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Bitcoin Mixers: What They Are & Why They’re Banned by Exchanges?

Bitcoin is a public blockchain where all information is recorded on the network and it can be accessed by everyone. To conclude, it does lack privacy, and this might not be the right choice for those who prefer anonymity on their transaction. Bitcoin mixers will be a great idea that gives importance to privacy. 

Bitcoin mixers are often known as tumblers, which mix Bitcoin transactions to make transactions more private and anonymous. This could remove any digital signatures associated with a trade. They perform certain functions, such as:

  • Accepting Bitcoin from multiple users
  • Sending out various Bitcoins to the destination
  • All the coins are mixed up to ensure anonymity. 

These types of mixers are used in several cases including:

  • To keep the origin and destination of the cryptocurrency coin secret.
  • To improve the anonymity of cryptocurrencies
  • To turn stolen gains into fresh coins.  

Let’s see how Bitcoin mixers work.

How do Bitcoin mixers work?

Bitcoin mixers work

Normally, what happens in trade is that; if a transaction happens between one person and another, the transaction will be recorded on the blockchain. But in Bitcoin mixer, the process is a little different. The Bitcoin from one person will be collected in a private pool and mixed up with other users, after that, it will be sent to the respective person. 

How it looks is, that the sender sends the Bitcoin to a mixer and the recipient receives the Bitcoin from a mixer. Any direct transaction between the sender and recipient cannot be found. 

Is there any variant of mixers? Yes, there are two types of mixers: centralized and decentralized. 

Centralized mixers 

These mixers will accept the Bitcoin and send back different Bitcoins for free. Any incoming and outgoing transactions will not be visible to the public, everything will be recorded. In the future, the company will be able to reveal the user connection to the coins. Blender.io is an example of a centralized mixer.

Decentralized mixer

This mixer uses the CoinJoin protocol that allows a large group of users to join together an amount of Bitcoin and then redistribute it. So, everyone will receive a Bitcoin back, but the person and destination will be anonymous. 

Features of a good Bitcoin mixer

A good Bitcoin mixer must possess all the below-mentioned factors.   

  • 100% anonymity
  • Fair fees
  • Absolute no transaction fees
  • Fast transactions 
  • Security
  • Availability of multiple addresses
  • No maintenance of mixing logs and user records

Pros and cons of using Bitcoin mixers 

Pros 

  • Bitcoin mixers play an important role in ensuring the privacy and anonymity of Bitcoin users. 
  • Bitcoin transactions are private and anonymous 
  • Useful in transacting with large amounts
  • Able to overcome strict government regulations

Cons

  • Difficult to investigate and track criminals, including hackers, drug traffickers, and money launderers.
  • High fees might be inconvenient for small transactions with large amounts of money.
  • Lack of trust

Is there any alternative to Bitcoin mixers? Of course yes, chain-hopping is an alternative to making transaction routes, demanding the transfer of assets across multiple platforms through accounts established with either inexpensively acquired or illicitly obtained assets.

Are Bitcoin mixers illegal?

Bitcoin mixers are mainly used by criminals since all the transactions made are anonymous. They use this for money laundering and for other illicit activities. Apart from criminals, a large number of regular Bitcoin users also use this mixer for privacy reasons. Bitcoin mixers are not legal in every country, and in India, there are no robust laws regarding the mixers. 

Summary 

Bitcoin mixers are an excellent tool for users whose priority is privacy and security in the transaction. These works by hiding any links that happened in the transaction between two parties. Privacy and anonymity are indeed a curse. These features can be used by criminals also for illegal activities such as money laundering. Keep in mind the positives and negatives of Bitcoin mixers and decide whether to try or not. 

FAQs

1. Are Bitcoin mixers used for illegal activities? 

A. Bitcoin mixers are often used for illegal activities as they could mix up addresses. Even though using Bitcoin mixers is unlawful, using them for illicit activities is considered a violation of the law. 

2. How anonymous are Bitcoin mixers rendering transactions?

A. Bitcoin mixers tumble all the transactions, and no private data is stored; complete anonymity and security on the blockchain are ensured. 

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