How Does the “CoinJoin” Technique Leverage UTXOs to Improve Anonymity?

CoinJoin is a technique where multiple users agree to combine their separate UTXOs into a single large transaction with multiple inputs and multiple outputs. All participants pay the transaction fee.

Crucially, the outputs are intentionally indistinguishable, making it impossible for an outside observer to link a specific input UTXO to a specific output UTXO. This breaks the common-input-ownership heuristic, significantly improving the anonymity set for the participants' funds.