How Bitcoin Mixers Help Protect Privacy

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Bitcoin mixers are services that mix BTC from different sources to obscure their transaction history. Using these services, Bitcoiners can protect their privacy and keep prying eyes from assessing the history of their funds or other information about them.

Bitcoin addresses are pseudonymous, and don’t inherently reveal the specific real-world identity of their owners, but they can be traced back to exchanges or other points at which an owner may have revealed their real-world identity. Blockchain analysis techniques are capable of deriving the amount of BTC someone holds, the things they’ve used their funds to buy or other information based on Bitcoin addresses.

Why Use A Bitcoin Mixer?

There are many reasons some Bitcoin users might not want the history of their BTC to be discovered. For instance, the revelation that a user holds a large amount of funds might make them a target of theft or scam. Or those living under repressive regimes might want to ensure that their financial activity is free from censure.

Mixing services can obscure this analysis in a variety of ways. Proposals for bitcoin mixers have included centralized parties that promise to mix coins, decentralized platforms, Lightning Network-style payment channels and projects that use privacy-focused altcoins as intermediary mixing steps.

Chaumian CoinJoin mixers, for instance, see groups of users send the same amount of BTC to a new Bitcoin address that they control and then merge all of the individual transactions into one main transaction. Users then take the same amount of BTC they originally sent back out, and now they have effectively obscured the previous activity of their bitcoin. Other services charge fees that are then used to financially motivate people to offer their own bitcoin to be mixed, thus improving the mixing efficacy.

Introducing uses algorithms to shuffle users’ bitcoin and secure their identity. Users can input the address to which they would like their BTC forwarded and input a custom time delay before mixing. The service does not store any logs to protect user anonymity and does not collect personal data.

By making it convenient, secure and effective to mix your bitcoin, is adding an oft-needed privacy layer to the original cryptocurrency network.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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