CoinSwap

One of the responses to the bitcoin fungibility issues is that CoinSwap will give 'privacy' to everyone on chain as it will allow you to swap coins with another person without leaving a trace on the blockchain. The idea is people cannot know for certain which coins were swapped or not, breaking the traceability of bitcoin.

I.e Alice and Bob can trade their coins, so Alice has bobs, and the history associated with his coins, and Bob can have Alices.

I haven't seen much discussion on this, but think it is worth pointing out how useless it is:

Imagine drug dealer Alice trades does a CoinSwap with Bob.

LE cannot tell if a coinswap occurred or not, so they ask Bob about their suspicious bitcoins that came from the DN.

Bob, being innocent and only wanting privacy for themselves and to be left alone instead of investigated quickly tells LE that they did a coinswap and provides proof. LE now knows the address to Alice and trace their coins. Alice is potentially operating under the assumption that their coins are now clean.

With that in mind, I am not sure how CoinSwap offers anything valuable.

Tainted coins have greater incentive to do a coinswap then untainted ones, and its likely you would simply get two criminals trading their coins for one another while suppressing incentive for clean coins to be swapped as you're likely to get unwanted attention with the new coins you swapped out: it becomes a lemon market of sorts.

This is in addition to other issues: its yet another transaction or two which requires interaction and fees, consuming both your money and time. Since the transactions have to happen with interaction you can still do transaction value analysis and in some instances figure out likely or possible coinswaps.

submitted by /u/SpawnMagic
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