What You Need to Know About the Bitcoin ‘Privacy War’

If you’ve been around Twitter recently, you may have noticed that Bitcoiners are furiously debating Bitcoin privacy. This feud has colloquially become known as the Bitcoin “privacy war”.

Bitcoin is not private by default. Because Bitcoin’s transaction history is open for the world to see, users must take the time to learn and use certain tools and wallets if they want to fully privatize Bitcoin.

Two of the most popular wallets out there today that make it easy for users to protect transactions include Wasabi Wallet (powered by the zkSNACKs) and Samourai Wallet. The teams have been at each other’s throats for years due to philosophical differences of opinion about the best way to preserve Bitcoin’s privacy.

The latest round of debate started last week when the Bitcoin hardware wallet Trezor announced it had partnered with Wasabi Wallet to allow an easy way for Trezor users to privatize their Bitcoin holdings. Samourai Wallet advocates took aim because they criticized zkSNACKs‘ decision to blacklist transactions, which caused the debate to flare up again.

Although much of the debate has shifted to mud throwing, important points emerge. The so-called war sheds light on how complicated Bitcoin privacy is, and many of the trade-offs users must consider when choosing a particular wallet.

Wasabi censorship

Wasabi Wallet and Samourai Wallet both rely on a privacy technique called CoinJoin, where many Bitcoin users join together to make a large transaction. Mixing up the transactions in this way makes it unclear to some onlookers which user owns which Bitcoin.

The years-long feud between developers of the two wallets has taken different forms over the years. Most recently, Samourai Wallet supporters’ main criticism of Wasabi Wallet is at Wasabi last year announced that the wallet’s coordinator (powered by zkSNACKs) would begin blacklisting certain Bitcoin transactions, disallowing them from being used in every CoinJoin, citing undisclosed “legal and regulatory” reasons.

Wasabi admitted the decision was ultimately “undesirable” but argued it was the best way forward to keep zkSNACKs goes, thus succeeding in helping as many users as possible to shield their Bitcoin. “[Blacklisting] is a small price to pay for the future of Bitcoin privacy,” Wasabi Wallet said in a statement at the time.

But Samourai Wallet supporters see the decision as a betrayal of Bitcoin’s ethos of censorship resistance. “Once they crossed the red line, the debate ended for me,” said pseudonymous Samourai Wallet co-creator SW Decrypt. “Our very existence stems from our desire to systematically dismantle every heuristic that chain monitoring firms rely on. To team up with your sworn adversary is unthinkable,” he said.

He added to it zkSNACKs were never explicitly asked by regulators to blacklist transactions, but they did so anyway. “By normalizing the intrusion of on-chain monitoring into the realm of non-custodial bitcoin wallet software, we allow an unthinkable ceding of territory without any justification whatsoever. No regulatory requirements, no legal requirements, nothing,” he said.

Pseudonymous privacy and security researcher L0la L33tz noted that blacklisting transactions does not impede Wasabi Wallet users’ privacy.

Still, she agrees that blacklist transactions can be a slippery slope. “Is a future desirable where we can only enforce our right to privacy at the whim of third parties? In my opinion, [EFF founder and privacy activist] John Perry Barlow said it best: “You cannot separate the air that suffocates from the air against which wings beat,” she said.

L0la L33tz complicated matters and also pointed out that users often confuse Wasabi Wallet with zkSNACKSthe company behind Wasabi Wallet, which is responsible for coordinating CoinJoins between users.

Wasabi Wallet gives users the option to use a different coordinator if they wish. Someone in the community could hypothetically set up another competing coordinator that doesn’t blacklist transactions. Although, zkSNACKS does indeed run the most liquid coordinator at the moment.

Samourai privacy concerns

On the other hand, critics of Samourai Wallet claim that the wallet’s default settings do not protect users’ privacy well enough.

L0la L33tz calls Samourai Wallet’s design decisions “questionable.” First, in Samourai Wallet, running the privacy-preserving tool Tor is not a default option. Rather, users have to flip a switch to use Tor—and therefore hides their IP address, which can be linked to a person’s identity. If users forget or don’t realize they need to turn this setting on, they can reveal their IP addresses with Samourai Wallet.

The other decision she and other Samourai opponents criticize is that users must run their own Bitcoin node to preserve the privacy of Bitcoin, which many Bitcoin users do not do. If users don’t run their own Bitcoin node, they share their “xpub” with Samourai Wallet, which reveals information about a user and what coins they own.

“It cannot be independently verified how many users are running their own nodes for [Samourai Wallet]and puts even those running their own nodes at risk of de-anonymization [Samourai Wallet] via exclusion,” said L0la L33tz.

Meanwhile, Wasabi Wallet does not allow the ability to track any of this data. “zkSNACKsthe coordinator behind Wasabi Wallet, doesn’t learn anything about users via standard Tor and block filters,” said L0la L33tz.

Samurai wallet counters that they have never complied with requests to share this data.

Wasabians argue that users must trust Samourai Wallet not to pass on this data, which goes against the “don’t trust, verify” philosophy of Bitcoin.

Don’t trust, verify?

Nevertheless, it is difficult and infinitely time-consuming to confirm information for yourself, instead of relying on others.

L0la L33tz claims that the war is “actually preventing people from learning about Bitcoin privacy and Bitcoin privacy tools. It’s a lot of noise and little signal that leads to confusion rather than education.”

This is a problem for all Bitcoin users, she argues, adding that it is important that as many people as possible in Bitcoin use privacy tools, to increase the “anonymity set”. The more people in this “set”, the more privacy each user has.

“Only with enough use of privacy tools can those who aim to use Bitcoin privately get a large enough set of anonymity; so in a sense this debate should be important to everyone who uses Bitcoin,” she said.

She argues that users need better tools to help them separate the signal from the noise: “Users need to be able to decide for themselves which tools best fit their personal threat vectors, and the constant conflict and accusations from both projects do not help users make educated decisions.