Topic: My noob questions (Read 751 times)

The Blockchair Privacy Indicator only tells you how easy it is link inputs and outputs as belonging to the same person. It doesn't tell you anything about who that person is or how easily or otherwise they could be identified. Without seeing the exact transaction I can't be overly specific, but we can look at the two indicators which have been displayed - "Round value" and "Output value x100".

One of the outputs of the transaction must have a "Round value" - something like 0.5 BTC, 1 BTC, 0.35 BTC. It is highly unlikely that a change value would be perfectly rounded, and so it can be assumed that the round value output is the recipient, and the other outputs are the change.

One of the outputs of the transaction is more than x100 bigger than the other. It is more likely that this output will be the change.

Essentially what Blockchair is telling you is that it is possible to tell which outputs from the transaction are the change and which outputs are to the recipient. Since your address is brand new, as you say, if it is otherwise unlinked to your identity or other addresses then that is far as the analysis can go.

If you wanted to improve the privacy on this transaction to make it less obvious which outputs were change and which weren't, then you could add some extra satoshi to the payment to avoid it being a round number (so instead of paying 0.1 BTC, pay 0.10048394 BTC, for example), and you could also split the change in to multiple outputs of similar sizes.

For more info about Blockchair's Privacy score, see this page: https://blockchair.com/api/docs#link_M6

Why did I get this bad privacy rating? I used a new address, so how is it bad privacy and how could I improve it?

It's a good approach, and using different accounts on the same wallet has a number of benefits. It vastly reduces the possibility of accidentally linking different addresses or change outputs together, since they are kept separate in different wallets. Since the accounts are all derived from the same seed phrase, it also means you only have to back up and secure a single seed phrase rather than multiple seed phrases. As long as you never transfer funds directly between accounts without mixing, coinjoining, or otherwise obfuscating them first, then it would be very difficult to link the accounts together just from blockchain analysis.

I also use a similar set up but with different passphrases instead of different derivation paths on my Ledger wallet. A single seed phrase which is backed up securely, and multiple different passphrases which I load temporarily to the wallet (rather than associating with a secondary PIN) when I need to access them. The upside of this is that if my seed is compromised, only the top level wallet can be accessed. The downside is it takes an extra few minutes to load each wallet as you have to input the specific passphrase each time.

Sure. Maintaining your privacy is no easy task, and this is by no means unique to bitcoin. It's time consuming and sometimes difficult or awkward to use Linux, use Tor, avoid Google, encrypt your communications, encrypt your data, avoid centralized exchanges, run your own full node, control your change outputs, etc. But it is also entirely possible to do all these things. Separate wallets, separate addresses, and labelling your transactions and your outputs, all let you keep track of change outputs to prevent linking them to other transactions or each other.

most clients usually let you set a description for each transaction you receive which could be a reminder of who the recipient or sender of a transaction was and in majority of cases users don't really need such reminders and in special cases the user can use a custom client (like what exchanges or merchants do) to have additional functionality.

This can be obfuscated. You can design a transaction so it is impossible to tell which outputs are recipients and which outputs are change. You can spend an entire output and leave no change. You can split your change in to multiple outputs. You can mix or coinjoin your change to consolidate it back to a single output.

Address reuse should still be discouraged. With the existence of HD wallets, there really isn't any reason to reuse addesses when you can generate new ones with a couple of clicks.

And this is why "address re-use" is a "Bad Idea"™ if you value your and other peoples privacy.

If you only ever use an address once, and give anyone who asks for one a completely new and previously unused address, then this kind of tracking becomes more difficult, as it is harder to ascertain what address belongs to whom.

Thanks, I have read most of that website but I still have some doubts about how to read that web page.

So the one on the left is the original output or "container of bitcoin" that the sender is using to send money away.
The ones on the right are the receiving addresses that receive parts of the original output. Each receiving address is a new input.

What I don't get is: why are they listed together? This way if John sends me 5 and John sends another 3 to Elisabeth, I will be able to see that John sent 3 to Elisabeth?? Isn't this a bad thing?
I mean unless this is a feature that like in emails sends the same message to many addresses (cc in emails) it seems like very bad privacy.

I certainly don't want the pet store to know that I spent money at the car store before if I am using the same output for these 2 payments, that's my business not his.

Looks like whomever sent that transaction was attempting to make a point... Possibly to the hackers.

Did you read the "addresses"?

The message appears to be:
"Just read all transaction outputs as text, you take risk when use Bitcoin for your Twitter game. Bitcoin is traceable. Why not Monero?"

Technically yes... But it was ~0.00000666 for each one... And 0.00001337 (aka "leet") to the hackers address

As already stated, you can have multiple inputs or outputs.

any address on the left side is considered sender(s) and anything on the right is considered receiver(s). technically you can have as many sender and receiver in any transaction as you want with any amount you want between 0 and less than sum of the inputs. but practically there are standard limits that apply for instance very small amounts such as 1 satoshi is considered spam and will be rejected by nodes.

So regarding the hack on twitter, what exactly happened in this transaction?




1 is the address of the sender, right?
2 is the address of the receiver, right?

So what are those other addresses? The sender sent money to those other addresses as well? If so why are those addresses showing in the transaction as well?

So the fee rate is calculated based on the size of your transaction in virtual bytes. Transactions with more inputs and outputs take up more virtual bytes than transactions with fewer inputs and outputs. The actual monetary value of the transaction is irrelevant as far as the fee goes. If you had a transaction of 500 vbytes, and you paid 5000 sats in fee, then your fee rate is 10 sats/vbyte. You might have a larger transaction which uses multiple inputs and ends up as 3000 vbytes, and you could pay a higher fee of 9000 sats, but your rate then would only be 3 sats/vbyte. So although your second transaction costs you more, it actually has a lower fee rate than your first. Since miners are always looking to maximize their own profits, they will generally pick the transaction with the highest fee rate. This lets them squeeze the maximum profit out of the finite space in each bitcoin block.

With that in mind, a reasonable fee depends on how many other transactions are waiting to get confirmed at the time, and what fee rates those transaction have paid. If the mempool (the mempool is the pool of unconfirmed transactions waiting to be mined) is empty, than a fee rate of 1 or 2 sats/vbyte will be more than enough to be confirmed quickly. If the mempool is very full, then a fee rate of 1 or 2 sats/vbyte will put you right at the bottom and you may have to wait many hours or even days to be confirmed. In those cases, you would want to pay a higher fee to get closer to the tip of the mempool if you are in a hurry.

If you want a site to just tell you what would be a reasonable fee to use, I would suggest using this one: https://www.coinb.in/#fees. You can ignore all the sliders and just use the small number at the bottom of the blue box "XX Sat/Byte".

If you want to have more control over what fee you set (and likely save some money along the way), then I would suggest using the bottom graph on this site, titled "Mempool Size in MB": https://jochen-hoenicke.de/queue/#1,8h. This is a bit more difficult to get your head around. Essentially each colored band shows how many megabytes of transactions at each fee rate are currently waiting to be confirmed, and so you can choose where you want to place your transaction. 1miau has written a good guide to using this site here: Make sure to avoid wasting BTC for too high fees – step by step guide (Electrum)

Yes indeed, the fact that it used both outputs to send the money doesn't make any sense. I didn't choose it, it was automatic and the fee is high due to the wallet I think. I must have sent that money using Exodus which doesn't allow you to select the fees. What's a reasonable fee?

I now see how I can select which output to spend from Electrum. Thanks!

By the way that website is awesome, he even has a youtube channel with very clear explanations. Thanks guys!

Those screenshots and the way the transaction was put together is why coin control is so important. What I mean with that is being able to select which outputs you want to spend.
You sent 0.00853949 BTC. You could have used only the 0.022188 output. There was no reason to include the 0.00034433 output in the transaction.

Since o_e_l_e_o used Euros as an example, I am going to do the same. Lets say you want to spend €6. In your wallet you have a €5 bill and a €10 bill. I assume you would pay using the €10 bill, am I correct? And you wouldn't touch the €5 bill. But what you did with your Bitcoin transaction is that you gave the cashier both bills to pay for your €6 item. That wasn't necessary.      

Additionally, the 180 sat/vbyte fee is very high and unless you are very much in hurry such a fee is not needed. Even if you are in a hurry, a lower fee would have probably server you equally as good.  

Oh ok, now I got it, thank you!
I guess they are called outputs because those coins originally came from the miners who mined them.

Transactions have both inputs and outputs. Bitcoin which are not being spent in a transaction are called unspent outputs.

Let's say I have 2 bitcoin in my wallet in a single unspent output. I then spend that unspent output by using it as the input to a transaction. With that transaction I create two new outputs - one output of 0.5 BTC to you, and one ouput of 1.5 BTC as change back to myself. These two new outputs are unspent outputs (also known as UTXOs short for "unspent transaction outputs") until such a time as they are used as inputs in a transaction.

It depends on the wallet you are using. Good ones will let you view individual outputs, whereas custodial or web wallets are unlikely to have this feature.

Here's a good resource that might help you understand if more thoroughly: https://learnmeabitcoin.com/beginners/outputs. I'd recommend all the beginner's guides on that site as good sources of info in general.

I want to know as much as possible (without studying computer programming and cryptography).
I don't know my private key nor have I written it anywhere, I only stored the seed physically.



Thank you. Can you define "output"? It seems weird that I have outputs. It would seem normal that the money I receive are inputs and the money I send are outputs, but by the way you speak it seems like it's the opposite.
How do I know how many "outputs" there are in my wallet?

I don't understand why these "outputs" must be moved altogether as one... given that it's completely digital wasn't it easier to consider every satoshi as a singular movable unit?

No, not at all. You only have to send the entire output, whereas your wallet likely contains multiple different outputs (one from each transaction you received).

The change is built in to the transaction automatically. Technically you are sending it to yourself. The miner does not have control of it at any point, and the fee for it is built in to the fee you pay for the transaction.

Correct.

Yeah, this is a bit strange and not typical. Which wallet software did you use to make this transaction?

The reason this likely happened is to "consolidate" inputs. By using two inputs, the change from both is combined in to one output. Having fewer outputs saves fees in long run. To go back to my earlier analogy, it's like I have a 10 euro note and 1 euro in coins, and I owe you 6 euros. I could give you the 10 and get more coins in change, or I could give you 10 plus the coins to make 11, and then get a nice 5 euro note back as change.

Don't make it too much complicated. All the balance at address 1,2,3 and 4 belongs to your general wallet. So it will just sum up at the end that's why total balance is what you are viewing on your electrum wallet. You can disregard the technical side if you are too confused. The most important thing to consider is your total balance. And you can deposit to any of your previous address since it was all connect and it will just sum up.

Mining fee will be deducted to your total balance at all. Just protect your private key and everything will be fine.

Thanks but I am still confused, what a weird way of processing the transfer. So basically every time I send money I have to send my entire wallet and then I receive back the change? Who is sending me back the change? The miner? Does he have to pay fees on that transfer too?

So I sent him the 2 amounts that are shown on the left, the 3 arrived to him and the 4 is what comes back to me (without the fees).

But why did I have to send him 1 and 2? Number 2 alone was way more than sufficient to make the payment. I don't get it.