CoinJoin is a cryptographic method of mixing transactions in the Bitcoin blockchain to make it more difficult for outside parties to identify the spenders and recipients of bitcoin payments. It does not require a modification to the Bitcoin protocol and works as an overlay on top of existing bitcoin transaction data.
To use CoinJoin, you first need to send some of your bitcoin from your wallet to an address that will be participating in the mix. This address will receive your change outputs, which will be mixed together with UTXOs from other users in the same CoinJoin. The result of this is that it becomes very difficult for surveillance firms to determine which UTXOs are owned by which input owners. For example, suppose that Alice transfers 1 bitcoin and Juan transfers 0.8 bitcoin to one of their wallets. When a CoinJoin is conducted it will combine these two transfers into a single transaction that has two inputs and two outputs (including the change). In this scenario, it would take a lot of computational power to determine which UTXOs belong to whom.
It is important to note that CoinJoin can take some time to process. This is because it involves a number of different bitcoin users and requires them to sign the final transaction using their private keys. The process of signing and broadcasting the final coinjoin transaction can be interrupted by problems with a user’s internet connection or accidental disconnection from their device. This is a known risk associated with coinjoining and should not be viewed as a significant drawback to its privacy benefits. CoinJoin