If you know anything about blockchain, chances are that you also understand how it works and how the public ledger stores and displays the recent transaction history along with the public wallet addresses of the parties involved in every transaction. However, the true identity of every person doing the transactions on a blockchain is always hidden from the public’s eye.
There are certain ways you can adopt to uncover the true identity of a wallet owner. So, Blockchain wallets are no longer fully anonymous but pseudonymous, as you can uncover the names of their true owners.
Since people are always concerned about revealing their true identity during blockchain transactions, bitcoin mixers have entered the market to provide them with the needed privacy and security.
In this article, we will learn more about bitcoin mixers and how they actually work. We will also see whether these mixers are even legal to use or not and how you can use one.
The Need for Bitcoin Mixers
In a normal transaction involving bitcoin, when the sender sends the Bitcoin, and the receiver receives it on the other end, the whole transaction is documented onto the public ledger of the respective blockchain. This data can be easily retrieved by anyone by using either of the two wallet addresses involved in the transaction. People can also see the amount of Bitcoin involved in the transaction.
Once a user has your wallet address, they can use the latest tools to retrieve your real-world identity. This helps both criminals and government organizations to track your Bitcoin transactions.
We can easily conclude that every bitcoin transaction can be traced back to the owner, and they are no longer private. While the public ledger is actually one of the most useful features of the Bitcoin platform, almost no one wants their identity to be revealed publicly.
If you are one of those bitcoin owners who want complete privacy in their transactions, you can use a Bitcoin mixer.
Introduction to Bitcoin Mixers
A Bitcoin mixer is actually a piece of software which can be used to receive small amounts of Bitcoin from multiple wallet addresses. Once the software receives the required amount of Bitcoin, it mixes them to hide the transaction quantities from different wallets and then sends the required amount to the required address.
Via bitcoin mixer, anyone who tries to trace your transaction will see the address of the mixer as the receiving address. Also, when the actual receiver tries to trace the transaction, they will have to stop at the Bitcoin mixer’s address. So, this introduces a wall of privacy between different blockchain users.
Bitcoin mixers are named so because they thoroughly mix your Bitcoin after receiving it from different wallets and make it impossible to see which wallets are used to send the Bitcoin.
So, turns out that using a bitcoin mixer is the only way to stay truly anonymous in bitcoin transactions these days. However, keep in mind that some of the big bitcoin mixers might charge you a fee for their service.
Bitcoin Mixers: How Do They Work?
When it comes to the working of bitcoin mixes, they can be divided into two different types.
A bitcoin mixer works just like a big box which receives bitcoin from different sources and mixes all of them together before sending them to the target destinations. This whole process is used to introduce a wall of privacy between senders and receivers and to also avoid any type of cryptocurrency transaction tracing.
While it might seem simple, it is necessary that you understand the working of both types of bitcoin mixers.
Centralized and Decentralized Bitcoin Mixers
The main purpose of using a Bitcoin mixer is to hide your true identity and separate it from your digital wallet address. The process of bitcoin mixing makes you anonymous when you make bitcoin transactions.
Centralized Bitcoin Mixers
As their name suggests, centralized Bitcoin mixers are owned by private entities. They work by asking you to send your Bitcoin to a specified wallet address which is actually the address used by the centralized Bitcoin mixer.
At the start of every transaction, the centralized mixer will ask you to specify the destination wallet address as well.
After receiving bitcoin from you, the centralized mixer receives more bitcoin from other users, mixes all of the cryptocurrency together, and then sends it to the destination address. Keep in mind that you will be charged how specific amount of service fees.
Decentralized Bitcoin Mixers
Just like their name, decentralized bitcoin mixers are just like cryptocurrency and are not controlled or owned by any person. They work by receiving smaller amounts of bitcoin and sending them together as a big amount.
Since decentralized Bitcoin mixers are P2P, they can’t be controlled, and their rules can’t be changed by anyone.
Certain protocols are used by these bitcoin mixers to mix your cryptocurrency and make you anonymous.
Decentralized mixers receive your bitcoin and make it a part of a very large cryptocurrency transaction which works by receiving bitcoin from other users as well. After a specific amount of time, you will receive the Bitcoin you sent in your destination digital wallet. By then, the bitcoin you sent will have completely changed.
Just because an automatic mixing system is used by these mixers, users are usually charged lower fees as compared to their counterparts. A typical centralized Bitcoin mixer will charge you at least 0.6% of the transaction cost. However, decentralized mixers only charge a maximum of 0.3%.
The Benefits and Drawbacks of Bitcoin Mixers
If you are looking for the benefits, the biggest one is that you are provided with complete anonymity in your Bitcoin transactions when you use a bitcoin mixer.
This helps you keep secure while making any amount of transactions through your digital wallets. But just like any other technology, there are some drawbacks to using bitcoin mixers as well.
Benefits of Bitcoin mixers always outweigh their drawbacks, hence their ever-increasing popularity.
Although your wallet is not directly connected to your ID, bitcoin analysis can easily reveal your true identity. This is why the public ledger can be used by government organizations and cyber criminals to reveal your true identity and to target you through various means. So, in order to keep yourself fully anonymous and safe, you will have to use a Bitcoin mixer.
When you have your Bitcoin saved in an open wallet, anyone can find out the number of coins stored in your wallet. So, you can use a Bitcoin mixer to mix your Bitcoin and then keep them in another wallet to conceal the amount of cryptocurrency you have.
Keep in mind that no matter how secure your exchange and digital wallet might seem to be, they can be hacked by a group of hackers as soon as they discover any loophole. So, by using a bitcoin mixer, you will be making it significantly harder for those hackers to trace your cryptocurrency. When you keep yourself a low profile, you will be able to easily ward off any hacking attempts.
Since cryptocurrency is still on top of the list of newly created assets, the regulation around it is still unclear. So, you are never sure what type of restrictions your government will soon place on cryptocurrency. The decentralized nature of cryptocurrency does not work well with some governments, and that is why they are attempting to ban it. If your country also bans Bitcoin, you will also lose your cryptocurrency if you are listed.
However, with the use of proper Bitcoin mixing, you can conceal the true amount of cryptocurrency you have in order to keep yourself safe in such events.
Proper blockchain analysis can easily reveal your identity and the amount of cryptocurrency you have in your digital wallet. Once your transaction data and wallet balance gets into the hands of the wrong people, they can easily target you to steal your cryptocurrency.
Bitcoin mixers are used by cryptocurrency owners around the globe to anonymize their cryptocurrency holdings. This significantly increases the level of privacy and security for them.
While direct cryptocurrency transactions are usually instantaneous, using a bitcoin mixer deliberately delays the transaction. Some bitcoin mixers even allow you to choose the delay time in cryptocurrency transactions. The delay makes it much harder for any person to trace your cryptocurrency transaction.
While delays are not essential to the working of bitcoin mixers, they do make your cryptocurrency transactions completely anonymous and almost impossible to trace. This is done by introducing a gap between your input and output.
Another big disadvantage is that bitcoin mixers are always a target of government regulators. That is because these mixers are also used by money launderers to make their transactions anonymous as well.
This is why the Bitcoin mixer addresses are listed in every blockchain, and your blockchain might also refuse to take your Bitcoin if it has been processed by a mixer.
Since bitcoin mixers are software, they use a specific pattern to mix their Bitcoin. As soon as this pattern is discovered by a cryptocurrency analysis company, they can reverse the effect of that bitcoin mixer easily and can trace every transaction processed by it.
Since some bitcoin mixers are really strong, they are used by criminals to launder money and hide it from the eyes of government organizations. Mostly, laundered money comes from illegal sources. Moreover, if a criminal uses the same Bitcoin mixer as you, it can link you to criminal activity as well.
Cybercrime agencies find it hard to trace cyber criminals since most of them have started using bitcoin mixers.
Since centralized mixers are owned by one entity, they can be hacked, or the owner can run away with your cryptocurrency. You have to transfer your Bitcoin into their digital wallet in order to start the mixing process. It makes the transaction irreversible and a lot easier for hackers to run away with your money without making much effort.
The data of every transaction is still stored by centralized bitcoin mixers. This means the owner knows your wallet address and also the address to which the Bitcoin was delivered. So, if, for any reason, the company is forced to reveal the information, you will lose your privacy. Moreover, some lessons now know that bitcoin mixing services deliberately sell their data to hackers and government agencies.
Centralized Bitcoin mixers can easily fail since they are controlled by a single entity. If the owner decides to shut the system down, they can easily run away with all of your Bitcoin, and you won’t be able to retrieve them. Hackers can also target these mixers, and as soon as they get into them, they can run away with all of the cryptocurrency.
Moreover, if the centralized bitcoin mixer decides to share your identity with the government authorities or hackers, they can easily get access to both the sender and receiver wallet addresses. This will also compromise your anonymity.
Decentralized bitcoin mixers work through an automated system. However, this also means that they need a huge quantity of Bitcoin in order to process the transactions normally. If the number of transactions is low, they can be processed through an elimination process in order to trace your transaction precisely.
Are Bitcoin Mixers Legal?
On their own, Bitcoin mixers aren’t. Considered illegal as they aren’t doing anything wrong by providing their users with anonymity. However, there have been instances where these mixers were used by money launderers and criminals to transfer money quietly.
So, the illegal activity attached to these bitcoin mixers is one of the major reasons why they are being banned in most countries.
In the past, Bitcoin mixers like Bitcoin Fog and Helix have been found to be involved in money laundering amounting to billions of dollars.
Choosing A Good Bitcoin Mixer
After going through all the information provided above, if you want to try a Bitcoin mixer, you’ll have to look for the below-mentioned key traits when choosing one for your regular use.
In the Bitcoin mixing process, you are actually sending your Bitcoin to a third party. That is one of the reasons why you should always choose a bitcoin mixer with impeccable security. Use your to see how long they have been providing services in the market and whether or not they are reliable.
If possible, you should also find a bitcoin mixer which does not store any user data. While storing data temporarily is a requirement, the software should delete your data shortly after. This way, even if the company is pushed by someone to reveal your transaction data, they won’t be able to breach their security protocol.
Delay in Transactions
Using the delay method in bitcoin mixing is one of the most useful tips you can follow to anonymize your cryptocurrency transactions. With the help of a delay, you will be able to make the difference between the sent and received coins even more significant.
Keep in mind that delay is a must in every bitcoin mixer, and whether or not you like it, every mixer uses a specific amount of time delay in every transaction.
Moreover, some platforms even allow you to control the delay in your transactions. For example, if you want to delay your transaction, you can use the flexibility and introduce our delay of up to 24 hours. You can also remove the delay and make the transaction almost instantly.
Before using any Bitcoin mixing service, we recommend that you also learn about their fee structure. While the fee percentage changes from one platform to the other, it usually sits between 0.6% to 3% of the total transaction amount.
Some of the most advanced platforms allow you to even control the fee you pay as well. With high fees, you are provided with the best services and are provided with coins received from random addresses. On the other hand, pay low fees, and you’ll receive your crypto from a public pool.
Speed is one of the key traits you should look for in a Bitcoin mixer. The platform should be able to start working immediately. Slower platforms even consume days to fully anonymize your Bitcoin by mixing them slowly. This primarily happens when you’re using a low-fee platform with a low amount of users.
On the other hand, popular bitcoin mixers mix your Bitcoin and output them immediately if you so need. That’s because they always have the required amount of Bitcoin to fulfil your transaction after completely anonymizing it.
There are specific mixing codes used by bitcoin mixers to make the process even more effective. The mixer will provide you with a mixing code after you make your first transaction with them. After this, you will have to put the same mixing code into the mixer the next time you intend to mix your Bitcoin. This is done to prevent you from receiving your own coins in the future.