If you have some knowledge about cryptocurrencies, you might have come across the term ‘coin mixer’. A coin mixer is a method of making digital currency transactions quite anonymous and difficult to track. Individuals with the need to have high levels of privacy and anonymity with their altcoin transactions frequently use coin mixers to accomplish that.
Why are Coin Mixers Necessary?
Digital tokens have high levels of cryptographic qualities. However, they have public, open-sourced ledgers. The ledgers record all transactions on a blockchain. Hence, if anyone makes a transaction with bitcoin, the ledger records it for the entire world to see. The transaction does not have any name of the person who transacted. However, it features a string of numbers and letters traceable to the involved account.
The ledger also hides the identity of the recipient. But, for most people, that is not anonymity enough. They fear that due to the public nature of the ledger, well-funded companies and hackers may eventually trace the transactions back to their accounts. That is unacceptable for the people who want the highest levels of privacy. Thus, many investors turn to coin mixers to get such privacy.
Who Needs Coin Mixers’ Services?
Many individuals and organizations may be more inclined to use these mixers. For instance, the organizations making large transactions in digital tokens may want these transactions to remain entirely anonymous. The need that anonymity to keep all their business dealings a secret. For these companies, it could become problematic if their competitors discover what they are buying and at how much.
The wealthy also seek anonymity to avoid becoming a target for hackers. If a hacker sees that ‘James D.’ made a transaction for 30 bitcoins (roughly $235,000 currently) they may decide to hack ‘James D.’ They target the individual knowing that they are probably a high net worth individual with a lot of Bitcoin in their wallet.
Idealists also value increased levels of anonymity for crypto transactions. This group believes that authorities must never have any capability to track all transactions that people make. Coin tumblers come in handy to the individuals with this philosophy.
Criminals also value anonymity whenever transacting in cryptocurrencies. The rise of crypto scams has become a major concern in the nascent industry. These criminal elements may cause heavy regulations to be imposed on Bitcoin and other cryptocurrencies.
How Coin Mixers Work
Coin mixers work by taking your crypto and mixing it with a giant pile of other digital currencies. They then send you smaller units of the cryptocurrency to an address that you select. But, the total amount you receive is minus 1-3% of what you put in. That percentage is mostly the profit made by the coin mixing company.
Using the coin mixers needs the investors to send the company cryptocurrencies. Nonetheless, it is always advisable to transact with the reputable coin mixing companies since some may end up being scams. The reputable coin mixing companies include Bitcoin Blender, Helix, and Coinmixer.se.
Currently, coin mixing is legal in most countries around the world. But the legality of coin mixing varies just as the virtual currencies themselves subject to individual governments. Somehow coin mixing works similarly to money laundering.
But, it is guaranteed that everyone who participates in coin mixing is a criminal. It just means that they want an enhanced level of anonymity with their cryptocurrency transactions.
Insight on Coin Mixing
Coin mixing can be explained in the same way as hiding IP address with Tor Browser. The Tor Browser features a network of connected computers used to bounce communication signals throughout the world. Hence, a user can use the Tor Browser in Sydney Australia and their IP address signal may appear to come from Berlin, Germany.
Coin mixing is relatable since one can enter ten bitcoins from their wallet but eventually end up with 20 half-bitcoins from many parts all over the world. Thus, the transaction becomes quite difficult to track. The more the sources involved, the more difficult it becomes to track the transactions.
Pros of Coin Mixers
The primary advantage of these mixers is that they prevent people from falling victims of hackers. They enhance security by making investors more anonymous.
Coin mixers also enforce a core concept of cryptocurrencies, privacy. The more private the digital currencies are, the more they can be used for peer to peer private transactions.
The coin mixers can also ensure that governments and other authorities do not snoop on cryptocurrency transactions. Having currencies that are uncontrollable by governments could be the central driving force behind the crypto phenomenon. Thus, their tamper-proof nature is a major advantage of using digital tokens according to many individuals.
The biggest disadvantage of the coin mixers is that they enable criminals to launder their money. Hence, they can easily hide their illegal activities. Therefore, it is hard for law enforcement agencies to track down and catch criminals. Nevertheless, as the cryptocurrency use is rising worldwide, the authorities will eventually find better tracking methods to catch criminals.
The coin mixing companies tend to charge fees of 1-3%. It may not be inconvenient for small transactions. However, for the larger transactions, the fees may translate to thousands of dollars paid to the mixers. That is quite a sum to give away for more private transactions. Nevertheless, for some people, it is worth it which is why many coin mixes are currently operating.
Trust is a major concern for many coin mixers. Hence, it is a disadvantage when using the mixers. Since the concept of coin mixing is quite new, many people find it hard to trust using it. Compounding it with the fact that BitMixer.io recently closed without warning, it is quite difficult to trust a coin mixing company.
BestMixer.io was also shut by Dutch authorities on suspicion of engaging in unscrupulous activities. The worst nightmare would be to try to mix a large number of Ethereum or Bitcoin and then the mixing company goes under with your money.