What Is a Cryptocurrency Mixer

  • Crypto Guru
    April 11, 2022, 10:55

A cryptocurrency mixer, also known as a cryptocurrency tumbler, will take your coins and mix them with other users’ coins in order to hide your transactions on the blockchain and make it difficult to trace transactions to your identity.

Why Use Сoin Mixers?

Because cryptocurrency transactions are recorded on public ledgers, just like bank transactions, it’s possible to trace your bitcoins. If you’re in an industry that requires anonymity, it’s crucial to use transaction methods that are difficult to trace.

How Do Mixing Services Work?

Most mixing services function by using anonymizing software to break up one user’s payments among many others often called mixing coins. These services also require users to go through a Know Your Customer (KYC) process that checks for identity verification.

When you send those coins to another address (such as paying with crypto at an online shop), they are sent out of your wallet again, but in blocks and transactions that can be traced back to you, instead of just one big transaction—this makes it harder for anyone else to trace exactly where those funds came from.

Are Cryptocurrency Mixers Legal?

Cryptomixers are not legal in all jurisdictions. This is due to money laundering and other financial crimes regulations. While mixing services can be used for illegal purposes, they can also have legal uses—for example, in witness protection programs or economic sanctions.

Depending on your state, it’s best to check whether you can legally invest in a cryptomixer or not.

Decentralized vs Centralised Mixers

The main difference between these two options comes down to whether or not they can be trusted. With a centralized mixer, users send their coins to an address controlled by someone else.

If that person decides to run away with their money, there’s no way for them to get it back. On top of that, if you don’t know to who you’re sending your coins in a centralized mixer, you could end up giving your money to criminals.

A decentralized cryptocurrency mixer solves both of these problems by giving control over transactions back to its users. This means that nobody has access to your funds except you—and there’s no risk of getting scammed because all addresses are publicly visible on a blockchain.

Problems With Using Mixers

On cryptocurrency networks, such as Bitcoin, users have true control over their funds and are responsible for their security. Unfortunately, they also have complete access to everything that is being done with those funds, which makes cryptocurrencies an ideal target for people looking to clean dirty money.

This security and privacy come at a cost though—users must be able to trust that their coins won’t get stolen or used in any illegal activity. Since all transactions on a blockchain are public, using mixers to anonymize transactions can create new problems.

For example, if you send your coins through a mixer and then make another transaction immediately after (which isn’t uncommon), it could look like you sent your coins through multiple mixers. This can raise red flags if trying to stay anonymous while making purchases.