In a world where everything is accessible, and the lack of privacy and anonymity is a concern to many, comes the crypto mixers as the perfect solution.
The world we're referring to of course is the crypto world. Because despite its mysterious and anonymous foundation, Bitcoin Blockchain is actually a public ledger.
Many would be surprised to know that, especially with the common misconception that bitcoin facilitates anonymity thus attracting crime and money laundering.
While many of us can be rather unbothered by the fact that anyone can open the bitcoin blockchain and take a look at all the transaction history since the network of the first truly digital coin launched back in early 2009. This core feature can be a huge concern for those who favor privacy and anonymity.
If you happen to share the same concern with the latter, worry not, dear reader — enter crypto mixers.
To make things clear, while bitcoin public addresses are "pseudonymous," meaning they do not reveal the identity of their owners, and with most cryptocurrency exchanges requiring to Know Your Customers (KYC), it is not difficult to link Bitcoin wallets to the real-world identities of their owners, mixers come in handy to some people who want to protect their data privacy.
What is a Crypto Mixer And How Does It Work?
Imagine yourself with a group of friends deciding to put $100 bills in a black box, and then each one of you would take a $100 bill out. You’d still have a $100 bill that’s for sure, but it is not the same bill that you’ve put inside the box. This is exactly what a crypto mixer does, but with cryptocurrencies.
Crypto mixers are programs that mash up a specific amount of cryptocurrency in private pools before sending it to its intended recipients.
A Bitcoin explorer, for example, which keeps track of all BTC transactions, will show that person A deposited Bitcoin to a mixer and that person B received BTC from a mixer. As a result, no one knows who sent BTC to whom.
Simply put, mixers make it impossible for third parties to track the specific source of cash by mixing transactions around numerous addresses.
Are Crypto Mixers Legal?
There is nothing necessarily illegal about wanting some extra privacy. In short, you may not want the public to know where you spend your money, how much you earn, or how much Bitcoin you have. However, many associate crypto mixers with money laundering and tax dodgers.
Back in February, the man who was at the center of a DeFi world, Michael Patryn, Wonderland's treasury manager, has been arrested for laundering cryptocurrency through a mixer. According to on-chain statistics, an address linked to him sent 2,000 ETH to crypto mixer Tornado Cash in 100 ETH in batches. At current market values back then, this crypto harvest was worth $5.5 million.
Several exchanges label mixers “tainted” and thus prohibit mixed bitcoin from entering or leaving the exchange. Binance, for example, has prohibited withdrawals to Wasabi, a privacy-preserving bitcoin wallet that combines CoinJoin, a popular mixing service.
