Wasabi Wallet: zkSNACKs also discontinues Coinjoin service!
Thanks to regulatory uncertainty
After the arrest of the two founders of the privacy-focused Samourai wallet and the withdrawal of the Phoenix wallet from the US, the Bitcoin community received the next piece of bad news yesterday: zkSNACKs, the developers behind the Wasabi wallet, have announced that they will discontinue their CoinJoin coordination service as of June 1, 2024. Although Wasabi Wallet will continue to function as a standard bitcoin wallet, this decision casts a further shadow on the situation around privacy services, which are under increasing regulatory pressure.
Regulatory uncertainty
In recent years, and especially in recent weeks and months, Bitcoin and crypto-privacy services have increasingly come under the scrutiny of the authorities. The arrest of the Samourai Wallet founders and the restrictions on the Phoenix Wallet in the US are just a few of the most recent examples that illustrate how much pressure has grown on developers of such services. The reason given by the team for the decision was that they first wanted regulatory clarity in order to be able to continue operating.
This decision was made after careful consideration and with a heavy heart. Throughout our history, we have always endeavored to act with legal clarity. At this point, we need to regain more certainty before moving forward.
zkSNACKs / Wasabi Wallet
Other services also affected
The shutdown of the CoinJoin service will also affect users of other wallet clients that connect to the zkSNACKs coordinator, such as Trezor Suite and BTCPayServer. In a blog post, zkSNACKs emphasized the history and achievements of the Wasabi wallet since its launch in 2018: "When Wasabi Wallet was launched, privacy in Bitcoin was just an idea, a dream of cypherpunks. After years of research, trial and error, we have proven that Bitcoin can be used as anonymous money in a fully sovereign way. Coinjoins provide a peaceful, secure and effective way to preserve our financial privacy. We have succeeded."
Wasabi Wallet remains in place
As briefly mentioned at the beginning, the Wasabi wallet will continue to function as a regular Bitcoin wallet, allowing users to generate private keys to receive and send Bitcoin. "Even without CoinJoins, Wasabi will be the most private light wallet with its client-side filter architecture, Tor integration and custom coin selection," explained the team around CEO Max Hillebrand. The company has also committed to continue funding the ongoing maintenance of the Wasabi wallet's basic features.
The day will come when someone writes the code to perfect all the features of good money. Until then, we should be grateful for what we have achieved together and be aware of the challenges ahead.
zkSNACKs/ Wasabi Wallet
The last warning
The debate about whether Bitcoin needs more privacy features directly on the main layer is almost as old as Bitcoin itself. The well-known whistleblower Edward Snowden also spoke out about the recent events and the zkSNACKs report.
In 𝕏 , Snowden criticized the fact that Bitcoin developers have been warned by him for ten years that data protection must be provided at the protocol level. "This is the last warning. The clock is ticking," he writes, emphasizing that real privacy should not be guaranteed by third-party solutions alone, but should be integrated directly into the Bitcoin protocol.
I've been warning Bitcoin developers for ten years that privacy needs to be provided for at the protocol level. This is the final warning. The clock is ticking. https://t.co/r7w7gdrHRp-
Edward Snowden (@Snowden) May 2, 2024
Back in the Bitcoin whitepaper, Satsohi Nakamoto discussed the challenges and opportunities arising from the need for privacy in a publicly visible transaction system. He explained that the traditional banking model provides a certain level of privacy by limiting access to information to the parties involved and the trusted third party. However, since all transactions in the Bitcoin system must be made public, Satoshi suggested protecting privacy in another way: by keeping the public keys anonymous. This way, the public can see that one person is sending an amount to another, but without any information linking the transaction to a specific person.
Of course, the "keeping public keys anonymous" mentioned by Satoshi is more difficult than ever to implement in times of regulatory obligations and know-your-customer procedures. The requirements that are increasingly coming to the fore in the wake of global financial regulation pose a direct challenge to the basic principles on which Bitcoin was originally built.
The discussion about the integration of privacy features at the protocol level of Bitcoin is not only a technical issue, but also a strategic one. The gradual introduction of Bitcoin, initially as a transparent, publicly traceable system, could actually enable wider acceptance and integration into existing financial systems. Had Bitcoin offered a high degree of privacy from the outset, it may have faced significant resistance from government regulators and there would have been significantly more headwinds.
Two sides of the debate
The gradual approach, where Bitcoin is first established without very strong privacy measures and then gradually given more privacy, could give Bitcoin the time it needs to build acceptance and trust before it attempts to implement deeper privacy technologies that allow users to maintain their financial autonomy and anonymity. The comparison with the "Trojan horse" is often made by proponents of this approach. On the other hand, privacy advocates such as Edward Snowden argue that true financial privacy should not be an afterthought, but must be a basic requirement. Both sides of the debate have compelling arguments. On the one hand, there is the argument of gradual adoption, which minimizes regulatory hurdles and facilitates global adoption. On the other side is the principle that privacy is non-negotiable and should be integrated into the technical infrastructure from the outset. Ultimately, there is no clear right or wrong in this debate. Overall, the choice between transparency and privacy reflects a deeper examination of the values we want to protect as a society. How Bitcoin and other cryptocurrencies evolve will be determined not only by technical possibilities, but also by legal and societal considerations.
