Bitcoin Optech Newsletter #422

Bitcoin Optech Newsletter #422 details new developments in Bitcoin privacy and infrastructure. It introduces Babilonia, a proposed probabilistic coinjoin and covert betting protocol aimed at providing privacy with plausible deniability. Instead of easily traceable actions, Babilonia leverages covert bets that resemble on-chain coin flips, appearing as normal payments externally, to effectively break the common input ownership heuristic. The protocol involves Alice and Bob creating a shared UTXO, signing refund and payout transactions, with Alice using public keys and an adaptor signature, and Bob constructing a conditional public key. The winner claims funds after Alice reveals a hidden secret out-of-band. The newsletter also summarizes benchmarks for a silent payments indexing server against compact block filters for light clients and covers notable changes and releases in popular Bitcoin infrastructure software.