A New Privacy Tool For Bitcoin

There is a new privacy tool coming to town: coinswaps on statechains. The original statechain design was proposed by Ruben Somsen at Scaling Bitcoin 2018 in Tokyo. I will summarize quickly, but Aaron van Wirdum has a very thorough explainer of the original concept here. The general idea is to have a facilitating entity (the statechain operator) create a 2-of-2 multisig address with a user to facilitate the off-chain transfer of a UTXO. The user then transfers their private key for the 2-of-2 to a new user. The statechain entity would be informed of when this happens and at that point will only allow the new owner to transfer the funds out. So the whole idea is to transact by literally transferring the private key itself and have the state chain operator enforce current ownership.

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