The researchers noted that Ethereum’s account model, contrasted with Bitcoin’s Unspent Transaction Output (UTXO) model, already makes it less private due to the practice of wallet reuse:
“The account-based model reinforces address-reuse on the protocol level. This behavior practically makes the account-based cryptocurrencies inferior to UTXO-based currencies from a privacy point of view.”
The Ethereum name service
A unique feature of Ethereum is its name service, which ties addresses to human-readable “.eth” domains. The researchers were able to scrape 890 domains located on public Twitter profiles.
This was already enough to discover potentially compromising activity, as about 10% of those wallets interacted with gambling platforms, while 5% used adult services.
The researchers then used the ENS addresses as starting points to discover if they could tie other addresses to the person’s public identifier.
They proposed several methods to identify specific account owners across multiple addresses, which include time zone signatures, gas prices and shared activity among multiple addresses.
De-anonymizing mixer services
The methods were applied to a well-known trustless mixer, Tornado Cash, which lets users “clean” their funds by sending them to a fresh address.
However, researchers found out that 7.5% of them withdrew their money to the exact same account that made the deposit, which rendered their mixing efforts completely futile.
Using custom gas values across multiple transactions and making direct transfers between the deposit and withdrawal wallets also makes identification easy. Overall, up to 17% of transactions can be de-anonymized through these simple techniques.
Furthermore, the majority of these linked users do not hold their funds in the contract for more than a few days, which can be used to reduce the overall anonymity set. Many will also use the same wallets to receive multiple 0.1 ETH withdrawals, which makes it easy to compare them with incoming wallet transactions.
While the researchers focused on Ethereum’s weaknesses, they cautioned that the same techniques could also be used on UTXO-based currencies — just not as easily. They concluded:
“We believe that in practice […] also Bitcoin non-custodial mixers provide drastically less privacy and fungibility than what currently the community expects.”