CoinJoin is a method for combining multiple Bitcoin payments from multiple spenders into a single transaction to make it more difficult for outside parties to determine which spender paid which recipient or recipients. It was first proposed by Gregory Maxwell in 2013.
In traditional Bitcoin transactions, it’s easy to trace payments as every transaction is public on the Bitcoin blockchain. This transparency can potentially lead to decreased privacy as anyone can see the sending and receiving addresses for each transaction.
CoinJoin aims to solve this issue by making transaction origin and destination analysis significantly more difficult. It does this by combining inputs from multiple users into a single transaction with multiple outputs. This way, all participants send and receive the same amount, making the transaction indistinguishable from the others, thereby increasing privacy.
However, it’s important to note that while CoinJoin improves privacy, it does not guarantee complete anonymity. Advanced blockchain analysis techniques may still potentially de-anonymize some CoinJoin transactions. Moreover, because the process involves trust between participants, there could be potential issues if participants act maliciously.