Crypto Mixer — A Coin Tumbler for Bitcoin
In an era of bold government attempts to exert control over the decentralized nature of cryptocurrencies, crypto mixers have become a critical part of striking a balance between financial autonomy and privacy. They’re also seen as a fundamental tool for revolutionizing cryptocurrency transactions by increasing their anonymity.
Essentially, crypto mixers help users obscure the connection between their cryptocurrency wallets and the exchanges and gambling sites they use to launder illicit funds. This is a huge problem, as the majority of dirty coins flow through these unregulated entities that can’t be subjected to KYC checks.
A typical mixer works like this: Robert deposits some Ethereum at a mixer website and the site mixes it with all the other Ethereum that has already been deposited to the mixer. Robert then withdraws the cleaned Ethereum and sends it to the person he wants to donate to. This prevents the donation from being linked back to him on the blockchain.
Custodial mixers are built into many privacy wallets, and they temporarily take ownership of a user’s cryptocurrency. As a result, they expose users to the risk of centralized server attacks and downtime that can compromise their anonymity. In addition, they can be exposed to regulatory scrutiny as a money services business if they don’t meet certain reporting and record-keeping requirements.
Decentralized mixers, on the other hand, combine a user’s coin with those of multiple other participants. Then, they redistribute the combined coins in a peer-to-peer fashion. This eliminates the need for a central server and the associated risks. However, this type of mixer still exposes a user to the risk that someone can figure out which coins are theirs with clustering analysis. Crypto Mixer