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Have you used #Loop?

Whenever discussions about bitcoin and kyc come up, I'll often see comments about Coinjoins with Whirlpool, or more about just not using kyc. These are great of course, but I rarely see comments on my favorite way to deal with kyc bitcoin, that being Loop.

Step 1: Have a lightning node. Great idea generally.

Step 2: Get on-chain bitcoin. Preferably above 0.01 BTC. Let's assume it's tainted with kyc.

Step 3: Make a lightning channel with a well connected node. ACINQ, Wallet of Satoshi, breezy, someone with very high connectivity.

Step 4: Loop out all of the funds from that channel to cold storage, except the channel reserve and active funds you're gonna use for zapping people/buying goods.

Congratulations you just broke all on-chain trace of where the hell your money has gone. And that's not all. You can come along and loop-in -> loop-out more kyc funds later, and those are even better off because they aren't indicated to be part of a channel with any connection to you.

As for fees, I haven't done a direct side-by-side comparison against whirlpool in a while, but it averages 0.35% for each side, or about 0.7% to loop in and then loop funds out.

Hope you find it useful.

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Discussion

Pollomoolokki 2y ago

Oh I had not thought about that... Well thought! I'm most excited for Peerswap https://www.peerswap.dev/ p2p atomic swaps.

There's many services offering liquidity on/off-chain but I feel more solutions will make the experience better.

Seeker Erebus 2y ago

More services, better results.

Pollomoolokki 2y ago

That too!

Kruw 2y ago

Samourai's Whirlpool is extremely expensive to use compared to Wasabi Wallet's coinjoins, so it's a bad example IMO. Wasabi's coordinator fees max out at 0.3%, and amounts under 1 million sats don't pay any coordinator fees at all.

Seeker Erebus 2y ago

Good to know.

Alfred Hodler 2y ago

Swapping UTXOs and breaking the UTXO link is not the sole purpose of coinjoin. Game theory says you have to do it in a publicly visible and provable way (coinjoins are very visible on the blockchain) in order to be able to say "After participating in N rounds my anonymity set is X and there's no point in trying to link me or any other participants to any particular UTXO in rounds 0..N-1. You can try but you can never prove a particular link".

If you do it privately using LN or other methods, you can end up receiving a "bad" (tracked) UTXO that will land you in trouble if you sell it on a KYC platform. Conversely, you could end up giving up your good KYCd UTXO to a "bad" party who will then use it for nefarious purposes and guess who will be getting a visit from the authorities in that situation. If you coinjoin, a rational opponent has to say "This peer clearly coinjoined with 50 other participants, so in order to prosecute him we'd have to prosecute everyone from that round".

Re Whirlpool vs Wasabi, WP is actually a lot cheaper in the long run (per anonset) because they charge only for the initial round. After that every subsequent round is free, indefinitely. Wasabi may be cheaper only for smaller anonsets.