What is a crypto mixer?

What

Most modern cryptocurrencies are created on the basis of a variety of blockchain networks. In which, by definition, stored all information about all transactions carried out within the network. So if you try, you can trace the path of each specific bitcoin to the time of production. On the one hand, this will confirm the accuracy of a coin or token, on the other hand, if there is a specific binding of a cryptocurrency wallet to a specific person, this “continuity” allows you to trace all its sources of income and expenses. Which seriously reduces the effectiveness of the declared "anonymity" of cryptocurrencies in general.

Why? Because any blockchain network node can get all the information about transactions within it - the principle of transparency. But no one said that law enforcement officials or the repressive apparatus could not be the network. Therefore, it was necessary to find a way to "break" the sequential chain of transactions - cryptomixers.

How cryptomixers work

They have many names - mixers, tumblers, scrambler or shuffler, the essence of this does not change. You send your coins to a “mixing service”, processing, “crushing” and recombination takes place there so that coins whose origin cannot be traced, come back. The fact of mixing itself can be traced, but that's all.

This can be done in several ways:

  • Decentralized peer-to-peer networks. Or “Chaumian CoinJoi mixers” , putting it simply, users “fold” on some part of the coin into the “common pot”, then - form a joint transaction, within which they take the equivalent part from the common pool. It is impossible to track who took it. No intermediaries, no possible information leaks. No user knows who will receive the amount. Plus, the process is carried out only if all participants give their consent to it, which eliminates the possibility of theft. But this thing works quite slowly, and its mixing volumes are not very significant.
  • Centralized services. Users throw off their coins to an intermediary who shuffles and distributes them. Simple, fast, affordable. An analogue of “banks in offshore zones”. But here immediately arises the problem of trust. A centralized cryptomixer can save information about transactions and movements, and then merge it to interested parties. In addition, banal theft of coins is possible, since it is impossible to trace their future path.

Why would an ordinary person need this?

At least because otherwise, anyone will have a full report on your transactions, sources of income and expenses. Criminals will know that you have money. Banks will know that you can pay loans on less favourable terms, landlords will know that rents can be higher, and the government will know that you do not pay taxes on your income. Actually, everything is the same as the situation of using traditional cash. Only less convenient and riskier. But you expect something completely different from cryptocurrency, right? Including banal observance of the constitutional right to protect confidential information.

Existing Services

  • Wasabi Wallet. Decentralized Mixer. Technically, there is a central server, but the operator can neither deanonymize users nor withdraw funds to their account. Plus, the service makes it easy to determine which coins in the cryptocurrency wallet were mixed and which were not.
  • Samourai wallet. The same, but also porting to a mobile platform. Plus a high level of privacy. Unless the wallet needs to be connected to its own bitcoin node.
  • JoinMarket. Also a decentralized system. However, it allows its users to earn money by providing their coins for mixing. The fee is small, but the service is quite active and popular, so there are many transactions there.
  • Anonymix Centralized service. Ability to manually delete transaction data, low commission - 0.3 percent of the amount plus 0.0001 BTC, certificate of origin.
  • Bitcoin Laundry. Centralized. No commission other than the standard fee of 0,0002BTC per operation.
  • CryptoMixer. A commission of 0.5 percent of the amount plus 0,0005BTC per transaction. But there are no restrictions on the minimum and maximum amount, plus a high degree of confidentiality and a “good track record”.

How legal is it?

The main problem is that there is still no normal regulation in the field of cryptocurrency in most countries of the world. There are certain aspects, such as working with stablecoins equated with securities that are more or less regulated, but the main field for work is outside the legal spectrum. And the situation with crypto mixers is even more complicated.

The fact is that these services can really be used by criminals to hide the sources of their income and expenses. The classic "money laundering." Yes, they, even according to official statistics, are a minority, but this is enough to have a formal reason for closing.

Especially centralized services that have legal representatives, addresses and more. With decentralized services, everything is more complicated - here as for other distributed networks high resistance to external influences is included. So high that it’s impossible to shut down such services technically - unless you block access from individual countries, but this can be circumvented.

Conclusion

Despite some ambiguity in the legal aspects of using cryptomixers, this market segment will continue to develop. Especially with the tendency to create a partially centralized cryptocurrency, which requires some additional anonymity.