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What are Bitcoin Mixers and are They Really Legal?

Bitcoin was launched in 2009, but it wasn’t until 2010 that it became available on online exchanges for buying, selling, and trading. It became the forerunner of the cryptocurrency market and remains the most popular cryptocurrency today.

Let’s explore this digital currency’s journey as it spawned new cryptocurrencies, triggered the development of the coin mixing technology, and brought to attention an interesting paradox. This article also aims to enlighten you on the legality of crypto tumblers.

Is Cryptocurrency Anonymous?

The rising price and popularity of Bitcoin saw the emergence of several other cryptocurrencies. Although not all of them garnered the crypto community's attention, their number was enough to bolster public interest in cryptocurrency. But besides the mushrooming of cryptos, the promise of anonymity and privacy amid the alarming number of cybersecurity attacks appealed greatly to the public.

Unfortunately, the appeal did not last long when the public realized their identity could still be traced through their transactions. Crypto proponents came up with a solution: coin-mixing technology.

What is a Bitcoin Mixer?

Bitcoin mixer is a software or service that shuffles the coins of multiple users in the same platform to prevent tracking of the coins to their source. The service is also known as bitcoin tumbler or bitcoin blender.

Are Bitcoin Mixers Legal?

Cryptocurrency tumblers are generally legal and have legitimate uses. Many rely on this technology to protect their privacy and avoid being tracked down by cybercriminals. However, shameless people took advantage of anonymity and privacy by using them for their nefarious intentions, e.g., money laundering, blackmail, etc. These criminal acts gave coin mixers a bad name.

Different countries have different laws on the use of these blenders. Some countries have restricted the use of the technology, with some service providers sanctioned for violating the law.

Be aware of the relevant laws in your area and research well before selecting a bitcoin mixing service.

Uses of a Cryptocurrency Mixer

We’ve already established earlier that the pitch about crypto being anonymous is not entirely true; transactions leave trails that lead to the sender and the receiver of the tokens.

Mixers or tumblers allow transactions from crypto holders to grow their portfolios without fear of losing their privacy. For legitimate users, this privacy means an extra layer of protection from cybercriminals who can steal their personal information or marketing people who intend to use their personal data to pitch a product or service.

These privacy tools are also useful for people who want to donate generously but anonymously.

How To Mix Bitcoins

There are two ways of bitcoin mixing: send the coins to a specific mixer’s wallet address or mix them with several other traders’ coins in a much larger transaction. The choice between these options rests entirely on you, so it would help to understand how each option works.

Centralized Mixer

Using centralized mixers means utilizing one privately-owned software service to do the mixing for you. The service will accept the crypto coins you deposited, mix them, and return the same amount to you using a different currency. However, this comes with a fee that averages around 1-3% of your returns.

Decentralized Mixer

Decentralized mixing is when you combine your funds with the tokens of several other crypto users on the same service to become a part of a big, single transaction. This mixing method is available in more technologically advanced blockchain channels. The number of participants in a transaction can affect the outcome of the coin shuffling. More pool members mean a more random distribution and a more secure transaction.

What’s A Bitcoin Blender, and is it Legal?

This protocol works in the same way a mixer or a tumbler does. It shields your cryptocurrency transactions and history from prying eyes, making them untraceable. It supports multiple tokens, typical of coin tumblers.

It's as legal as coin mixers, but then again, it depends on the government regulations in your location and your purpose for using a blender.

Coin Mixing: Threats and Opportunities

Mixing bitcoins is no different from any other exchange system; it has its share of threats and opportunities.

Threats

Though mixing promises anonymity to its users, some service providers may not be forthright with their dealings, causing users to fall into scams. They may sell your personal information to unauthorized parties or, worse, steal from you.

Centralized mixing services may also compromise the privacy of their customers by revealing customers' data when obligated to do so.

Opportunities

When properly done, coin tumbling can keep your transactions untraceable, securing your crypto assets and personally identifiable information. You prevent yourself from becoming easy prey to hackers.

Privacy Protection

The promise of anonymity hooks crypto holders to coin mixers. It provides an excellent solution to privacy issues, such as people with malicious intentions getting a hold of your personal information and transaction history.

However, not all tumbling services are trustworthy; some have unreliable structures, while others have a bad reputation. Some may not even be legal within their jurisdiction. A wrong mixer choice can spell disaster for your privacy, digital assets, and safety.

Keeping abreast with the latest trends and news in the crypto industry is not enough. Users must make informed decisions when selecting a coin tumbler and remain vigilant; otherwise, the purpose of getting a mixer is defeated.

Tips for Using Cryptocurrency Mixers

The importance of safeguarding one's privacy cannot be over-emphasized; it is the reason for creating coin mixers as a safeguard. However, the recent controversies surrounding its use have raised questions about its relevance.

However, this privacy and anonymity instrument cannot be faulted for these issues. The problem lies in the users' lack of knowledge or intentional abuse of the service.

Here are some hacks to make the most of tumblers.

Choose a platform with a good track record in crypto mixing. Shortlist your choices to service providers with a positive reputation within the cryptocurrency community, e.g., UniJoin. Read reviews about them. Find out how fast they do the mixing process; those which require long lead times may indicate a low number of users.

Use withdrawal time delays to increase the difficulty in tracing the transactions.

Think before choosing the service with the lowest fee. Remember: the higher the fee, the better the anonymization quality.

Another hack is to create separate wallets in different blenders to manage the service fee and improve the possibility of receiving tokens in a larger amount.

Best Bitcoin Mixer Alternatives

If Bitcoin Mixers are not for you, but you still want privacy, try software such as Lightning Network and Electron Cash or privacy coins such as Monero and ZCash.

Lightning Network markets itself as a platform providing expandable blockchain transactions with instant payments that can run in milliseconds.

Electron Cash is a special purpose vehicle (SPV) wallet that allows you to manage your private keys, assuring the safety of your transactions. This tool is designed specifically for Bitcoin Cash holders.

Privacy coins combine signatures to conceal the real one and shield the addresses in transactions.

The Bottomline

Bitcoin Mixers are created to provide better security for cryptocurrency users. However, this method has also led to numerous illegal activities, leading governments to regulate or even ban this technology. If you are interested in blending, do your research and choose reputable software services.

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