I think I have found a flaw with Darksend mixed coins anonymity which I am going to call "Dead change" in reference to Zombies which, if they stay dead, it's fine, but once they start moving they are gonna infest everyone whos in the same room/town with them.
If this issue is already known under another name - so be it
First of all, the issue with Darksend being marketed as a strong anonymity feature is that a lot of people will use darksend and therefore neglect other things to protect their identity. Once there is problem with Darksend, the anonymity might be broken completely because of that.
However, Darksend also wants to be an easy to use feature that people do not need to know much about in order to use it. Because of this, there has to be clear how many funds are anonymous and how many are not. With the current implementation, this is not the case.
Imagine mixing some coins (let's make it 20 Coins for this example, so thats 2 x 10.00000001 DRK). You now go ahead and spend 15 coins on something that you really cannot afford to be linked to you in any way. Fair enough, you can do that, but that will create a transaction using the 20.00000002 Coins, giving 15 of the to whoever you buy something from and giving 5.00000002 back to you as change. This change is "Dead Change".
It is highly important to keep in mind that the change (the 5.00000002 coins) is now tied to the purchase. Whatever you do with those coins can be traced back to your 15 coins purchase. Say you want to send them to an exchange, buy something else from another site etc. You have to be really careful what you do with them. Putting them on an exchange might lead to the exchange getting questioned about what you did with them. They might (have to) tell someone that you exchanged them to Bitcoins and that you sent your bitcoins to address X which belongs to.. lets say, coinbase, which has your real name etc. and suddenly your identity is tied to the purchase.
Another scenario would be that you just want to send all your DRK to your new wallet and you think it doesn't matter which funds you use because you will re-mix them before using anyway, so you combine mixed and non-mixed funds which ties the 15 coins purchase to your actual address that is probably associated with you. All because that 5.00000002 coins dead change was in there.
And there are a lot more things that can happen because of this.
As with Zombies, dead better stays dead. If you but it into a room (a transaction) with healthy (anonymized, unused) people (denominations), they are all gonna be infested (tied to a purchase / de-anonymized).
It's even worse. Unlike Zombies, Dead changes can infest each other if being used in a chain or if being combined resulting in even less anonymity / more ties to purchases.
The problem is that the dead change shouldn't be in the "anonymous coins pool" anymore. But they cannot be in the normal pool as well because then they might get used in a transaction with your non-mixed coins which is even worse. The question is, is it enough to have a 3rd pool for change?
The answer is no, because in crypto, Zombies infest each other. The change of several transactions would link them all together when being spent. Thats just as bad as leaving it in the "anonymous coins pool". Potentially even worse.
So the dead change that cannot be spent because otherwise the anonymity of the spending transaction might be compromised.
In the current implementation this can be prevented by not created change of mixed coins at all. This can be done by using up the whole input either by paying larger fees or by sending more DRK that one is supposed to. If money is sent to an exchange, send 100.00000001 anonymized coins instead of 100 or 95. Send 10.00000001 coins instead of 8.5 etc.
But thats not a good solution, it's just what we have to work with right now. In the example with the 5.00000002 Coins dead change, this change could re-enter Darksend mixing with other already mixed funds in order to make 4 x 1.00000001, which would leave 0.99999998 DRK of dead change behind while the rest is being re-anonymized.
However, the 0.99999998 DRK won't ever be spendable without possibly breaking anonymity. It can be donated though, if it's the only input of the donation Tx.
This is why I AGAIN suggest denomination convertibility. That means making the Darksend denominations be 1, 10, 100 etc instead of 1.00000001, 10.00000001 etc. Also, smaller denominations like 0.1 would be nice to have.
That way Dead change that accumulates over time can easily be re-anonymized without bloating the blockchain too much by combining 10 dead change re-anonymized denominations into the next bigger one. With the current implementation that is not possible as it would leave behind 0.00000009 DRK.
With denomination convertibility, there wouldn't be a leftover.
I hope there will be something implemented to prevent this from happening in the future. If not my solution suggestion, then hopefully something better.
Thanks for reading,