There is huge chance for you to clean your BTC through the strategy you posted but if you must do the process make sure the exchange is DEX,  have good record,  and you must also read their privacy policy to prevent future issue. However,  I will advise you also make use a privacy wallet just in case there's a lagging which could expose your privacy.

Takers, who coordinate the coinjoin, pay for the mining fees of makers. This allows the taker to know which equal sized output belongs to each maker since the taker constructed the transaction themselves.

All other outside observers besides the taker do not know which equal sized output belongs to each maker. However, outside observers can usually calculate clusters of inputs belong to the same entity and the change output belonging to that same group of inputs.


JoinMarket uses a decentralized order book for buying and selling liquidity while other coinjoin protocols like WabiSabi use a central coordinator with a timed round to gather liquidity. WabiSabi coordinators do not learn any links between the UTXOs of a user.

In a JoinMarket coinjoin, there are makers (who provide liquidity) and takers (who buy liquidity from them). These coinjoin transactions are all public on the blockchain, with a distinct footprint. Takers trust no one in JoinMarket. Makers leave a log of the movement of funds with the taker who pays for their liquidity.

While it is true that the transaction may be flagged, as I wrote in an earlier post, if you participated in a CoinJoin you can prove that the funds you pay out to your addresses came from your own input and were paid to addresses you own.

So all you have to show the exchange is that you had access to the address corresponding to the key which sent the coins. For this purpose, for example you can sign a message with all private keys involved, give the exchange the public keys, and they can check that you have indeed sent these funds. And if there were dubious funds involved in this CoinJoin, you can prove they are different from the funds caming from your sending address.

For example, let's say we have a CoinJoin:

- Address A pays 1 BTC
- Address B pays 2 BTC
- Address C pays 1 BTC
- Address D pays 3 BTC

Now the CoinJoin pays to Address E-K 1 Bitcoin each. Address E and F are owned by the owner of Address B, addresses G, H and I by the owner of Address D, J by the owner of Address A and K by the owner of Address C.

Address A owner wants to prove their source of funds, because an exchange found out that the funds coming from addresses B and D came from hacks. So they sign a message with the private key from Address A and another one with the private key from Address J.

Of course this makes it possible for the exchange to match the chain of transactions before the CoinJoin with chain analysis results. But as far as I understood the OP, their purpose is to anonymize the coins "for the public" (for observers on the public blockchain) but always to be able to prove the chain the funds came from, when requested by an exchange or authority.

There's indeed still an issue I forgot to mention and you already suspected: In all solutions where you exchange a Bitcoin UTXO for another one coming originally from another person, e.g. CoinJoins and also atomic swaps, you could actually end up with coins from a doubtful source.

If your route is BTC -> XMR -> BTC then the obvious problematic step is the XMR -> BTC part. If you already did some transactions with XMR to obfuscate the amount, maybe for this step it is actually advisable to use a trustable non-KYC exchange (see link in my first post for several options). Or, if you know how to do it, check the Bitcoin UTXO's provenance (but be careful to not expose your privacy in this step, as chain analysis tools can check the IP addresses from those querying an UTXO ...).

Another possible negative for atomic swaps is that it can be difficult to find an exchange partner. https://kycnot.me has some platforms for atomic swaps too.

In CoinJoins it is easy to prove source of funds: simply prove you own all addresses involved (sender and those recipients who receive your coins).

In atomic swaps you should always be able to prove the source of funds as long as you keep stored all data involved, i.e. all addresses, private/public keys, amounts and transactions IDs, however I don't know the exact procedure in the case of atomic swaps with adaptor signatures. You can easily prove that you sent an amount and received an amount on the target blockchain. But I don't know how you do the "connection" here, apart from the amount itself (which can be variable due to the exchange rate).

As far as I know you can technically always prove the source of funds if you keep all your transaction data, it doesn't matter if you use Monero or Lightning. If you use mixers, this may be different as there is a centralized intermediary. While they often provide a letter of guarantee signed by them which contains the deposit address and withdrawal address, an authority could distrust the certificate if they don't have a list of mixers.

Edit: See this guide to prove you made a transaction with Monero. You must do this with all intermediate transactions on the XMR network. With the atomic swap transactions you must do something similar but the exact approach may be a bit different with the incoming (BTC -> XMR) and outgoing (XMR -> BTC) swap, if you're interested in this approach I can investigate.

Atomic swaps with adaptor signatures and other private techniques exist for several coins, but I don't know if there's a software solution to exchange directly to ERC20 tokens like USDT (or on another blockchain). But for your purpose, you should also be fine if you exchange BTC to ETH and then back to BTC. This approach for example works with Ethereum.

Take into account that it's common to re-use addresses in Ethereum, but you should do like you would do with Bitcoin-style coins and realize some transactions in ETH with different addresses ("accounts") before you change it back to BTC to maximize privacy.

Yes, it's perhaps not ideal for beginners. However it's one of the few serious Monero competitors so I mentioned it.

MimbleWimble - the Grin approach to privacy - can also used with Litecoin through the MWEB function.

Exactly, this is very important in all techniques mentioned, I mentioned it also in one of my earlier posts.

I would be careful with "bridges", as most of them are partly centralized, and this is of course not good for privacy (neither too secure). You can never be sure one of these "bridge platform" custodians runs analytics software. And many of them make it possible to follow the "tracks".

IMO both Monero and Lightning offer both good privacy if you use them well. Use several transactions with different amounts with Monero or use several channels, also playing with amounts, if you want to do it via Lightning. And in both cases never deposit the "KYCed" and the "un-KYCed" coins on the same exchange or centralized wallet platform, nor use the same HD wallet (e.g. Electrum) for them. If you use HD wallets create two wallet files, one for KYCed and one for non-KYCed coins, connect both via Tor, and never connect them simultaneously.

I think if I had only basic technologic knowledge I would go for the Monero approach, of course also other privacy coins work (e.g. Grin).

Another technique to improve privacy are atomic swaps, i.e. trading one crypto for another one decentrally. Be aware that there are various techniques, only the technique with adaptor signatures improves privacy. A quite good option is: Atomic swap Bitcoin -> Monero, split the coins with XMR to variuos different accounts -> Atomic swap back to Bitcoin, but to different wallets, and never re-using any address in the process.

You can also use private exchanges, like those suggested in kycnot.me, at least for one of the Bitcoin <-> privacy coin exchanges.

Well let's compare what both solutions do exactly:

- Monero creates ring signatures. This can be compared to big transactions with many senders and recipients (with some "fake addresses", i.e. existing addresses which in reality are not sending nor receiving anything mixed in afaik), and obfuscated amounts and receiver addresses. So while there are techniques which can identify senders if the user is careless, the exact transaction is very difficult to reconstruct.

- In Lightning, you would create a channel with the coins you want to "un-KYC", then transfer the coins via Lightning to another address, and close the channel (not mandatory). There is no on-chain connection between both addresses, but in the case a chain analysis company operates a Lightning node and you happen to route through it, then it could detect you. Via onion routing this is prevented a bit but it's not perfect.

In my (advanced but not expert!) opinion, in both cases the privacy is not 100% perfect, but you're private if you do several transactions but spaced out a bit and using several addresses. The likelihood that someone is able to analyze your transaction pattern decreases with every transaction.

Lightning has however a slight disadvantage: if the channel is closed, then chain analysis companies will know that you used Lightning because of the script which is pushed on chain. And your counterparty in the channel will probably eventually close the channel if you stay unresponsive for a too long time. So then they could use this information to follow your way through Lightning if they operate Lightning nodes like explained above.

Another disadvantage is of course that you will pay more fees with Lightning in this case, because you can't simply re-use the channel to "un-KYC" other coins.

On the other hand, Monero is 1) less secure and 2) more volatile, so there are also some risks.

Some more info: https://www.voltage.cloud/blog/lightning-network-privacy-explainer