Despite the decentralized nature of Bitcoin, digital coin transfers are not anonymous. All transactions are recorded in the blockchain, where transaction chains and wallet balances are visible. After the cryptocurrency is converted to fiat, the owner of the coins can be identified by indirect data. The problem of de-anonymization is solved by bitcoin mixers. For example, Mixer.Money offers to adjust the privacy level up to 100%. There is a popular belief that such services are used for criminal purposes. However, to a greater extent, mixers are in demand among businessmen and ordinary users who want to keep their settlements confidential and secure. If after a transaction, third parties can find out the wallet balance, it indicates a gap in financial protection. There are no guarantees that the data obtained will not be used to their detriment.
What are bitcoin mixers
You don’t need to go through KYC to create a BTC wallet and transfer coins. But there are ways to determine the identity of the sender through indirect data. Blockchain securely records transactions but makes them transparent. The data cannot be altered, but is easy to track.
Bitcoin mixers make it difficult to identify the user’s identity. They use several technologies for this purpose, but the principle is the same – the client sends unverified Bitcoin from one address and receives clean coins from different sources to another account. Due to the involvement of an intermediary, it is impossible to find a connection between these wallets and identify the user.
Why bitcoin mixers are needed
States are purposefully tightening the rules of regulation of the crypto industry. In order to obtain a license from the European Union or the United States, exchanges are obliged to allow only verified clients to trade. Law enforcement agencies have developed a number of measures to identify account holders. Identity will be established if the user:
- Sends bitcoins from the exchange to his wallet or performs the reverse operation.
- Pays for the purchase with coins.
- Withdraws digital money to a card.
Law enforcement agencies track mostly large sums. But there’s no guarantee that the rules of the game won’t change. A few years ago, only transfers over 700 thousand rubles fell under bank filters. In 2022, users faced blocking even when receiving Br40-50 thousand from exchanges (exchangers).
Bitcoin mixers make operations anonymous, help to check coins for purity. The highest rating is given to cryptocurrencies that have recently been on exchanges or platforms with cruel KYC rules.
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Anonymity of transactions
Studies by reputable industry agencies debunk the myth that Bitcoin mixers are closely linked to crime. For example, Chainalysis found the following:
- Only 8.18% of cryptocurrency transactions are associated with crime.
- 2.7% of coins were used in darknet transactions
- More than 40% of assets come for mixing from exchanges.
Privacy-enhancing services are in demand among businessmen and traders. Large market participants keep serious amounts on their wallets, which attracts attackers.
It is possible to remain anonymous in a decentralized ecosystem. But after coins are withdrawn to a traditional bank, the identity of their owner can easily be established by circumstantial evidence.
Mixers make this task much more difficult. But that doesn’t mean it can’t be solved. Some services exchange customers’ coins among themselves. Because of the small number of wallets, it is possible to decipher the initial balances. The Mixer.Money service works in a different way. Clients are offered to choose one of two modes:
- “Mixer. Coins are crushed and mixed. In return, users receive bitcoin from other participants.
- “Full anonymity”. The mode is resistant to most known deanonymization methods. Customers’ money is not mixed. They are split and sent to exchanges – traders with daily turnovers of up to $100 million. Customers receive pure coins from other platforms.
Checking coins for purity
In 2023, all major platforms verify customers and conduct transactions through the AML-filter. Transactions are assigned a risk-based rating. If the service determines that coins have been spotted on Darknet or mixers, they will be blocked.
However, investors are not immune from buying “dirty” coins. They can be obtained from dubious exchanges or individuals. Some mixers send customers their own assets or lower-rated cryptocurrency.
Mixer.Money users are guaranteed to receive pure bitcoin from foreign exchanges. This makes it much harder to decipher the identity of the owner. When the “Full Anonymity” mode is active, crypto coins are sent from third-party addresses, so it is impossible to establish communication with the client or the platform.
Types of BTC mixers
Regulators and law enforcers are constantly improving techniques to decipher the technology and identify the original BTC wallet. Therefore, mixer services are improving systems to protect customers’ private data. At first, simple cryptocurrency mixing platforms appeared. They distributed coins to wallets using an algorithm. Modern services already have built-in protection against deanonymization.
Centralized
The first mixers appeared in 2011. They accepted customers’ coins to one wallet, mixed them and returned them. In 2023, platforms of the classic type are practically not used due to the low level of privacy. The most reliable services belong to exchange mixers.
Mixer.Money applies a mechanism that prevents the client from returning their own coins. Each unit is assigned a number. The algorithm makes sure that the identifiers of incoming and outgoing transactions are different.
The safety of funds on centralized platforms depends on the honesty of the administration and technical equipment. If hackers break into the service, they will get access to clients’ money. The standard principle of operation of managed mixers is as follows:
- The service accepts requests from clients.
- Each transaction is split into small amounts and sent to users’ wallets.
- The operation is repeated dozens of times.
Users receive coins from other clients. The more participants, the higher the level of anonymity.
Decentralized
On such platforms, users join a distributed network and exchange bitcoins. The mixer acts as a regulator. None of the users know the mixing stage, wallet balances of the participants and other personal information.
Developers do not have access to client funds and data – abuse is ruled out. As users exchange assets, their amount is randomized. Each participant will receive several small transfers within the amount sent.
How Mixer.Money works
This bitcoin mixer was launched in 2016 and has a good reputation. A system of guarantee letters has been introduced to protect users. If there are problems on transactions, these documents will help you get your money back. The service charges 1-5% for services. Beginners can make a free test transfer to assess the level of anonymity and the speed of the operation.
The main features of working with the site are as follows:
- Fast application fulfillment. Mixing takes up to 6 hours depending on the selected mode. This is an important advantage – on other platforms Bitcoin is mixed for more than a day.
- Floating commission. The value varies within a set range. This is an additional level of anonymity.
- The minimum transaction amount is 0.01 BTC. The maximum is 50 BTC.
- The “Exact amount” mode is available. It is used for anonymous transfer to a third party. The fee is constantly changing, so in the standard mode the amount is slightly different each time. When the “Exact amount” option is active, a specific amount will be sent to the specified address, and the rest will be sent to an additional account “For change”.
- Adjusting the level of anonymity. High privacy is not always required. If privacy is reduced, it is possible to carry out the operation faster and cheaper.
- Deletion of data from the system after 168 hours. Verification on the site is not required, but the service reads IP and receives information about the transaction when transferring.
- To increase anonymity, you can use the Tor-mirror of the site. In this mode IP address will be hidden.
- Transaction processing after 1 network confirmation.
Users can work through the site or Telegram bot. In the messenger you can get a 10% discount. Customers are offered to choose the mode depending on the level of privacy required. The details are presented in the table.
| Parameter | “Mixer” | “Full anonymity”. |
|---|---|---|
| From the pool of users of the “Full anonymity” mode. There is protection from getting your own cryptocurrency |
Customers can withdraw assets to personal wallets or directly to the exchanger. Beforehand, it is necessary to make sure that a large payment window is available on the recipient’s site – at least 6 hours. The general mixing algorithm is as follows:
- Open the application form and select the mode.
- Specify the address to which the “clean” coins will be transferred. Multiple accounts can be used to increase the level of anonymity.
- Select “Mix my bitcoin”.
- Transfer the asset to the address specified on the screen.
- Download a letter of guarantee. It will be required if the coins do not arrive on the due date.
Regulation of bitcoin mixers
States demand transparency from cryptocurrencies, so they oppose mixing services. For example, the UK has proposed regulating such platforms. But in some countries, the work of bitcoin mixers is legal.
In the US, the sphere of activity of these companies is “transfer of money”. The regulator makes the following requirements for platforms:
- Register with FinCEN (the Anti-Money Laundering Authority).
- Develop a KYC procedure.
- Provide reporting upon request.
However, this makes the operation of BTC mixers meaningless. The SEC recognizes that new rules are needed for such services. The crypto community is convinced that the privacy of financial information is the prerogative of each individual. In 2023, the Fight for the Future Coalition of Digital Rights Organizations published an open letter to the U.S. government, which was signed by influential industry companies such as Ledger, Zcash, Mobile Coin and others. In it, businessmen and developers ask for more freedom for the market. Blocking mixers hurts the industry as a whole and hinders the development of privacy-oriented technologies.
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Author: Saifedean Ammous, an expert in cryptocurrency economics.
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