Published on: 2018-04-01T14:37:13+00:00
Electrum version 3.0.6 now offers a new option for multiple change addresses, although it is not enabled by default. Eric Voskuil responded to a proposal regarding privacy enhancement through change obfuscation by clarifying a misconception about the cost of unspent outputs. He explained that the perceived increase in cost is not necessary and arises from specific node software implementations.There is a common belief that the count of unspent outputs in a network leads to higher costs due to the bloat in UTXO size. However, this belief is inaccurate, as the additional cost is not required but rather a result of implementation details in certain node software. Redundant indexing of unspent outputs is unnecessary, meaning not everyone has to bear the cost.In a Bitcoin-dev thread, Damian Williamson proposed a feature called change obfuscation to enhance transaction privacy. The idea was to randomly distribute change across up to twenty output addresses, ensuring each output is not dust. However, Evan Klitzke pointed out that this approach would be costly for the network due to the increased UTXO size. Moreover, it may not provide the desired level of privacy, since the wallet would need to combine those inputs in future transactions, resulting in higher transaction fees. Despite understanding the additional cost, Klitzke did not support the suggestion.In response to Williamson's proposal, an "Enhanced privacy" option was introduced in Bitcoin Core for transaction creation. This feature allows users to distribute change randomly across up to twenty output addresses (with a minimum of five), as long as each output is not dust. It is recommended to limit the total number of random addresses based on the change amount. If additional inputs are available, they can be selected to increase the change, although this may reduce obfuscation when the outputs are spent. However, the initial spend with change will have a higher transaction cost due to increased outputs, and subsequent spending of the change will depend on the future spend amount(s) and the number of inputs required.Although there is still a possibility of transaction linkage, guessing what was retained by the owner of the original utxo's becomes more challenging unless the new change outputs are spent together in the same transaction. Ultimately, the "Enhanced privacy" option significantly improves privacy for Bitcoin Core users.
Updated on: 2023-08-01T22:49:09.755739+00:00