A coin mixer is a special feature designed by the crypto community to allow non-anonymity-focused cryptocurrency users to mix their coins with that of other users for a better level of privacy and anonymity, thus avoiding tracking and marking of said currencies by centralized entities and the activities that their users have had with them.
En the world of cryptocurrencies, and the tecnología blockchain, following the philosophy cryptanarchist, there are a large number of tools and solutions aimed at improving privacy and anonymity. One of these tools is, without a doubt, coin mixer o Coin Mixers.
However, although it is a very useful tool to improve these privileges, the services of coin mixer they have a bad reputation. This is because they are sometimes used to hide illegal practices, such as theft and hacking of funds. So it is very likely that if you ever hear about them, it is not in a positive way.
That is why at Bit2Me Academy we have decided to bring a complete article dedicated to Coin Mixer services. In order to thoroughly disclose what the purpose of these services is, and how their use can have a positive impact on improving the privacy of cryptocurrencies, especially in Bitcoin.
So, the Coin Mixers are services that perform the mixing of cryptocurrencies in order to hide their public traces; making them practically anonymous and almost impossible to trace.
As is already known, many cryptocurrencies like the Bitcoin they do not offer a degree of privacy and complete anonymity. Bitcoin is not anonymous, it is pseudo anonymous. Since the transactions we carry out always leave traces or public traces. For example, addresses, dates and amounts transferred, due to the operation of their technology blockchain. Let's remember that this is a decentralized, autonomous and, above all, transparent technology. This is because it is open source and we can see how it works. But also because it maintains a unique and detailed record of all transactions made from the beginning of Bitcoin to the present day. A feature that makes it perfectly auditable by anyone who wants to do it.
But although the transparency that blockchain technology enjoys is a very positive aspect for Bitcoin as digital money. Sometimes it can turn out to be a very important privacy leak.
Luckily, we are more and more people who understand the great problem of not having privacy in times of Big Data and artificial neural networks. Two elements that allow us to create super precise avatars of ourselves at the service of corporations and governments, enslaving society. For this reason, many users choose to use the mixing services of Coin Mixers, as a way to enjoy greater privacy in their operations.
How do Coin Mixers work?
The Coin Mixer platforms allow the mixing of cryptocurrencies with those of other users seeking the same end, better privacy and anonymity. Some of these platforms have a certain amount of coins in reserve to carry out the mixing processes. Or they only integrate the assets that the HODLERS and other people who want to keep their cryptocurrencies completely anonymous and who, for various reasons, also want maximum privacy. So they deposit their assets in a central account of the Coin Mixer. From there these are prepared for mixing and will then be returned to their respective owners.
During the mixing process all cryptocurrencies are combined with each other. For this, the amounts are divided, in order to almost completely hide the origin details of those cryptocurrencies. This is achieved by being able to mix or match all the coins deposited in tens or hundreds of small transactions, which make all the cryptocurrencies involved in the process almost identifiable. After mixing, the amount deposited by each user is returned to the purse indicated by him. Except the commission that is charged for having used the services of the mixer. This commission is used in part to pay the miners involved in the transactions. Since the more mixes, the more mining costs. The other part corresponds to the earnings of the platform.
In these services, the cryptocurrencies that are returned to users are not the same cryptocurrencies that they initially deposited. Nor do they have to arrive in a single transaction, so as not to give clues. In other words, the mixer returns users totally different currencies from the ones they deposited, breaking the relationship between cryptocurrencies and the information of the original owner.
Advantages and disadvantages of using Coin Mixer
Pros
- Coin Mixer's services maximize privacy levels, so companies or owners of large amounts of cryptocurrency rconsiderably reduce the risk of being extorted or hacked and robbed of your assets.
- Prevent organizations and governments from tracking your funds and know what and how much you own or how you use it.
- Guarantee the right to privacy and anonymity in transactions to any user of cryptocurrencies, especially Bitcoin.
- Prevent some cryptocurrencies from being listed as contaminated for having been linked in a criminal act. Such as theft and hacking of assets, money laundering and financing of illegal activities.
Cons
- The Coin Mixers use patterns, if that pattern is discovered, its operation can be analyzed and the transactions involved can be deciphered. Today there are people and government departments analyzing the operation of Coin Mixers to break their method of concealment.
- They have been used by criminals to hide cryptocurrencies that come from illegal acts. For example, by making money laundering easier for them. That is, they could even link you to a criminal if they reveal how a certain mixer works.
- If the Coin Mixer is good, unfortunately It makes it difficult for the competent authorities to link and catch cyber criminals who circumvent the laws.
- If you are not sure of the reputation of the Coin Mixer to be used, Users can be victims of scams and thefts. Since by depositing your assets in the central account of the service, your money may not be returned.
- If a centralized Coin Mixer is used, the service owners will know which users made the deposits and which coins were delivered to them. So if the service is forced to deliver the data of its users for any reason, they will lose their privacy. Even a Coin Mixer may have been created by a government for this sole purpose, and invest a great deal of money in promoting it as insurance.
Types of Coin Mixer
Centralized Coin Mixer
The centralized mixers They are platforms that accept the deposits of several users in addresses controlled by someone who has control of everything that goes there. These addresses will normally be controlled through a program, in order to mix the cryptocurrencies and send different coins to each of the participants.
The advantage of these services is that the more users want to use it, the more coins will be involved in the mixing process. Making it more difficult for any observer to determine the origin of cryptocurrencies. However, its main disadvantage, as we already mentioned, is that if the owners of these platforms will deliver the information of the users linked to the platform, they will expose them. Furthermore, depending on the trust and integrity of these platforms, users could be victims of scams.
Decentralized Coin Mixer
Decentralized mixer services, meanwhile, offer an almost unbreakable degree of anonymity and privacy. In these mixers the users must organize themselves to mix their coins. Making a payment for themselves without the need to operate through a trusted third party. So, with decentralized Coin Mixers, none of the users involved in the mixing process will see where the assets came from or where they were directed. Likewise, with decentralized mixers, it is even unavailable that the Coin Mixer himself can see the origin or destination of the funds.
In these mixers, users will only sign the transactions if they are sure that they will receive the same amount in return after the mixing process. So with decentralized mixers the theft of cryptocurrencies is not possible.
Are Coin Mixers illegal?
Well, no, most users who use the services of a Coin Mixer do so for privacy reasons and not to hide illegal acts. According to data revealed in a webinar Signature Chainalysis, it is estimated that only 8% of the funds transferred to these services come from illegal activities. So the Coin Mixer services are not only used by cyber criminals as we have been led to believe. But by users who seek to enjoy privacy in their transactions and in their lives. Although this does not imply that cybercriminals do not take advantage of these benefits as well. Just like a criminal, he uses cars, phones, clothes or food.
However, from the point of view of regulators in some countries, Coin Mixer services are classified as a money laundering service. Still, there are no specific laws or regulations that prohibit the use of coin mixers.