PrivateSend is the feature that gives Dash users full privacy when they use it. It is an improved and extended version of the CoinJoin. In addition to the core concept of CoinJoin, we employ a series of improvements such as decentralization, strong anonymity by using a chaining approach , denominations and passive aheadoftime mixing.
By having a decentralized mixing service within the currency we gain the ability to keep the currency itself perfectly fungible. At the same time, any user is able to act as an auditor to guarantee the financial integrity of the public ledger without compromising others privacy.
PrivateSend uses the fact that a transaction can be formed by multiple parties and made out to multiple parties to merge funds together in a way where they can’t be uncoupled thereafter. Given that all PrivateSend transactions are setup for users to pay themselves, the system is highly secure against theft and users coins always remain safe. Currently to mix using PrivateSend requires at least 3 participants.
To improve the privacy of the system as a whole we propose using common denominations of 0.1DASH, 1DASH, 10DASH AND 100DASH. In each mixing session, all users should submit the same denominations as inputs and outputs. In addition to denominations, fees should be removed from the transactions and charged in bulk in separate, sporadic unlinkable transactions.
PrivateSend is limited to 1000 DASH per session and requires multiple sessions to thoroughly anonymize significant amounts of money. To make the user experience easy and make timing attacks very difficult, PrivateSend runs in a passive mode. At set intervals, a user’s client will request to join with other clients via a Masternode. Upon entry into the Masternode, a queue object is propagated throughout the network detailing the denominations the user is looking to anonymize, but no information that can be used to identify the user. Each PrivateSend session can be thought of as an independent event increasing the anonymity of user’s funds. However each session is limited to three clients, so an observer has a one in three chance of being able to follow a transaction. To increase the quality of anonymity provided, a chaining approach is employed, which funds are sent through multiple Masternodes, one after another.
For a more detailed explanation, please refer to the Dash Whitepaper.