For a fact, cryptocurrencies are considered to be the most secure systems, grounded by the peer-to-peer network and blockchain technology. Regardless of transactions being secure, it doesn’t mean they are private. They still can be traced, implying that your transactions might be a target for prying eyes. It’s because these cryptocurrencies, such as Bitcoin, operate using a public ledger that is also transparent. BTC users, traders, and miners can publicly monitor your transactions.
The ‘Purpose’ of Crypto Mixers
Coin mixing platforms try to eliminate the traceability factor and allow you to use your coins confidently. As such, Bitcoin Mixers blends your BTC using a random system aiming at making a misleading avenue, restricting third parties and hackers from tracking your moves. BTC mixers are also referred to as shufflers or tumblers. They can cloak your web identity and wallet address and hide your transactions from snoopers.
Regardless of Bitcoin mixers being the best solutions for achieving higher anonymity in crypto transactions, they still present risks to crypto users and traders. This article shines a light on these risks.
Bitcoin Mixers
Bitcoin’s underlying blockchain network is an open ledger, and the network transactions can be viewed and accessed using a block explorer. When your wallet ID is exposed, this welcomes risks such as unwanted access. Furthermore, this puts your Bitcoin funds at risk. Government and other authorities can’t craft IP addresses from blockchain addresses. However, the trail of the digital assets, including where they are transferred to buying products or paying for services, can be tracked, unveiling the recipient and the sender.
Since most cryptocurrencies comply with the Know-Your-Customer (KYC) guidelines, all Bitcoin transactions can be monitored. Your crypto wallet address can be traced, identifying the sources of your crypto and the destination you transfer them to. Tumbler services hide the identification process making it impossible to track or trace your transactions.
Like most coin mixers, Bitcoin mixers are privacy-oriented tools that aim to boost Bitcoin transaction anonymity. They amalgamate several Bitcoin payments from various sources and senders and forge a single transaction. The exchange processes all the payments as one transaction, hiding many users and multiple Bitcoin transfers.
Bitcoin mixers have a pool of benefits, the major one being higher levels of privacy. They account for two-thirds of all Bitcoin transactions. Having higher anonymity in transacting your digital assets eliminates the threat of your transactions being examined by cybercriminals. Mixers assist in keeping your identity hidden and maintaining your privacy.
Bitcoin Mixer Scams & Risks
Regardless of being a huge assistant in keeping transactions private, these shufflers are still being flagged and viewed as suspicious. Scammers and cybercriminals have figured out ways to take advantage of crypto traders and scam holders looking to conceal their identities and transactions.
Various bitcoin mixing sites direct users to phishing sites when looking for a legit Bitcoin mixer online. These phishing sites deceive crypto traders and steal their funds.
Darknet Scams
The first ever case of scamming using a Bitcoin mixer made by the U.S department of justice was in early 2020. A man from Ohio was apprehended for defrauding Bitcoin traders and laundering over $300 million. Larry Harmon from Akron, Ohio, was arrested and charged with using a Bitcoin mixer to engage in dark web services.
The dark web website Helix was used as a Bitcoin mixer, obtaining funds from users and hiding them under numerous micro-transactions. Harmon was in league with the site and conducted operations that involved concealing illegal transactions from the Darknet authorities.
Other Darknet entities have turned to Bitcoin mixers to obfuscate their transaction trails. Darknet markets use crypto exchanges with fewer identity verification requirements to liquidate their digital assets.
Centralized Mixers
Factoring that mixers are centralized, they present an obvious risk of single-point failure. To be put in simpler terms, even if you trust mixer entities in using multisig addresses, your privacy will be lost if their services are breached. Even when the tumbler is willing to share your data, you will still lose your privacy.
However, CoinJoin tried to solve this issue where it combines multiple user inputs into one transaction. It takes the coins and crafts them into a single transaction, and each participant signs before its broadcast to the network.
No one can track the origin of the coins, not even the mixer that does the merging. This is the major reason why crypto exchanges ban coin mixers. The risk of third-party involvement or data breach of the shuffler means crypto trader funds will be lost forever.
Corruption Brought by Anonymity
Using Bitcoin mixers implies that transactions will always be kept private. Anonymity is increased, but transparency and auditability are just as important as privacy. Increased anonymity leads to a lack of accountability that, in turn, creates opportunities for cybercrimes, scams, and corruption.
Evidence from the past attests to this. Criminals have engaged in crimes and funded them using digital currencies, and with mixers in play, it becomes nearly impossible to track and trace these malicious activities.
Final Thoughts
Employing Bitcoin mixers is a good idea if you want your transactions to be more anonymous and private. Regardless, using a coin mixer has its own risks. Even though mixers aren’t illegal in most jurisdictions, exchanges have banned users from linking wallet addresses to coin mixers.
Also, as seen from human nature, privacy is necessary for individuals looking to transfer digital assets. As people realize the importance of privacy, mixers will undoubtedly be adopted. Even so, users and crypto traders must be cautious about employing Bitcoin mixer services due to scams and other cybercrimes linked to the entities.
Source: https://crypto.news/how-bitcoin-mixers-create-false-sentiments-for-crypto-traders/