Bitcoin Mixers: How To Master The Art Of Digital Disguise (2024)

Someones always watching. Whether its the ever increasingly prying eyes of the government, an exchange trying to sell your data to the highest bidder or criminals, the Bitcoin blockchain is open for everyone to see. Everyone has a basic human right to privacy, so it’s understandable that you’d like to keep your finances private too, luckily a Bitcoin Mixer can help you do just that!

However, Bitcoin Mixers aren’t the silver bullet a lot of people think they are and come with a number of trade offs and risks, if they work at all. Not knowing how to use them properly can result in your funds getting caught up with illegal money laundering or worse, stolen or seized by the government.

What Is A Bitcoin Mixer?

Bitcoin mixers, also commonly called Bitcoin tumblers or Bitcoin blenders are software or services that allows users to have their bitcoin mixed together with tens or even hundreds of other users in order to sever any ties to the funds original source.

Why Do People Use Crypto Mixers?

As the Bitcoin Blockchain is a public ledger, it means that it’s open and free for anyone to look at. Each transaction and address is just a big, essentially random, string of numbers and letters but it is possible to match up these with real world identities. This is why Bitcoin is said to be pseudonymous not anonymous.

Matching up identities to addresses and following the trail of bitcoins is what Chain Analysis firms specialize in and there’s a number of ways that users of Bitcoin routinely make this job easier. Things like re-using addresses, using KYC exchanges to buy or sell bitcoin and using public Bitcoin Explorers without shielding your IP address all contribute.

Dive Deeper: Beginner Bitcoin Privacy

Using a Bitcoin Mixer can help to regain some or all of this privacy and restore your coins to being pseudonymous once again. However, Bitcoin Mixers aren’t a silver bullet and you should fully read and understand the below information before using them as a lot of coin mixing services out there aren’t as perfect as they’d have you believe. There’s also been many instances of users losing their bitcoin in the process too.

How Does A Bitcoin Mixer Work?

In general a Bitcoin Mixer works by taking in a number of coins from multiple different people, “mixing” them in one or more transactions and then randomly sending those same coins out to the original people. This is usually done multiple time in a row as well to increase the difficulty of tracking which coins originally belonged to which party.

Centralized Mixers

This process of receiving, mixing and sending back out can be done by a centralized service, but we would not recommend using them. Besides the fact that they’re usually over priced and charge much higher fees, they’re often not as private as they claim to be and have a history of stealing user funds.

While some are obviously going to be better than others, you cannot know what is going on behind the scenes. Maybe they don’t do any actual legitimate mixing at all. Maybe they’re acting as a law enforcement honeypot or maybe they get forcibly shut down while you’re using it and you lose your coins that way. It’s just not worth the risk, especially when a much better option is available.

Decentralized Mixers

As this process of receiving funds, mixing them and sending them back is a repeatable task, its not surprising that it’s been automated. On top of this automation there’s now decentralized coin mixing services that are built right into Bitcoin Wallets

While having a Bitcoin mixer wallet is obviously much more convenient than using a separate service, the main reason this is a much safer way to mix your bitcoins is because many are built on Free and Open Source Software (FOSS) that has been reviewed and verified by security experts.

Wasabi Wallet was created to help Bitcoin maintain its cypherpunk roots on its path to a global reserve currency and to mitigate the inherent privacy issues of its public ledger. This is why Wasabi Wallet is an open-source, non-custodial, privacy-focused Bitcoin wallet for desktop that implements trustless coinjoin magic.

Wasabi

As you can fully review and self host the software, it gives you the user full control and security over how your bitcoins are being mixed which is always preferred. The fact that it’s substantially cheaper and in some cases free is just icing on the cake!

What Is CoinJoin?

While mixing of bitcoin in general goes by a number of different names like Bitcoin tumbler or even Bitcoin blender, one very important term you should be aware of is CoinJoin. A CoinJoin is a special Bitcoin transaction that mixes multiple Bitcoin outputs together from different spenders. Think of it like combining many different UTXOs from your wallet in a transaction, but instead those UTXOs are coming from different people.

The idea has been around for years and there is a lot of math and effort that goes into making sure that the transaction is as good as it can be at breaking the link between who pays whom. Wasabi uses their own WabiSabi protocol for the construction of CoinJoin transactions. Samourai, a very popular Bitcoin mixing wallet and service that has recently been shut down by the government, used to call their implementation Whirlpool with each cycle having 1,496 different ways it can be interpreted. Under the hood though, they all use the same basic CoinJoin idea.

Are Bitcoin Mixers Legal?

Whether something is “legal” always depends on which jurisdiction or country you’re in, but in general yes they are legal. That being said, there are still countries where they’re illegal, so be sure you check this first before using them.

Note: Even in countries where they are legal, bitcoin mixers have a long history of being caught up in money laundering and other illegal acts and as such, get shut down by governments or other authorities.

Some quick examples include:

• Dec 2013: Bitcoin Fog is used to launder some of the 96,000 BTC that was stolen from the Sheep Marketplace robbery
• Feb 2015: 7,170 BTC is stolen from the exchange Bter.com and traced back to Bitcoin Fog
• Apr 2021: U.S. Federal authorities arrest the founder of Bitcoin Fog on charges of money laundering alleging that during its 10 years of operation it laundered over $335 million
• Aug 2021: Owner of mixer Helix pleads guilty to helping criminals launder $300 million
• 2022: Bitcoin mixers Blender.io and Tornado Cash are sanctioned by the US Department of the Treasury, making it illegal for US citizens, residents and companies to use the service
• Mar 2023: Bitcoin mixer ChipMixer and $46 million dollars in Bitcoin were seized
• Apr 2024: U.S. Federal prosecutors charged the CEO and founders of Samourai Wallet with conspiracy to commit money laundering and operating an unlicensed money transmitter business

Is Bitcoin Mixing Safe?

As mentioned above, we don’t recommend using centralized Bitcoin mixing services. They’re not just more expensive, they’re much more risky as they can steal your funds or get shut down by government agencies at a moments notice.

Even if you’re using a decentralized Bitcoin mixer and doing so for legitimate, privacy preserving reasons it’s important to know that your actions can still be viewed by some people or companies as suspect which can result in your bitcoins becoming “tainted”. For example, Binance has been shown to actively monitor users withdrawing to Wasabi and performing CoinJoins and then suspending their account as a result of this.

While we’re no fans of Binance here, this isn’t actually their fault as they are simply following AML rules that are set out by the Financial Action Task Force (FATF), an international body that sets the world’s standards for anti-money-laundering procedures. While it’s certainly not a good look, it demonstrates that using these services does still come with a small risk even if you’re not doing anything wrong.

What’s The Best Bitcoin Mixer?

The best crypto mixer is one that:

• Ensures the CoinJoin breaks all deterministic links between transaction inputs and outputs
• Hides the clients IP address via services such as Tor
• Is decentralized and easy to use
• Has low fees

Alternatives To Bitcoin Mixers

If you want to use Bitcoin in a more private way there are a few different things you can do besides using a Bitcoin mixer:

• Lightning Network: The Lightning Network is a layer 2 network that sits on top of Bitcoin. As such, when you send funds via Lightning it’s not recorded on the Bitcoin Blockchain. Lightning payments are also incredibly cheap and fast too, however do note that it’s still possible to trace payments, just harder
• Liquid Network: Similar to Lightning, the Liquid Network is also a layer 2 solution that isn’t recorded on the blockchain. One of the main use cases of Liquid is to improve the confidentiality of Bitcoin transactions. When you move bitcoin via this sidechain the amounts and asset types are not visible to third parties

You can also use these after a Bitcoin mixing round to increase your privacy even further. While some suggest using various privacy coins such as Monero, Zcash or Dash these come with their own pros and cons and can often be treated just like funds used in a Bitcoin mixing service by exchanges or other companies that monitor the Bitcoin blockchain.

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