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Understanding the challenges of other advanced confidentiality techniques

The ricochets

Privacy on Bitcoin

The ricochets

  • What's a ricochet?
  • Why does it work?
  • When and how to use Ricochet?
The use of Bitcoin transaction structures that add ambiguity to chain analysis, such as coinjoin, is particularly beneficial for privacy protection. However, as we discussed in the chapter on payjoins, coinjoin transactions are naturally identifiable on the chain. Remember the analogy we drew between encryption and coinjoins: when a file is encrypted, a third party who discovers the encrypted file cannot access its contents, but can clearly identify that the file has been modified to hide its contents. The same applies to coinjoin: when an analyst examines a coinjoin transaction, although he or she cannot establish direct links between inputs and outputs (and vice versa), he or she can nevertheless recognize that the observed transaction is a coinjoin.
Depending on how you intend to use your UTXO after coinjoin cycles, the fact that it has undergone this process can be problematic. For example, if you plan to sell your coin on a regulated exchange platform that has recently undergone a coinjoin, the platform's chain analysis tool will detect this fact. The platform may then refuse to accept your coin-joined UTXO or demand an explanation from you, with the risk of your account being suspended or your funds being frozen. In some cases, the platform may also report your behavior to state authorities (for example, as TRACFIN requires of PSANs in France, or as the Financial Crimes Enforcement Network (FinCEN) does in the USA).
There is a tool capable of blurring the traces of a Bitcoin coin's past, thereby restoring some form of fungibility. This is precisely the purpose of ricochet.

What's a ricochet?

The ricochet is a technique that involves performing several fictitious transactions towards oneself (sweeping) to simulate a transfer of bitcoin ownership. This tool differs from the other transaction structures we've discussed in that it doesn't gain prospective anonymity, but rather a form of retrospective anonymity. In effect, the concept of a ricochet blurs the specificities that can compromise the fungibility of a Bitcoin coin due to its past.
To smooth out the imprint left by a past event on a coin, such as coinjoin cycles, ricochet executes four successive transactions in which the user transfers funds to himself at different addresses.
After this sequence of transactions, the ricochet tool finally routes the bitcoins to their final destination, such as an exchange platform.
The aim is to create distance affecting the fungibility of the coin, such as a coinjoin transaction, and the final act of expenditure, which could reject this coin because of its past. Thus, chain analysis tools might conclude that there was probably a change of ownership after the event and consider this coin to be fungible. In the case of a coinjoin, blockchain analysis tools could then assume that it was not the same person who sent the bitcoins and carried out the coinjoin, and that there is therefore no point in taking action against the sender.

Why does it work?

Faced with this ricochet method, one might imagine that chain analysis software would deepen its examination beyond four bounces. However, these platforms face a dilemma in optimizing the detection threshold. They have to set a limit on the number of hops after which they accept that a property change has probably taken place, and that the link with a previous event (such as a coinjoin) should be ignored.
However, setting this threshold is risky: each extension in the number of observed jumps exponentially increases the volume of false positives, i.e., individuals erroneously marked as participants in an event, when in fact the operation was carried out by someone else. This scenario poses a significant risk for these companies, as false positives lead to dissatisfaction, which can drive affected customers to competitors. In the long term, a too high detection threshold can lead a platform to lose more customers than its competitors, which could threaten its viability. It is therefore complicated for these platforms to increase the number of bounces observed, and 4 is often a sufficient number to counter their analyses.
The phenomenon observed here is somewhat analogous to the theory of the six degrees of separation.
The theory of the six degrees of separation suggests that every person on Earth is connected to any other by a chain of relationships comprising at most six intermediaries. It would therefore be enough to pass through a series of six people, each personally knowing the next, to reach any individual in the world.
In the case of Bitcoin transactions, a similar phenomenon is observed. By tracing a sufficient number of Bitcoin transactions, we inevitably come across a coinjoin. The ricochet method leverages this principle by utilizing a greater number of hops than the exchange platforms can reasonably track. If the platforms decide to track more transactions, it will then be possible to simply add an extra hop to circumvent this measure.

When and how to use Ricochet?

The most common use case for Ricochet occurs when it's necessary to conceal a previous participation in a coinjoin on a UTXO you own. Ideally, it's best to avoid transferring bitcoins that have undergone a coinjoin to regulated entities. Nevertheless, if you find yourself with no other option, particularly in an urgent need to liquidate bitcoins into state currency, Ricochet offers an effective solution.
This method is effective not only for coinjoins, but also for any other mark that could compromise a UTXO's fungibility.
The idea behind this ricochet method originally came from the teams at Samourai Wallet, who had integrated it into their application to automate its operation. The service was paid on Samourai, as each ricochet incurred a fixed cost of 100,000 sats for service fees, in addition to mining fees. The same applies today on Ashigaru. Thus, its use is generally recommended for transfers involving large amounts.
The Ashigaru application offers two ricochet variants (the same ones we previously had on Samourai):
  • The reinforced ricochet, or “staggered delivery,” offers the advantage of spreading Ashigaru’s service fees over five successive transactions. This option also ensures that each transaction is broadcast at a different moment and recorded in a separate block, allowing it to mimic as closely as possible the behavior of a change of ownership. Although slower, this method is preferable for those who are not in a hurry, as it maximizes the effectiveness of the ricochet by strengthening its resistance to chain analysis;
  • The classic ricochet, which is designed to execute the operation with speed, broadcasting all transactions in a reduced time interval. This method, therefore, offers less confidentiality and less resistance to analysis than the reinforced method. It should only be used for urgent shipments.
Ricocheting simply means sending bitcoins to yourself. It's perfectly possible to ricochet bitcoins manually on any wallet software, without using a specialized tool. All you have to do is successively transfer the same coin to yourself, using a new, blank address each time.
In the next chapter, we examine various techniques for secret transfers of ownership. These methods differ radically from those we have examined so far, both in terms of operation and results.
ashigaru-ricochet
Ashigaru - RicochetUnderstanding and using Ricochet transactions
Quiz
Quiz1/5
What is the main difference between an enhanced ricochet and a classic ricochet?