Xim: Distributed Match-and-Mix for Bitcoin

A fundamental limitation of Bitcoin and its variants is that they link pseudonymous public addresses with transactions. The movement of coin between addresses can be observed by examining the public block chain that records the history of transactions. This record enables adversaries to link addresses to individuals, and to identify multiple addresses as belonging to a single participant. Users can try to hide this information by mixing, where a participant exchanges the money in an address coin-for-coin with another participant and address. In this paper, we describe the weaknesses of extant mixing protocols, and analyze their vulnerability to Sybil, denial-ofservice, and timing-based inference attacks. As a solution, we propose Xim: a complete decentralized mixing protocol that aims to minimize the losses of an honest participant if they interact with an adversary. We bootstrap a protocol by Barber et al. with a new discovery protocol for anonymously pairing up participants. We explain the relationship between parameters used in our protocol for initial setup, and show why our protocol is effective in deterring denial-of-service, inference, and Sybil attacks.