A bitcoin mixer is a service that obscures the origin of crypto deposits and recipients. However, some mixers don’t provide a true guarantee of anonymity.
Darknet Markets — which we won’t link to, as it links to forgeries of marketplace sites — appears at or near the top of Google results when searching for “how to mix/tumble/launder bitcoin.”
It is recommended that you avoid using this site.
What is a Mixer?
As the name implies, a mixer is a service that allows crypto users to mix their digital assets with those of other users in order to obfuscate the source and destination of these assets. As such, mixers are a popular tool among people looking to improve the anonymity of their Bitcoin transactions.
The reason for this is that, unlike traditional financial transactions, blockchain-based Bitcoin activities are publicly visible to anyone with access to the public ledger. As such, any Bitcoin transaction can be traced back to its original owner with relative ease. Mixers solve this problem by allowing users to exchange their tainted coins for “clean” ones that are mixed together with those of other users.
To do this, a user deposits their tainted Bitcoin into the mixer’s pool. The mixer then exchanges these tainted bitcoins for clean ones in proportion to the size of their initial deposit. For example, if the user deposits 10 BTC, they will receive five clean bitcoins, one for each of their previous tainted addresses.
While mixers are often used for illicit activities, there are also many legitimate use cases for them. For instance, people living under oppressive regimes may need to obfuscate their transactions in order to avoid being targeted by authorities. Similarly, people who are using cryptocurrency to fund activism and political efforts may want to protect their privacy.
How Does a Mixer Work?
Crypto mixers are a popular tool for individuals seeking increased privacy and anonymity with their crypto transactions. The concept is simple enough: users deposit tainted cryptocurrency with a mixing service, which then sends the mixed coins back to their wallets, hiding any link between the original source and the recipient.
The process is a bit more complicated than that, however. Mixers typically have a pool of tainted and clean cryptocurrency in reserve to carry out the mixing process, and they take 1-3 % of the total mix as a fee for their services. This is how they make money and cover their costs.
A bitcoin mixer also ensures that any returning customers receive a new mix each time by ensuring that the amount of tainted cryptocurrency they send is proportional to the size of their original deposit. This way, cyber criminals who have used the service in the past can be identified and prevented from receiving the same coin again.
While crypto mixers are widely considered to be an essential tool for anyone seeking higher levels of privacy with their cryptocurrency transactions, they have recently become the focus of intense scrutiny from regulators and law enforcement. This has led to some of the highest profile mixing services being hit with sanctions, and it has raised concerns about the impact that these sanctions may have on the wider blockchain and cryptoasset industry.
What Are the Advantages of a Mixer?
Bitcoin mixers are helpful for users that want to keep their cryptocurrency transactions private. They make it nearly impossible to trace your coins from one exchange to another. Mixers are generally free and offer fast mixing times (within 3 minutes). They also work as a way to improve the basic security of your crypto transactions because they help prevent leaking of your private keys or IP addresses.
However, they are not foolproof. If you use a centralized mixer, it is possible for a third party to retain your personal information. This can lead to a serious loss of privacy and can potentially compromise the safety of your cryptos.
Decentralized mixers are much safer because they do not have any control or access to your personal information. They work through an open-source protocol, such as CoinJoin, to create a permissionless mixing process. This ensures that no single party can detect your personal information, and they are less likely to be compromised.
Although mixers are not illegal, they can still be used for illicit activities. This is because they can obscure the identity of the original owner of a coin, making it difficult for law enforcement to investigate suspicious activity. In fact, mixers are often used by cyber criminals to fund their schemes. This includes ransomware, extortion, and other types of scams.
What Are the Disadvantages of a Mixer?
Mixers are designed to obfuscate the path of funds by pooling cryptocurrency from multiple users and then sending each back a portion of the same amount that they deposited, plus a service fee. As a result, it’s nearly impossible to link the inputs to the outputs on the blockchain, even if you have all of your bitcoin addresses in one wallet.
That’s a huge advantage for people who need to anonymize their transactions, such as those trying to avoid detection by oppressive governments. However, the fact that mixers can obfuscate the path of cryptocurrency also makes them attractive to cybercriminals who want to hide their activity from law enforcement and others.
As a result, the number of cryptocurrency transactions sent to mixers has seen significant quarter-over-quarter growth since 2020. Some of the largest increases have come from centralized exchanges and DeFi protocols, but the majority of them come from addresses associated with illicit activities, such as extortion or ransomware attacks.
Fortunately, there are ways to reduce the risk of using mixers by choosing noncustodial mixes that run through strong cryptography instead of blind trust. These services are still vulnerable to attack, but they eliminate the counterparty risk that comes with centralized mixers and custodial mixing services. They also allow for full control of users’ private keys after the mixing process.