Wallet Privacy Improvements

[notmandatory]

This is a tracking issue for wallet privacy features mentioned but not completed in bitcoindevkit/bdk#918. Some of these will require #188.

I'm doing some bitcoin core repo archeology to identify privacy related wallet features. I started with the excellent core onboarding wallet write up from @willcl-ark, which mentioned choosing an "appropriate" change script type. I have identified the below features BDK's wallet API should support. Some of these we already support, the rest I'll make new BDK issues for. Please comment if you know of any I'm missing.

• Discourage fee sniping with nLockTime bitcoin/bitcoin#2340, fixed in Discourage fee sniping with nLockTime bdk#611
• [wallet] use P2WPKH change output if any destination is P2WPKH or P2WSH bitcoin/bitcoin#12119
• [wallet] Use destination groups instead of coins in coin select bitcoin/bitcoin#12257, WIP Use destination groups instead of coins in coin_select to improve privacy bdk#1851
• wallet: "avoid_reuse" wallet flag for improved privacy bitcoin/bitcoin#13756
• wallet: shuffle coins before grouping, where warranted bitcoin/bitcoin#13808
• rpc: Shuffle inputs and outputs after joining psbts bitcoin/bitcoin#16512
• Native Descriptor Wallets using DescriptorScriptPubKeyMan bitcoin/bitcoin#16528, the part about 6 descriptors is useful
• IsUsedDestination should count any known single-key address bitcoin/bitcoin#17621
• wallet: Increase OUTPUT_GROUP_MAX_ENTRIES to 100 bitcoin/bitcoin#18418, WIP Use destination groups instead of coins in coin_select to improve privacy bdk#1851
• wallet: Strictly match tx change type to improve privacy bitcoin/bitcoin#23789
• wallet: generate random change target for each tx for better privacy bitcoin/bitcoin#24494
• wallet: avoid mixing different OutputTypes during coin selection bitcoin/bitcoin#24584

Originally posted by @notmandatory in #918

[martinsaposnic]

These are my first few days on BDK so still struggling, so please correct me if I'm wrong and do not take what I say as final or correct

Took a look at this one

use P2WPKH change output if any destination is P2WPKH or P2WSH bitcoin/bitcoin#12119

BDK uses descriptors to define address types, while Bitcoin Core uses explicit configuration options (-addresstype and -changetype).

In BDK:

• Address types are defined by the descriptor you use when creating the wallet
• Change addresses use the same descriptor type as defined for the internal keychain
• You cannot dynamically change address types at runtime

So it does not make sense to implement this feature in BDK.

[martinsaposnic]

bitcoin/bitcoin#2340 should also be marked as completed

(PR bitcoindevkit/bdk#611 fixes this)

[martinsaposnic]

Both bitcoin/bitcoin#12257 and bitcoin/bitcoin#18418 are addressed here bitcoindevkit/bdk#1851

[mapaba79]

Hi everyone! I'm a developer participating in the BDL (Bitcoin Developer Launchpad) program by Vinteum.

We are currently in the PoC (Proof of Concept) phase, where we are tasked with choosing a project, deeply understanding its mechanics, and contributing to its development. I've chosen to work on the privacy feature: 'avoid mixing different OutputTypes during coin selection' (based on Bitcoin Core PR #24584).

I'm currently studying the BDK codebase and the original Core PR. If anyone has tips, is already looking into this, or has specific thoughts on how this should be integrated into the current bdk_wallet architecture, please let me know!