Many users still avoid crypto mixers, believing they are utilized by criminals for money laundering, associating them with Bitcoin laundry activities. However, it’s crucial to distinguish between nefarious Bitcoin laundry operations and legitimate privacy-preserving BTC mixers. This belief is further fueled by rumors that cryptocurrencies block addresses linked to mixing services. We will share why a crypto mixer is not only necessary for ordinary users but also 99% has nothing to do with criminal activity.
Distinguishing Bitcoin Mixer from Bitcoin Laundry: Understanding the Differences
As Bitcoin gained popularity following its launch, it quickly attracted the attention of criminals. They began to actively use it to carry out illegal transactions. This drew intense scrutiny from law enforcement agencies to cryptocurrency.
We started developing analytical tools to link addresses with specific individuals. It was done quite successfully.
Simultaneously, regular developers realized that despite the overall anonymity of the Bitcoin blockchain, it was possible to identify the owner of a specific address. This did not suit them, since privacy is the main goal of using the first cryptocurrency.
Therefore, the so-called crypto mixers began to appear. The initial Bitcoin mixers were far from perfect, but they quickly found ways to address these issues. As a result, mixing technologies began to be improved.
CoinJoin, for instance, emerged as a decentralized solution that enables users to combine their Bitcoin transactions, obfuscating the origins and destinations of the funds, which significantly enhances privacy. It differs from other mixing methods as it requires users to actively participate in the mixing process, providing a more transparent and secure way to enhance transaction privacy.
Types of Crypto Mixers
All cryptocurrency mixers can be safely divided into 3 categories:
- The first generation services. To date, they actually have not been left, since they are not able to ensure a high level of confidentiality due to limited functionality.
- Second generation services. They have advanced functionality for the removal of transactions with various methods.
- Services incorporating CoinJoin technology like bitcoin mixer Tumbler.io, which stands out for its decentralized nature and the ability for users to have direct control over the mixing process.
Let us dwell on each of the species.
Crypto Tumblers of the First Generation
These services can be called primitive. Several different addresses were used to obtain bitcoins from users. However, the service did not have its own coins. As a result, often the participant received his own coins, and therefore the connection did not finally break off.
The first-generation services did not have the necessary functionality. The commission was strictly established. Therefore, analysts, based on the size of the commission, the time of the transaction, and the coins themselves, which were not crushed, could find contact with the sender. Yes, it has become more complicated, but not so much as not to detect the connection of the original address with the further course of the transaction.
Crypto Mixer of the Second Generation
They appeared much later and are still being improved. These are already modern bitcoin mixers with a large number of functions that can confuse the transaction so that the connection is completely broken. Far from being a tool for Bitcoin laundry in the criminal world, these modern crypto mixers offer advanced functions to completely sever transaction links, safeguarding user privacy.
Analysts and attackers may guess that the crypto mixer participated in the transactions. However, to establish the original source already becomes unrealistic at the expense of:
- Mixing coins.
- Mixing not only user funds but also incorporating the service’s own reserves into the process.
- The use of a huge number of addresses and their fast replacement in compromise.
- Transaction protection. After mixing and distribution, the system can delay further operation for several hours and for several days.
- Distributing varying amounts across multiple addresses. This makes it impossible to discern the recipient’s actual amount.
- The variability of the commission. The user himself can indicate the percentage of the remuneration of the service, which minimizes the risk of detecting the crypto of the mixer.
At the same time, services also use hidden user protection measures. For example, bitcoin mixer Tumbler.io implements three robust measures to protect its users’ privacy: Advanced Coin Mixing, Randomized Delay, and Multilayer Encryption. This ensures a high level of security.
This technology is already decentralized. The bottom line is that users combine their bitcoins into a common transaction, indicating the ways of outputs (recipients). Coins in transactions are mixed and it is already difficult to establish to whom they belonged.
Moreover, since any owner of the wallet knows that it can use several public addresses, it becomes almost impossible to establish a real number of participants, especially if there are many of them.
Some cryptocurrency wallets integrate CoinJoin technology into their products. This allows users to quickly and conveniently hide their participation in the transaction.
Protection of Users or Helping Criminals?
Crypto Mixers realized that criminals began to use their services. Therefore, most of them decided to cooperate with analytical services to identify coins that were involved in criminal activity or stolen.
As a result of this crypto, the mixers began blocking addresses at which there are such coins, preventing them from participating in mixing.
This was a great way to prevent the use of their services in criminal activity. The analytical service Chainalysis, engaged in the study of blockchains, conducts a study every year regarding the use of crypto mixers. Starting, in 2019, the share of illegal transactions in crypto mixers began to fall rapidly. So in 2019, it amounted to 3.37%, and in 2021 sharply sank to 0.15%.
Ordinary users can safely use a Bitcoin mixer, such as Tumbler.io. Without obfuscating the transaction, users risk their assets, as it is quite possible to trace the owner and steal bitcoins. Crypto mixers will help protect funds from attackers and ensure complete confidentiality in the blockchain.
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