DeFiMix: Indistinguishable Coin Mixing Schemes in Decentralized Finance

Abstract

The need for enhanced transaction privacy in decentralized finance (DeFi) is critical. However, existing coin mixing solutions often reveal telltale patterns on the blockchain, exposing users to heuristic analysis. This paper presents DeFiMix, an indistinguishable coin mixing scheme engineered to obscure transaction flows while guaranteeing fairness and security. DeFiMix achieves this through a dual-layer mechanism. First, an off-chain secret handshake protocol enables anonymous negotiation between senders and mixers, effectively breaking the link between transactions and participants. Second, on-chain transactions are structured using time-locks and concurrent signatures to resemble common DeFi activities such as staking and lending, rendering them indistinguishable from ordinary operations. Using security analysis and extensive simulations, we validate DeFiMix’s ability to prevent transaction linkage while remaining practically viable. The results underscore DeFiMix’s strong indistinguishability and fairness, alongside its minimal computational demands, establishing it as a compelling solution for privacy-focused transactions within the DeFi ecosystem.