What is a Cryptomixer?

Cryptocurrencies are based on blockchain technology, which records transactions in an entirely transparent manner. This essentially means that law enforcement can trace any cryptocurrency transaction back to its original user. In order to counteract this, a number of users have developed specialized services called mixers or tumblers that help to break the chain of sequential transactions. These services, which are also known as crypto mixer, essentially take a user’s tainted bitcoins and re-mix them with the coins of other users. Once the mixing process is complete, the user receives new “clean” bitcoins at a set of output addresses – typically in proportion to the size of their initial deposits – plus a service fee.

While many cryptocurrency users employ mixers for legitimate purposes, they are also a popular tool for illegal activities such as money laundering and other forms of financial crime. This has prompted some regulators to restrict or even ban the use of these services. However, regulating or even over-regulating these services could potentially stifle innovation in the space.

To address this, most centralized mixers postpone the linking of input and output addresses by an extended period of time. This makes it more difficult to link the incoming and outgoing bitcoins, but this does not fully obfuscate a user’s origin as a centralized mixer can still provide information about the history of their input and output bitcoins. Moreover, some custodial mixers may save both the incoming and outgoing bitcoins on their servers. This can lead to a significant loss of anonymity, especially if the company chooses to share these records in the future. cryptomixer