What Is Bitcoin Mixer? Part 1
Should I Mix My Bitcoins?
If you read a lot about crypto, you have probably heard the term Bitcoin Mixer (or Bitcoin Tumbler).
What is Bitcoin Mixer?
Bitcoin mixer is a technology solution that allows mixing different potentially traceable cryptocurrency assets, usually Bitcoin (thence Bitcoin mixer), so as to hide the path back to the assets’ source.
Even though Bitcoin addresses are pseudonymous – they don’t reveal the actual identity of the owner – still they can be linked to the real-world identities.
For example, when you withdraw Bitcoins from a certain exchange where you have identified yourself while signing up, the exchange knows that the particular withdrawal address is yours. There are also more advanced techniques, such as blockchain analysis, to link certain addresses to the identities of Bitcoin-owners.
So each time coins are being moved from these addresses, users run the risk of revealing all kinds of personal information. Depending on how they spend the coins, users can reveal how many coins they own, what they spend their money on, etc.
By combining the coins in a Bitcoin mixer with other coins, users can cover the links between Bitcoin addresses and the real-world identities up. This allows them to use Bitcoin in a more personalized and anonymous way.
How Does A Bitcoin Mixer Work?
Mixing strategies range from fully centralized solutions where all users trust the same mixer to solutions where users don’t have to trust anyone. There are also solutions that resemble Lightning Network-like payment channels, and even the use of privacy coins such as Monero and Dash is an option.
The method that the Bitcoin Mixers use is often the same. A large number of Bitcoin from various sources are lumped together. Subsequently, this money stock is divided into many criss-crossed transactions, so numerous, that the original source can hardly be traced back.
In some cases, Bitcoins can be converted to Monero, for example, sent via a mixer and then converted back to Bitcoins. The Bitcoin Mixer charges a fee for its service.
Types Of BTC Mixers
Centralized mixers are services that accept payments and then send back different coins for a 1-3% fee. Initiating a transaction, a user enters an address in a form available on the platform, and then sends cryptocurrency to an address specified by the service.
The service blends different amounts of coins from separate addresses and sends back an accidental amount of Bitcoins to each address. Such coincidental mixing and matching go on until a user gets back the total amount he has requested to his wallet. When many people use a particular Bitcoin mixing service, it becomes increasingly difficult for an outsider to tie the “incoming” coins to the “outgoing” ones.
However, centralized mixers leave two major problems unsolved.
- First, users are obliged to entrust their privacy to those who operate the mixer. Since the operators have access to the users’ Bitcoin and IP-addresses they can ultimately know which user has sent and received which coins. If they are willing to share this data with some interested parties voluntarily or for money (say, law enforcement officials or criminals), user privacy is lost.
- And two, maybe worse, there is no guarantee that the mixers will return the funds.
Also, the most popular BTC mixing services are currently centralized which means that they can be shut down by the authorities relatively easily. When centralized mixing services are faced with bans and closures, decentralized mixing services can take their place. These would of course be more difficult to remove.
Decentralized mixers are services available on more sophisticated blockchain platforms, like Ethereum and others supporting smart contracts. Users join hands and pool their coins to make one massive transaction, and the coins get returned to the pool members at random. The degree of randomization is proportionate to the number of pool users.
Decentralized mixers have two main disadvantages:
- They are not quite user-friendly, demanding some technical skills to work with them.
- The number of users should be large enough to make them usable. If the number of users is limited or if the decentralized mixer is infrequently used, then the transactions can be trailed through either just observation or the exclusion method.
In the second part, the benefits of Bitcoin Mixers will be discussed. You’ll know how Bitcoin Mixers should be used and get an idea of some of them. You will also learn about the Five Best Bitcoin Mixers.
And remember, if you need to exchange your coins StealthEX is here for you. We provide a selection of more than 300 coins and constantly updating the cryptocurrency list so that our customers will find a suitable option for exchange with a low fee.
How To Buy Cryptocurrency At StealthEX
You can study a detailed article with an exchange guide, watch a tutorial video on our YouTube channel, or just go to StealthEX and follow these easy steps:
- Choose the pair and the amount for your exchange. For example, BTC to ETH.
- Press the “Start exchange” button.
- Provide the recipient address to which the coins will be transferred.
- Move your cryptocurrency for the exchange.
- Receive your ETH coins!
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The views and opinions expressed here are solely those of the author. Every investment and trading move involves risk. You should conduct your own research when making a decision.
December 8, 2020Bitcoin mixer