How to clean UTXO with Lightning.

Open a private channel, for example, for 1 Bitcoin to a node that has a lot of liquidity.

Send it through this channel to Boltz and perform a swap in liquid because it is much cheaper. For security and to avoid time and liquidity analysis, do not do everything at the same time and break it down. Use AMP and MMP if available.

Boltz will not know where that money comes from, and if you make several transactions, they will not know that they are from the same user, as long as you use Tor. Boltz will only know that so much money arrived and that it was sent to a certain Liquid address, nothing else.

The private node you are connected to also does not know where that money is going. It may be to Boltz, it may not.

Once you have everything in Liquid and want to return to Bitcoin, use sideswap so that the provider is different and cannot associate the last swap in the chain.

You start with a UTXO that has a history associated with you and end up with a UTXO that has nothing to do with you.

You can reuse the channel as many times as you want.

And the cost of this is ridiculously low.

Good luck tracking this. It may seem more difficult than Monero, but this leaves no complete log of the entire process on a blockchain, only partial logs on the servers that perform swaps with missing information, information that is not even available to them on another server.

I have yet to see Chainalysis show any de-anonymization attacks on Lightning.

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Discussion

For everything to be non-custodial, you should avoid using sideswap and use a different atomic swap provider (different from the one used in the first hop), since sideswap requires trust in the pegout.

This software would be fantastic. You put in one bitcoin and, for a fee of less than 0.5% to make it profitable for everyone, you get another clean bitcoin. To make it even cheaper, the software provider could offer the first atomic swap jump, so that they would keep the profits.

The business could be profitable by charging just 0.2% for anonymization.

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Good strategy but with only one private channel is imposible use effectively AMP or MMP payments.

The rest is on point

All good, except for using boltz. Better do do p2p swaps and it costs less. Also on robosats one can make swaps as a maker and earn sats. We already won on that. Bisq is coming with swaps next year with i2p built-in, besides tor.

True, but this does not allow you to perform the swap when you want or automate it.

Indeed, just like cooking a good meal it takes time.

Yes, this is a good strategy for privacy, but it's not cheap. I'm your example of 100M sats (1BTC), it's 0.7% fee from boltz in both directions... So 700k sats into liquid and 700k sats out of liquid.

Have you played around with a similar strategy but with fedimint? Fedi pegs out on chain and some mints don't even have a fee, or you can run your own mint.

Thoughts?

Read my note again carefully. From Lightning to Liquid is 0.25%, and from Liquid to Bitcoin is 0.1%.

Good call, didn't notice that the fees were different for different swaps. πŸ‘

Good read, thank you πŸ™ŒπŸ«‘ GM

Yikes! "It may seem more difficult than Monero" is quite the understatement.

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