Cryptocurrency transactions, whether it is Bitcoin or other currencies, are often considered private and secure. However, this is not entirely true. On one hand, your crypto wallet, unlike your bank account or credit card, is not directly tied to your identity, because you are not required to provide any verifying information when creating a wallet. On the other hand, bitcoin transactions are transparent, which means that you leave some transactional footprint, which may be used to identify you. If you truly care about the privacy and security of your transactions, you will need to add a level of security, namely a Bitcoin mixer.
What is a Bitcoin Mixer?
Such services are known under various names. They can be called bitcoin tumblers or CoinJoin as well. Seasoned Bitcoin users are aware of them, because they help to obscure transactions, making tracing it impossible for third parties.
The basic mechanism of all crypto mixers is similar. All transactions by various users are combined into one pool. Then the coins for each target transaction are taken from this pool. Consequently, it becomes impossible to tell which user sends money to whom. Coins become mixed, hence the name of the service.
For a better understanding, let’s compare the operation of a Bitcoin mixer to making a fruit smoothie. If a group of people has several fruits and exchanges them, it is pretty easy to tell who has got whose fruit. However, if you put all fruits through a blender first, you find out, everyone still can get their share, but you cannot tell where it came from. In the same vein, bitcoin tumbler obscures the source of the transaction preventing potentially interested parties from tracing it.
The World of Bitcoin Mixers
There are various types of Bitcoin mixers out there. The most important distinction is between centralized and CoinJoin crypto mixers.
Centralized mixers obscure the source of the transaction by offering you to exchange your Bitcoin for other types of coins. However, there is a centralized entity operating the service, which creates some risks and vulnerabilities. Firstly, the Bitcoin mixer itself knows the source and the target addresses of each transaction and theoretically can reveal it, for example, per the request of the officials. Secondly, centralization creates the risk of losing control over your coins.
CoinJoin crypto mixers are considered more reliable. They work in a decentralized way. Coins from many users are pooled into a single transaction, which is then distributed to the target wallets. The mixer itself is oblivious to the specifics of each transaction. To make each transaction even less identifiable, additional measurements can be taken, such as varying commission size and transaction delay.
There are several well-recognized bitcoin tumblers you may be interested in using. For example, Wasabi Wallet is a notable one based on a CoinJoin method. Several more worth mentioning are Samourai Wallet and JoinMarket. The latter offers a unique market-based approach to mixing coins.
When Do You Need a Crypto Mixer?
There are various reasons to use a Bitcoin Mixer. They are helpful in many scenarios. Even if you do not operate a large amount of Bitcoin and do not use cryptocurrency for business, bitcoin tumblers reduce the risk of fraud and other cyber threats, because malicious actors are unable to trace your transaction. If you use cryptocurrencies for large investments, getting familiar with using mixers is a must.
However, you need to consider the fact that in many countries crypto tumblers belong to a legally gray area, because their operation may violate anti-money-laundering laws. Before using such a service, study local laws, as well as reviews for a particular mixer.
In any case, Bitcoin Mixer provides you with a much-required resource to protect your anonymity and secure your transactions. Your operations with your crypto wallets remain untraceable. This is especially important if you use hot wallets, which are considered more prone to cyber threats. Whether you are a seasoned investor or just a beginner in the world of Bitcoin, learning how to use a crypto tumbler will provide you with an additional layer of security for your crypto operations.