A crypto mixer is a service that obfuscates the origins of digital coins transferred between users. These services make it difficult for investigators to trace the funds’ source or owner and can be helpful for individuals who wish to remain anonymous or circumvent restrictions in their jurisdiction. However, these services can also attract increased regulatory scrutiny and legal action if used for money laundering or other illicit purposes.
There are two main types of crypto mixers: centralized and decentralized. Centralized mixers typically offer a user-friendly interface where users deposit their coins for mixing. The mixer then shuffles the coins and redistributes them to users’ wallets, preserving their anonymity. This is an efficient solution, but centralized mixers are a single point of failure that could be compromised by a hack or system outage. In addition, centralized mixers typically save both the input and output Bitcoin addresses of users, which can be used to identify them later on.
The decentralized alternative is a peer-to-peer mixer, which utilizes CoinJoin or a similar protocol to fully obscure transactions by combining them with vast amounts of other people’s funds. While these services may be more cumbersome and require a greater number of participants, they are generally the most reliable way to achieve true anonymity.
In this example, three people send their tainted coins to the mixer, which pools them together and randomly spits out new bitcoins for each participant. The largest depositor walks away with five clean addresses that contain a total of 0.97 BTC, while the other two walk away with correspondingly smaller amounts. cryptomixer