFFF EF73 4EA6 77F3 1129
 
 
some notes on the darkwallet example transactions
 
INPUTS
1FDCg = 0.0067
1FAkh = 0.0056
total = 0.0123
 
OUTPUTS
1MUZn = 0.001   total = 0.0062 => fee = 0.0005
1231P = 0.0052
1Fufj = 0.001   total = 0.0055 => fee = 0.0001
1iYSY = 0.0045
total = 0.0117
 
fee = 0.0006
 
so we can see the 1FDCg input address has the same owner as 1231P
 and that 1FAkh is owned by the same person as 1iYSY
 but cant tell from this tx which of those owns 1MUZn or 1Fufj
 
so we can see the owner of 1FDCg address paid 0.0005 for the miner fee
 while 1FAkh only paid 0.0001

@belcher:
The idea surely requires some more thoughts (potential incentives for sybil attacks, ...) but I like the analogy with mining.
Miners are incentivized to ensure network security by blocks rewards and txs fees.
With this model, users are incentivized to ensure better network privacy thanks to "coinjoin fees".
Note that people at unsystem may have considered a similar idea (see bottom of this page).

As it seems that just-mined-bitcoins have a higher value on privacy, it would be cool to have something that show this to the end user.
Something that show that some "offers" are better than others.

So Sybil attacks.
...
Would appreciate thoughts.

To people who like this idea. Be honest, how much did you like the part about generating an income from your own hoarded bitcoins.
I'm guessing the psychological effect of earning interest on your coins, even if its only a few thousand satoshis a day, will be very strong.
You all love getting money for doing nothing. Of course you do, that's part of the reason you chose to save and invest (In bonds, shares, and yes, bitcoins) rather than consume your entire income.

So we have to be careful our greed and entrepreneurial rapture don't blind us to some problem (sybil attack, etc)

I'm coding an implementation of my idea. Stay tuned.

By the way, does anyone have any ideas for the name of the project?

Hi everybody, i have a question regarding the cascads and transaction fees.

So, in the first post it says that you can get better anonymity when you cascade your outputs.

If i have 5 BTC and find e.g. 3 People who also want to anonymize 5 BTC i can make a CoinJoin transcation tx_1 with them. The first (minor) problem is, that we have to pay transaction fees. So every praticipant have inputs with at least 5.1 BTC (0.1 BTC for fees). If we have that, we can make the transaction tx_1 where the outputs have a value of 5 BTC.
The problem that i see is, that if i want to cascade, say 3 times, i have to pay transaction fees every time.
I see two ways one could do that.

1. The transaction fees for the second transaction, which uses the output from transaction tx_1 is paid only from that output/input. So i have to find participants who want to make a CoinJoin Transaction with an Output of 4.9 BTC (5BTC - 0.1 Fee) which could be hard, or i find participants who want to make a transaction with less than 4.9 BTC. If i allow participants with lower values the rest is send to an change address of mine. But in this case i can't , in the beginning, know how much Bitcoins i have left in the output after say three cascades.
So if i want a cascade of three and at the end i want to have 5 anonymous BTCs the first Input must be 5.3 BTC -> output ist 5.2. The second Input is 5.2 BTC -> output 5.1 BTC. The third Input is 5.1 BTC -> 5.0 output.
I think it could be hard to find participants with exactly the amount of Inputs that i need. Furthermore i have to know in advance how long my cascade has to be and how much bitcoins i want in the end.

2. The transaction fees is paid by another Input.
So Alice makes transaction tx_1 with an  Input of 5.1 BTC -> output is 5.0 BTC.
The second transaction tx_2 consists of the Input with 5.0 BTC from the last transaction, and a new Input with 0.1 BTC for my fees.
Assume an attacker who can match all Bitcoin addresses to the person behind these addresses excluding the output addresses used for outputs in CoinJoin transactions.
If Alice uses an address  for the transaction fees input , which the attacker can match to Alice, the attacker knows which output of tx_1 belongs to Alice.
Why?
The attacker knows who participates in tx_1 because he knows the persons behind the inputs. The only thing he doesn't knows is, which ouput belongs to which participan. But if one output is used in a second transaction in which Alice pays the fees for, and no other input in that transaction could come from Alice, the only plausible way is, that Alice is the owner of the ouput from tx_1 which is used in tx_2. In that case the anonymity of the CoinJoin Transaction tx_1 is broken.
This even works if the fee Input comes from another CoinJoin transaction. You just have to look at the inputs of the CoinJoin transaction uses for the fee input, if one input matches an address of Alice you can be pretty sure, that the output from tx_1 also belongs to Alice.

So my question is, am i missing something, or is this really a problem when using cascades in CoinJoin. Cause i see no other option than the first case, if you want to use cascades and don't want the anonymity broken by the fees.

I hope you can unterstand what i mean.

Greetings
Duky