ALL ABOUT BITCOIN MIXERS
Bitcoin mixer is a service used by those who want to keep their bitcoins private and want to increase their anonymity.
Bitcoin mixers are without any doubt becoming one of the most interesting areas of Bitcoin, especially in the eyes of regulators and legislators. According to regulators, Bitcoin mixers provide services that are illegal or should be thought of as illegal. While these claims are very strong, the underlying facts are extremely weak.
One might even say that these claims are pure lies since they are not based on any sound science, research or data. However, to see how ridiculous these claims are, one must understand how the Bitcoin mixers work, which is exactly what this article will explain.
Update: On August 8, 2022, the U.S. Treasury sanctioned Ethereum mixing tool Tornado Cash and made usage of this tool completely illegal for any U.S. citizen.
Before diving deep into how a Bitcoin mixer works, here is a very brief summary of what Bitcoin mixer actually is. Bitcoin mixer, also referred to as Bitcoin tumbler, is a service that helps Bitcoin users keep their bitcoins private. It does so through increasing the anonymity of transactions and transacting parties.
Absolutely not. Bitcoin is pseudo-anonymous. Sending and receiving bitcoin leaves a fingerprint. If the fingerprint is ever linked to your identity, everything you have ever “touched” will be linked to you.
All the “fingerprints” are publicly stored in bitcoin’s blockchain. Therefore, anyone you send bitcoin to can look up your previous transactions or even see your crypto balance. Shocking, huh?
The simplest definition of how Bitcoin mixers work was already our previous article, but let’s see it again here to make sure that it is understandable for everyone.
Technically, a Bitcoin mixer can be thought of as a giant pool. People put the same notes into the pool, let’s say 100-dollar notes. All the notes are then mixed, shuffled all around and at the end, the people who put the money in take the same amount, but not the same 100-dollar notes, out of the pool.
Very similar logic, although a much more complicated process (at least technically), is what happens during the Bitcoin mixing. What Bitcoin mixing does is that it shuffles bitcoins through an imaginary black box, which makes it difficult to see that Person A sent 1 bitcoin to Person B. The only thing that will be visible in Bitcoin's public blockchain is the fact that Person A sent 1 bitcoin, as did many other people, and that Person B received 1 bitcoin, as did other people that were part of the Bitcoin mixing process. Thanks to this, no one actually knows who sent 1 bitcoin to whom, except for the sender and receiver.
What is also important to state is that when Bitcoin mixing occurs, the service or platform takes a cut. This is obviously to help in running and developing it, but also to pay the transaction fees of the miners. Usually, the cut represented typically in the form of fee is somewhere between 1% - 3%, but can vary depending on the platform used, but also on the size of the mixer. The bigger the number of the participants or the bigger the complexity of the mixer, the higher the fees can get.
To make the transactions even more anonymous, some mixers also offer different upgraded features on the whole process. The recipient can for example receive not one, but many different transactions that should total the amount they are expecting to get. This makes it very hard, almost impossible, for the on-chain analysis companies to track the transaction.
Other mixers also offer an option of delayed transaction, which means that the output is sent to the recipient much later, yet again, making it much more difficult for the on-chain analytics companies to track the flow of funds from one person to another.
While Bitcoin mixers definitely provide positives to their users, they also have their own drawbacks. These are, for instance, association with black markets and criminals who are using these services to launder money. Although this type of activity is assumed to be much smaller than many believe, it is still undeniable that it is present at least partially. Thus, cryptocurrencies obtained in hack or theft can be very difficult to track and return, if the hacker uses proper mixing tools and if the Bitcoin mixers work well.
Another problem with Bitcoin mixers is that most of them are relatively short-lived. This means that they have been operating either for a very short time, or have already closed their services due to various reasons, such as regulatory pressures. This means that finding a reliable Bitcoin mixing service that would work for a long time may be a bit difficult.
Last but not least, if the patterns of Bitcoin mixer are discovered by the authorities, it can be relatively easy for them to decipher all the transactions that were facilitated by this service. Once that happens, the Bitcoin mixer becomes irrelevant and, especially if it was centralised and stored the transaction history and transaction data, the users of these services can get into trouble.
Bitcoin mixer is a service that helps Bitcoin users keep their bitcoins private. Bitcoin mixer shuffles bitcoins which makes it difficult to see the original trace of Bitcoin transaction.
Bitcoin mixer can be thought of as a giant pool. People put the same notes into the pool, the notes are then mixed, and at the end, the people who put the money in take the same amount out of the pool.
The legal status of cryptocurrencies varies from country to country and is still undefined or changing. It is your sole responsibility to comply with all applicable laws and regulations in your country.
CoinJoin is a type of anonymous transaction that helps Bitcoin users enhance their privacy. Most Bitcoin mixers, as well as anonymous cryptocurrency wallets, use the CoinJoin method.
Consider the following transactions made at the same time: A purchases an item from B, C purchases an item from D, and E purchases an item from F. Without CoinJoin, the public blockchain ledger would record three separate transactions for each input-output match. With CoinJoin, only one single transaction is recorded. The ledger would show that bitcoins were paid from A, C, and E addresses to B, D, and F. By masking the deals made by all parties, an observer cannot with full certainty determine who sent bitcoins to whom.
Luckily, there is a solution to all of these problems. And that solution is Whir. While Whir is a new way of transacting bitcoins anonymously, it does not store any information about transaction or transacting side, which means that the transactions are not only private in the real time, but will also remain private forever.
While the longevity of this project will be determined only by time, it is more than clear that thanks to its features and services, it is well-positioned to be serving the clients needs for some time.
Moreover, with the range of 0.001 to 1 BTC of transaction value per one transaction that is added to the mixer, mixing “tainted” bitcoins or bitcoins from hacks or thefts would be incredibly long and also expensive task, since every time the hacker would want to use Whir, they would need to pay a fee for it.
While Bitcoin mixers are not a somehow new thing in the cryptocurrency world, they still have a long way to go to become properly optimized. One of the iterations for improvement is delivered by Whir, which decided to look at the whole Bitcoin mixing situation from a different angle, to bring easy-to-use interface as well as low fees right to those, who need it the most. Thanks to this, Whir offers another option to those, who would want to buy, sell or spend their Bitcoin anonymously.
Privacy is a fundamental human right recognized in the
UN Declaration of Human Rights, the International Covenant on
Civil and Political Rights and in other treaties. Whir is for all.
Let’s be clear. Privacy is absolutely vital for the bad guys, too. We, however, do not support the crooks, and our service is not suitable for them either. Even though whir does the best to anonymize the transactions, there are far better coins for crypto anonymity, such as Monero or zcash. Please read our terms before use.