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Crypto Mixers: What are They and What they Do

In today's digital space, it's easy to hack systems, even if they are designed to be secure. The cryptosystem is no different. Despite its earlier claim of anonymity, crypto enthusiasts and players decided most cryptocurrency like Bitcoin isn't anonymous. Instead, it is pseudonymous.

Third parties can use built software or methods of analyzing and cross-referencing blockchain networks, which become more advanced as digital technology develops. Because of these advancements, it's no longer enough to rely on the blockchain as it is. Crypto mixers come into the picture to fill the gap.

Some crypto platforms provide clients with information on how their media works, highlighting how they serve their users' best interests. However, these platforms are susceptible to phishing and data breaches. These vulnerabilities become elevated when the platform is centrally controlled, meaning a single database containing users' information exists on the website's server.

In this article, we’ll explain how crypto mixers work and how they can help crypto users secure their assets without revealing their personal details and information about their respective wallets.

What is a Crypto Mixer?

It is a service that blends the crypto coins of several users to mask their personal information and bitcoin transactions, allowing them to trade safely while ensuring no one can trace blockchain transactions to them.

Crypto tumblers become functional when people pool their coins to form a community-driven transaction. Every transaction in a blockchain network is recorded in a public ledger, giving anyone access to information about the transaction and the user. Crypto mixers ensure that this access is curtailed, if not eliminated.

What Does a Bitcoin Mixer Do?

A hacker who’d like to dip their hands into a bitcoin trader’s account would typically look at the public ledger to identify bitcoin wallets trading huge amounts of crypto. They check out other transactions made through this wallet to trace the user’s information. The information the hacker gets makes it easy for them to plan and execute their privacy breach and gain financially from it. In worse scenarios, they steal the crypto assets for themselves.

However, crypto tumblers disrupt this scheme. The technology they use prevents the third party from tracing the identity of the wallet owner. Coin mixers usually have a user-controlled time delay feature, allowing users to decide when to send coins to their wallets. The longer the time delay, the more secure the transaction becomes.

How Does A Crypto Mixer Work?

All bitcoin tumblers collect coins from willing participants, shuffle the coins deposited by users in the pool, and send the funds to specified destination addresses. This way, the source of crypto funds becomes more difficult to trace.

Specific details on how a coin mixer works depend on the type of mixer used.

Types of Crypto Mixers

A bitcoin tumbler can either be centralized or decentralized. What’s the difference?

Centralized

A centralized bitcoin tumbler is operated by a private company that blends crypto coins deposited by several users and randomly sends back coins to the addresses specified by the participants. The process is repeated until you receive the total amount you requested. Before participating in the process, you need to fill out a form provided by the mixing/tumbling service provider so you can specify your recipient’s wallet address. You also need to pay a fee of 1% to 3% of the deposit amount for the bitcoin mixing service.

However, centralized mixers can access your bitcoin wallet and IP addresses, compromising your privacy and security. Also, since a single entity operates it, you can potentially lose all the funds you deposited in the mixing process if the network shuts down for whatever reason.

Decentralized

On the other hand, decentralized bitcoin blending is a peer-to-peer (P2P) service, usually employing Coinjoin as a protocol. Users place their crypto coins in a pool to create one big transaction before the coins are shuffled. Participants are not guaranteed to get the same coin they pooled because coins are randomly returned to the participants. However, they are assured of the amount they requested.

The number of participants is critical to ensure anonymity in a decentralized mixer. Each mixing transaction must have many users pooling in their coins to minimize the risk of tracing back the transaction to you by process of elimination.

Pros and Cons of Mixing/Tumbling Services

This crypto innovation has its merits, but it has its flaws also. Users need to know and understand the benefits and drawbacks before availing of a crypto coin mixing service.

Pros

We’ve established the purpose of crypto mixers, but does it pay to avail of a mixing service? Here are some reasons for using bitcoin mixers.

Anonymity and Privacy

Coin blending severs a user's identity from their bitcoin transaction log. Each transaction in a blockchain network is logged and stored in a public ledger, and despite the logs not recording the user's real name, other people can still trace the origin of the user's address. Bitcoin shuffling allows you to move your crypto coins from wallet to wallet without getting under the radar of hackers, ensuring your anonymity and privacy.

Safeguards your Crypto Coins

Trading in an open network makes you vulnerable to people with malicious intentions. They can see the number of cryptocurrencies in your digital wallet and trace the coins' sources. Crypto tumblers prevent this exposure from happening.

Protection from Unfavorable Changes in Regulation

Currently, cryptocurrency trading is only regulated if it involves the sale of a security under state or Federal law, deemed as money transmission under the state law, or the conduct of the business qualifies the seller as a money service business (MSB) under Federal Law.

Some countries have totally banned cryptocurrencies, and some mixing services have been sanctioned. Violations of the anti-money laundering /counter-terrorism financing (AML/CTF) regulations might have played a bigger role in these than the bitcoin mixing technology itself.

With the growing number of illegal activities related to cryptocurrencies, government authorities might impose tighter controls on cryptocurrency trading. More countries may order a total ban on cryptos. If any of these happens, cryptocurrencies may become scarce, and their prices might increase. Coin tumblers can cushion you from these adverse impacts.

Cons

We can summarize the downsides of coin blenders into three.

A Breeding Ground for Illicit Activities

The crypto blenders' privacy features mean they also protect the privacy of felons, paving the way for them to easily launder money and transact without getting traced. Since they can stay anonymous, players on the dark web can carry out their dastardly acts. Even competent authorities will find it challenging to identify and catch cyber criminals, making cryptocurrencies a growing concern for government authorities accountable for financial security.

An Easy Target for Scams

Suppose you are a newbie to bitcoin transactions. You may choose the wrong crypto-mixing service and fall prey to thieves and scammers. But even an experienced user may be left helpless because you may not get back what you sent when you put your crypto assets in a service's central account.

Is Bitcoin Mixing Illegal?

Bitcoin mixing is legal and has legitimate uses. Questions on its legality emerged after some money laundering cases were linked to coin tumblers.

Several crypto users depend on coin mixers to safeguard their privacy and shield them from shady parties who might hack into their personal details and sell them or physically harm them, users.

However, unscrupulous people took advantage of coin mixing’s ability to provide privacy by using the service for illegal activities, such as blackmail, money laundering, and more.

The spate of illegal activities performed through coin-mixing services led to some countries banning the platform, such as Bangladesh and China. Japan and the United States recognize the legitimacy of coin mixing, but both countries have imposed restrictions on crypto assets, e.g., stricter implementation of anti-money laundering and know-your-customer (KYC) regulations.

Can Crypto Mixers Be Traced?

Bitcoin mixing is designed to make it difficult for anyone who wants to track bitcoin transactions. However, a crypto tumbler can still be traced since the addresses are still registered in the public ledger.

Governments have been keeping a tight watch on mixing services because of the illegal activities associated with them. Cryptocurrency tracking systems have been deployed to monitor suspicious addresses.

The KYC regulations have been integrated with recent advancements in blockchain technology, making it easy for government authorities to trace crypto transactions. Also, government authorities can summon crypto mixers to provide the records of their users who are suspected of illegal actions.

Choosing the Best Bitcoin Mixer

Every bitcoin mixer has its unique features. You must determine which type of platform you want to put your crypto assets in, but more importantly, look for a reliable bitcoin mixing service provider. Check out each bitcoin mixer review to know more about the coin blending services.

Among the more popular and secure coin blenders are the following:

Let’s look at why they are considered among the best.

UniJoin.io

This platform, operated by progressive blockchain experts, integrates with the Tor browser and uses an in-house CoinJoin technology to secure its users’ anonymity and keep their cryptocurrency transactions private.

UniJoin is suitable for experts and beginners because it's easy to navigate and perform bitcoin transactions. Besides not having forms to fill, it features a simple interface and user-friendly process. This bitcoin blender has a no-log policy, so it can't save your transaction history. The policy adds an extra layer of security.

After placing your first order, you will be given a UniCode—a unique mixing code ensuring that you don't transact within the same pool in the succeeding rounds. The code guarantees you won't get the same coins back from previous orders.

UniJoin charges randomly generated fees within the usual 1% to 3% of the transaction to demonstrate its focus on anonymity and privacy. Users also pay the required miner's fee from the total mixed amount. The scheme effectively prevents blockchain analysis from revealing your identity.

The complimentary reviews from its users and a ScamadviserTrustcore of 87/100 put UniJoin ahead of the pack.

Anonymix

It was launched in 2020 as a Bitcoin mixer, with its low price of 0.3% per transaction as its main attraction. Since then, it has been recognized as a fast bitcoin cleaning option.

Anonymix allows users up to 10 wallet addresses to conceal their bitcoins movements within the cryptosystem. Each additional address is charged an additional 0.0001 BTC.

The platform offers seven options for time delay, as follows:

  • Quick mix
  • 1 hour
  • 3 hours
  • 7 hours
  • 12 hours
  • Random delay

Even the fund distribution is user-controlled. You will be asked to input the percentage of your total funds you’d like to send to each address. This feature makes your transactions less visible than when you use equal-share percentages most mixers implement.

Mixer.money

This mixer platform uses "secret" pools that offer members total anonymity and speedy transaction processing of six hours. Mixer.money does not require users to register and has a zero-log policy. The policy ensures that records relevant to a transaction are deleted 48 hours after completion. It features a user-controlled time delay of six hours maximum.

Mixer.money splits a user's deposit into smaller amounts before mixing them with funds from other members so that the coins your receive in your bitcoin wallet become untraceable.

Its main drawback is its high pricing at 4%-5% per transaction and an additional 0.0007 BTC for every output address.

A Scamadviser report, updated in June 2022, reveals the platform's absence of malware or phishing activities. However, it only registered an average Trustscore of 61%. The evaluation reveals possible reasons for the lackluster score.

The website's owner has concealed their identity, which spammers may use to their advantage. It also registered low traffic, considering Mixer.money's claim of being a popular site or large corporation. However, the low traffic might be because the mixer's domain name has only been registered recently at the time of the evaluation, and therefore users or visitors have yet to have the opportunity to post reviews or comments.

Sinbad

Sinbad is another bitcoin mixer earning Scamadviser's high Trustscore, pegged at 90%. Although it is relatively new, it quickly caught the attention of Bitcoin users for its ease of use and intuitive interface. Like UniJoin, it is compatible with TOR.

It gained a reputation for being reliable and secure because of its security features. It does not store logs or IP addresses to secure its users' privacy. Moreover, it allows customization of the mixing process to enhance the transaction's anonymity. A user is allowed up to 8 addresses.

It has a low mixing fee of 0.5% to 2.5% per transaction. You may adjust your fees per transaction depending on your expected transaction speed. The variable fee per transaction can help you evade blockchain analysis.

The Bottomline

The crypto community embraced the emergence of crypto mixers as a solution to anonymity and privacy issues that surfaced when cryptocurrencies became better known. With its advanced technology, the future of coin mixers looked promising. The mixer platforms restored people's belief that performing bitcoin transactions is secure.

However, the positive impact these mixing services brought forth was short-lived despite the legitimacy of their purpose. It has become a tool for scammers and hackers.

Malicious people have exploited the anonymity and privacy that legitimate crypto users deserve. They did their shady deals through bitcoin mixers to mask their identities and evade the authorities. A few tumblers have been sanctioned, but these scammers have marred the credibility of honest players.

These illegal acts have diminished the value of bitcoin mixing.

Will this mean a bleak future of crypto mixers, if not the end? Hopefully not. Because there are more decent and reputable coin tumblers we can rely on.

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