Privately running wallet privacy heuristics on your own UTXOs without needing to run your own node

The recent advancements in privacy-heuristic tools have highlighted a growing interest in understanding the privacy implications of blockchain transactions. Tools like am-i.exposed allow users to assess how much information their wallet transactions might be leaking by pasting an xpub or an address. Additionally, a work-in-progress (WIP) panel on btc-rpc-explorer is being developed for wallet fingerprinting based on heuristic analysis, identifying likely creators of specific transactions through various on-chain signals.

A new system has been introduced, addressing concerns about handing over sensitive wallet information to third parties. This system enables individuals, including those without their own node, to privately run privacy heuristics on their wallets. The approach involves precomputing heuristic verdicts for each transaction and publishing them as encrypted filters per block. Only the wallet interested in a particular outpoint can decrypt the corresponding verdict, ensuring no server ever learns which transactions or wallets are being queried.

The privacy model relies on several cryptographic techniques. Each transaction receives a privacy classification encoded into a 24-bit tag encompassing numerous heuristics such as linkage, clustering signals, structural indicators, and fingerprint-style signals. To obtain a private verdict, the server publishes a filter with two columns per block, where one column contains a membership set for transaction IDs and the other holds encrypted heuristic tags. A client matches a transaction ID from the first column and decrypts the corresponding code from the second column using a key derived from a Verifiable Oblivious Pseudorandom Function (VOPRF).

The security architecture assumes a fully malicious server scenario. It utilizes Tor for anonymous communication, preventing IP leakage, and supports decoy techniques to camouflage the user’s interest in specific blocks. Despite this robust setup, the system acknowledges potential limitations, such as the operational expense of key rotation and the absence of alternative privacy transport methods currently implemented beyond Tor.

Looking forward, the proposed system may also explore features like provenance tags and monitoring the decay of anonymity sets in CoinJoins, providing users insights into when their privacy may be diminishing. These advancements aim not just to enhance transactional privacy but also to educate users on maintaining privacy against common vulnerabilities such as address reuse and poor coin control practices.