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How Bitcoin Mixers Help The Privacy-Conscious Hide Their Transactionsby@CryptoAdventure
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1,210 reads

How Bitcoin Mixers Help The Privacy-Conscious Hide Their Transactions

by Crypto AdventureMay 10th, 2020
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There's no doubt that the cryptocurrency network is considered to be one of the most secure systems because of its blockchain technology and peer-to-peer network. But does this mean that your transactions are hidden from prying eyes?

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There's no doubt that the cryptocurrency network is considered to be one of the most secure systems because of its blockchain technology and peer-to-peer network. But does this mean that your transactions are hidden from prying eyes?

The truth is that digital assets like Bitcoin operate on a transparent public ledger, which implies that every other trader, miner, or BTC user can monitor your moves and transactions

However, thanks to coin mixing platforms, you can now throw your distrust for BTC under the carpet and use your coins with confidence. 

A Bitcoin mixing service blends your coins via a random system with the ultimate aim of creating a misleading avenue which restricts hackers and third-parties from tracking your transactions. 

Also known as tumblers, shufflers, or blenders, BTC mixers are capable of hiding your wallet address or web identity to protect you from internet snoopers. 

Digital privacy is a right that everyone is entitled to, something Satoshi him/herself advocated for. Thanks to the provision of bitcoin mixers, you can claim that entitlement by shuffling your digital coins and emerging with untainted crypto whose origins have been obscured.

In this guide, we present an in-depth discussion on Bitcoin mixing services, specifically paying attention to their appeal to crypto users and how they help improve the anonymity of BTC transactions for the conscious privacy user. 

So, In a Nutshell, Bitcoin Mixing is...

For those who aren't familiar with BTC mixing protocols, they basically combine numerous Bitcoin payments into a single transaction, so that it becomes difficult to disentangle who exactly sent what and to whom.

You can think of coin mixers as a centralized "middleman" within a decentralized ecosystem. These "mixers" methodology prevents the involvement of a third party and thus protects the identities of the addresses sending and receiving Bitcoins. 

The process of Bitcoin mixing or tumbling turns out to be the most efficient one to ensure the required anonymity of crypto transactions. By employing a "FoolProof Algorithm", Bitcoin mixers protect user's coins so that they don't get redirected to phishing sites or swindled by scammers.

As per a report by analytics firm Chainalysis, crypto wallet Wasabi alone was responsible for mixing $90M worth of BTC in August 2019. This data indicates that crypto mixers are becoming increasingly prevalent and better at mixing larger numbers of coins to boost anonymity in transactions. Consequently, this could create a virtuous circle, with improved services attracting more crypto users and more users, leading to improved privacy.

Is Mixing Coins Safe?

Many crypto users desiring privacy can rely on coin mixers as the perfect place to gain 100% anonymity and confidentiality on crypto transactions.  

Mixers are safe to use if you want to protect your crypto assets by hiding your personal identity. Service providers maintain financial privacy by obscuring transaction history data that can be used for unethical and malicious activities by hackers or untrusted employees on exchanges. 

Most credible coin mixers don't store or record any personal details like log info, emails, etc. from its users. Moreover, they eliminate all the user-related info while mixing up the Bitcoins, making the coins entirely untraceable and safe for use.

Best Applicable Use-Cases of a Coin Mixer

The Bitcoin network provides absolute transparency, which means that it gives illicit players a chance to look into your transactions. By looking at a user's spending patterns, hackers can figure out which addresses are controlled by the same wallets. 

This is where mixers come into the picture. For instance;

i) Merchants across the globe have started accepting Bitcoin payments. Now, if you're using the same wallet for every time purchase on a single merchant, it becomes easy to track your details. This way, your user identity on a merchant website can also get exposed. Thus, a mixer turns out to be helpful in order to protect your privacy.

ii) Secondly, suppose that your cryptocurrency wallets have a lot of funds in different digital assets. If that wallet ID gets exposed online, it becomes highly susceptible to attacks. Using a Bitcoin tumbler in such a case will help conceal your wallet address.

iii) Similarly, if you are hodling an obscene amount of bitcoins in your wallet, you will always be a person of interest to attackers. In such a case, a mixer provides additional privacy to holders by mixing tokens and sending them to a wallet that they haven't exposed in the transactions.

iv) Finally, hot wallets that are always connected to the internet are highly susceptible to external threats. Using a mixer for transactions to and from a hot wallet can ensure that you keep the identity hidden from potential hackers.

Is Full Transparency Ideal for Cryptocurrency?

The entire infrastructure of cryptocurrencies is built on anonymity, but after the technology paved its way into the mainstream, regulators were prompted to keep a closer eye on the industry. 

In that rationale, a crackdown has been launched against privacy coins in various corners of the globe. For instance, in March 2019, the French National Assembly's finance committee proposed a ban on anonymous cryptocurrencies such as Monero and Zcash. 

Due to such measures, it's probable that more crypto users will be driven toward Bitcoin, as they are aware that they can transact with it on any regulated crypto exchange. Also, most users know that they can still make occasional use of its extra privacy features, such as coin mixing, whenever they need increased anonymity.

Regarding the need for more privacy in the crypto sphere, Bitcoin Core developer Nicolas Dorier commented:

"The need for privacy is growing as a counter-reaction to repression. When a user once gets his coins on some exchange frozen without any recourse, when his exchange is over complying from fear of regulators, the only defence this user has is to mix his coins for the next time."

Ian Miers, a Zcash coin developer, reiterated Dorier's observations and believes that enhancing BTC's privacy is essential for its survival, as lack of privacy directly attacks the coin's fungibility, which is what makes BTC a revolutionary currency.

Interestingly, a key exec at blockchain analytics company Chainalysis does not think that privacy coins are bad despite not being able to track them fully. Jonathan Levin, co-founder, and CSO at Chainalysis has noted on several occasions that full transparency of cryptocurrency transactions might not be as beneficial as it seems. 

While Levin appears to advocate the privacy in crypto in some sense, he acknowledges that ultimately, there needs to be oversight for crypto businesses to tackle the illicit elements that abuse cryptosystems. He added that that regulatory compliance is necessary for Bitcoin adoption

Despite their support for some degree of privacy in BTC transactions, Chainalysis is still viewed as anti-ethical to the spirit of crypto. In a recent interview, Andreas Antonopoulos, a well-known Bitcoin educator, criticized firms like Chainalysis that help in deanonymizing Bitcoin transactions. 

Antonopoulos acknowledged that Bitcoin's preliminary design was faulty concerning privacy protection. He further noted that this issue would be resolved as new privacy-preserving enhancements are coming to the BTC protocol.

Bottomline

While some folks suppose that cryptocurrencies need to be absolutely transparent to legitimize themselves, is it arguable that privacy is necessary if Bitcoin or any other crypto is to become an authentic and widely used currency?

The fact is that privacy is becoming an important concern for an increasing number of crypto users, but few realize that Bitcoin isn't as anonymous as they think. For this reason, Bitcoin mixing services, such as Samourai Whirlpool or Wasabi Wallet, are growing increasingly popular because they make digital coins safe and transactions private. 

Bitcoin mixers provide you with confidentiality by blending your coins with other coins previously sent or in their reserve, then sending different coins to the address you specify. In this way, there will be no connection between your wallet address and the one where you want your crypto delivered.