Ledger has increased the privacy levels of your transactions for the latest version of your wallet software. The Ledger Live 2.11.1 interface will allow users to select which unspent transactions (UTXO) they want to use to make network payments for Bitcoin, Bitcoin Cash and Bitcoin SV.
The new function is called Coin Control, translated into Spanish as “Currency Control”. This allows users to manage their transactions in an advanced way, thus increasing their privacy and enabling an advanced configuration of fees to pay.
Coin Control is based in the operation of UTXO of Bitcoin and other alternative market currencies. An element that makes up the balance of the wallets and that consists of all those transaction outputs not spent by the user. That is, coins that have been received at the owner’s address and that are available to make payments.
In general, cryptocurrency wallets tend to automatically select the currencies to be transferred (UTXO) under the known dynamic known as “First-in-Fist-Out”(FIFO). If a user wants to make a transaction, then the mechanism includes only the oldest UTXOs in the wallet to complete the desired amount to transfer. In this sense, the first transactions that the owner received since he created his wallet are the currencies that are used to make the currently desired payment.
Although this strategy is simple and automated, it is inconvenient if a user is seeking greater privacy in their transactions. The algorithm does not separate currencies coming from a KYC exchange house from those that have been received from an anonymous address. Because of this, the most private and difficult to trace UTXOs are mixed with those coins that come from sources where the identity of the owner is fully exposed.
Ledger incorporates a solution to increase privacy
The Coin Control Function avoids this exposure by allowing you to choose which UTXO will be part of a transaction and which will not, thus generating a selection strategy. The user only has to choose an account to be debited, enter the recipient’s address, enter the desired amount to be transferred and select the advanced options. In these options you have the possibility to continue using a FIFO algorithm, or to view all your UTXOs and select only those you want to use.
The Ledger user can also minimize the fees to pay for a transaction. This can be achieved with an option that reduces the byte size of the transaction and thus less UTXO is spent. Likewise, a transaction can be configured to determine a maximum number of entries, this would allow a UTXO not to become economically unsustainable to be transferred later, when a rate increase occurs. The wallet will also show which transactions you have pending, which are confirmed, and which others are replaceable.
The idea of this new functionality is that Ledger clients can better manage their wallet transaction flow, protecting those anonymous transactions from those that are already related to personal information. Likewise, help prevent a third party from knowing how much money you have in your account, since you have the possibility of selecting the smallest UTXOs to carry out transactions of little value.
The Bitcoin community is increasingly interested in increase privacy of its services, being some purses and side chains like Lightning Network the standard bearers in this fight. It is a principle that many bitcoiners and cryptocurrency users share, but that does not please to regulators. Due to this, there is still a struggle to achieve higher levels of privacy without this directly affecting the legal use of cryptocurrencies.