Crypto enthusiasts are quite familiar with how the Bitcoin blockchain or blockchains in general work. It acts as a ledger where anyone can view the transactions that have happened from the very beginning. Even though the transaction details can be seen, the identity of the wallet holders is still not exposed.
However, anonymity is still a feature for many and insufficient for others. That’s where a crypto mixer or bitcoin mixer comes to the rescue. These mixers help wallet holders conceal their crypto transactions. These include the origin and destination of the transaction. Let us see what Bitcoin mixer is and how they work.
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What is a Bitcoin mixer?
A Bitcoin mixer, as the name suggests, simply mixes digital currency in a pool while obscuring the transaction history. It was initially designed to keep investor transactions confidential, and it makes it difficult to determine where the funds originated. Although they aid in user privacy protection, mixers are also employed in the money-laundering process. As a result, they have raised concerns among several government watchdogs.
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Types of Bitcoin mixer
Currently, there are several different categories of cryptocurrency mixers, including:
Centralized mixers: For a fee, these mixers first accept cryptocurrency and then send out a separate batch. One of the popular centralized mixers is Blender.io.
Decentralized mixers: They camouflage transactions by utilizing peer-to-peer (P2P) or fully coordinated protocols. Users pool their cryptocurrency, resulting in the distribution of tokens and the loss of transaction traceability. Some of the popular decentralized mixers are JoinMarket and Wasabi.
How do they work?
Mixers work by pooling Bitcoin from different users and then mixing it into simple words. The user’s bitcoins are combined with coins from other sources by the mixer service. It makes a pool of mixed coins, rendering it difficult to determine where each coin came from initially.
The mixer then performs a series of transactions involving numerous users and different addresses in order to mix the coins. It is challenging to establish a link between the coins that were deposited and the output due to these transactions.
The mixing service provides the mixed BTC back to the user after the mixing operation is complete. In order to further obscure the transaction trail, this operation could entail numerous transfers.
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Are Bitcoin mixers illegal?
Hackers often use crypto mixers to conceal their transactions. Tornado Cash, another well-known mixer, has also been a hub for these bad actors to cover their illegal activity and financial crimes. For such actors, mixers have come in quite handy to make them unidentifiable.
Law enforcement has scrutinized the mixing process, even though it is not illegal. Rising money laundering conspiracies have put Bitcoin mixing under the radar of these regulators.