What is a cryptocurrency mixer?

Crypto mixers combine several digital currencies making them almost undetectable.
| CryptoPress
What is a cryptocurrency mixer

Crypto mixers combine several digital currencies to obscure their transactions, making them almost undetectable.

Using a coin mixer allows non-anonymity-centric cryptocurrency users to mix their currencies with those of others, therefore avoiding the monitoring of such tokens by centralized institutions.

The purpose of cryptocurrency mixers is to mix your cryptoassets with those of other users in order to execute innumerable transactions and obscure the origin and destination of your coins.

In addition to the ‘dark’ forums of the deep web, these services may be accessed on the mainstream online. Despite the fact that this method is legal in many jurisdictions and this service is open to everyone, its suppliers market it as a privacy enhancer rather than a means of laundering money.

Blockchain Ethereum mixers like Tornado Cash, for example, have been more popular with hackers in recent years. Among those who have utilized this service are the perpetrators of attacks on Crypto.com, which resulted in the theft of $34 million, as well as those who attacked Ronin, the blockchain network tied to the Axie Infinity game.

How does a bitcoin mixer work?

The profit margin for cryptocurrency mixers is often between 1% and 3% of the total coins combined. There are several acceptable uses for commingling, but it may also be used to launder money by commingling unlawfully acquired money.

All cryptocurrencies are mixed together throughout the procedure. To do this, the sums are divided up into smaller and smaller units in order to obscure the original source of the cryptocurrency. When a large number of minor transactions can be used to aggregate all of the deposited coins, it is possible to virtually identify all of the different cryptocurrencies involved. After mixing, each user’s deposited funds are returned to the wallets they designated. 

Other than a fee paid for using the mixer’s services, there are no further fees. To some extent, this commission is utilized to compensate the miners who participated in the transactions. Due to the higher mining costs associated with a greater variety of combinations. The platform’s earnings make up the other half.

The bitcoins that consumers get back from these businesses are not the same cryptocurrency they first put. No need for them to come in a single transaction to avoid giving away any information. Coins are returned to customers in completely different forms from the ones they originally placed, therefore disrupting the link between the cryptocurrency and its original owner’s identity.

What types of crypto mixers are there?

There are two primary sorts of services offered by cryptocurrency mixers:

Centralized mixers:  users may transfer a particular quantity of cryptocurrency to a centralized mixer by entering their e-wallet addresses on the site. Consequently, in order to “mix” cryptoassets, the user gives the agent complete authority over numerous transactions. We use the term “agent” to describe a sophisticated algorithm that performs a variety of tasks at random. 

Decentralized mixers: they cut out the middlemen and, as a result, for modest transactions between users on the same platform users may establish groups and choose which cryptocurrencies they wish to “mix.” Of course, the more people there are in the “pool,” the more random the results will be. Example: CoinJoin.

Centralized or decentralized mixers: Which is better?

Definitively decentralized. As centralized mixers have access to users’ IP addresses, decentralized mixers provide a far better degree of anonymity than centralized ones. This implies that, to some degree, the sender’s address and the recipient’s address may be anticipated. Aside from exposing platform users’ personal information, these platforms may also be targeted by cyberattacks that result in the loss of their identity and privacy as a consequence.

As an added benefit, decentralized mixers give users more control over their assets because they can use digital signatures to verify that an incoming sum is equal to the mixed sum. This is not possible with centralized mixers. They’re also preventing the commingling of their cryptoassets from being stolen.

Advantages and disadvantages of using a Coin Mixer

Pros

  • By using Coin Mixer’s services, businesses and people with a lot of bitcoins can make themselves much less susceptible to hacking, theft, and other forms of extortion.
  • Don’t let groups or governments know what you own, how much you have, or how you spend your money.
  • Protect the right of all cryptocurrency users, especially Bitcoin users, to privacy and anonymity.
  • Allow certain coins to keep their value even though they were used in a crime.

Cons

  • Coin Mixers employ patterns, which may be used to study and decode their transactions. Government authorities are researching how Coin Mixers mask their operations.
  • Criminals have hidden cryptocurrency with them. For example, easing tax evasion. They may exploit your knowledge of a mixer to link you to a criminal.
  • If Coin Mixer is successful, it will be harder for law enforcement to catch cybercriminals.
  • Scams and theft may occur if people don’t know the Coin Mixer’s reputation. Since money in the service’s central account may not be reimbursed.
  • A centralized Coin Mixer will know each user’s deposits and coins received. If the service is forced to provide users’ personal information, they will lose privacy. The government may have spent a lot of money to market the Coin Mixer as secure.

Are cryptocurrency mixers illegal?

Each nation’s laws and authorities regulate the usage of cryptocurrency mixers, although they are not illegal. Despite the notion that bitcoin mixers assist maintain anonymity, the truth of the matter is that these services are also employed by criminals. Despite the fact that bitcoin mixers provide an advantage in terms of privacy, this is still a problem.

According to statistics shown in a webinar presented by the business Chainalysis, just 8% of the money moving to these services comes from unlawful behavior. As a result, contrary to popular belief, the use of coin mixing services is not exclusive to cybercriminals. They are used by those who desire to conduct their personal and financial affairs in full privacy. Criminals online may still take use of these advantages, though. This cannot be discounted. Automobiles, telephones, clothes, and food are all used by criminals in the same manner.

Coin Mixer’s services, on the other hand, are considered money laundering services by regulators in a number of countries. Despite this, the use of coin mixers is not explicitly prohibited by law.

Image: Mixer Vectors by Vecteezy

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