CryptoURANUS Economics: 06/17/21


Thursday, June 17, 2021

Mixing Service: Defined in CryptoCurrency

Mixing Service (Tumbler):
Defined in CryptoCurrency

A mixing service, also known as a “tumbler”, lets you send in your cryptocurrency and get the same amount back, minus fees, from other people.

The purpose of a mixing service is to improve the privacy and anonymity of digital money by making it harder to track what the cryptocurrency was used for and who it belongs to. 

Coin Mixer:
A cryptocurrency mixer is a tool for improving the anonymity of cryptocurrencies. The algorithm is rather simple—a user sends their cryptocurrency to a mixer's address which is registered for each user individually. The coins are then mixed with transactions of other people or distributed among hundreds of thousands of wallets that belong to a mixer. Once the process is completed, "clean" bitcoins are transferred to the pre-set storage—either back to the sender or the new owner.

Explaining how a coin mixer works, based on the example of a bitcoin transaction sent by a Petya ransomware attack victim. Source:
The distribution of funds among numerous wallets makes it impossible to establish a link between a sender and a receiver. A user can also break the transaction input into denominations in order to hide the real amount.

The mixers' owners charge a 0.5–3% transaction fee for their services. It is vital to remember, however, that if you send the coins to another person's wallet, you might never get them back.

Using a mixer is not so different from using an exchange platform. You need to enter the address to which you would like to send the mixed bitcoins, set the service fee (it heavily influences the transaction speed), and press "Continue." Next, you will be redirected to the page with the mixer's address to which you need to send your bitcoins in the first place.

Cryptocurrency Dash is also secure when it comes to untraceable transactions. The PrivateSend technology enables users to mix and break the transaction inputs down into standard denominations. The wallet then sends requests to "masternodes" which are responsible for mixing.

What could be an alternative to coin mixers? Think of special wallets with a high degree of anonymity, e.g., Electrum. There are also wallets that have a built-in bitcoin mixing option.

In 2014, Cody Wilson, a crypto enthusiast who has also created a 3D-printed gun, along with Amir Taaki, introduced the Dark Wallet project—a browser plugin and an Ubuntu client.

Dark Wallet is built atop CoinJoin, which implies that all transactions are mixed and it's impossible to find out who was the first to own a cryptocurrency. The more users of the wallet, the better the anonymity.

Cryptocurrency tumbler or cryptocurrency mixing service is a service offered to mix potentially identifiable or 'tainted' cryptocurrency funds with others, so as to obscure the trail back to the fund's original source. This is usually done by pooling together source funds from multiple inputs for a large and random period of time, and then spitting them back out to destination addresses. As all the funds are lumped together and then distributed at random times, it is very difficult to trace exact coins. Tumblers have arisen to improve the anonymity of cryptocurrencies, usually bitcoin (hence Bitcoin mixer), since the currencies provide a public ledger of all transactions.

Tumblers take a percentage transaction fee of the total coins mixed to turn a profit, typically 1–3%. Mixing helps protect privacy and can also be used for money laundering by mixing illegally obtained funds. Mixing large amounts of money may be illegal, being in violation of anti-structuring laws. Financial crimes author Jeffrey Robinson has suggested tumblers should be criminalized due to their potential use in illegal activities, specifically funding terrorism; however, a report from the CTC suggests such use in terrorism-related activities is 'relatively limited'. There has been at least one incident where an exchange has blacklisted "tainted" deposits descending from stolen bitcoins.

The existence of tumblers has made the anonymous use of darknet markets easier and the job of law enforcement harder.

In February 2020, the alleged operator of a cryptocurrency tumbler was indicted on charges of "money laundering conspiracy, operating an unlicensed money transmitting business and conducting money transmission without a D.C. license."

Peer-to-peer tumblers:
Peer-to-peer tumblers act as a place of meeting for bitcoin users, instead of taking bitcoins for mixing. Users arrange mixing by themselves. This model solves the problem of stealing, as there is no middleman. When it is completely formed, the exchange of bitcoins between the participants begins. Apart from mixing server, none of the participants can know the connection between the incoming and outgoing addresses of coins.

Money laundering:
In December 2013 cryptocurrency tumbler Bitcoin Fog was used to launder a part of the 96,000 BTC from the robbery of Sheep Marketplace. In February 2015, a total of 7,170 bitcoin was stolen from the Chinese exchange and traced back to the same tumbler. In April 2021 U.S. Federal authorities arrested the founder of Bitcoin Fog, a Russian-Swedish man named Roman Sterlingov, on charges of money laundering, operating an unlicensed money transmitting business, and money transmission without a license in the District of Columbia. Alleging that during its 10 years of operation it laundered over 1.2 million bitcoin at a value of approximately $335 million.

Wallets in an Anonymous Network:
On the Darknetmarkets website, one can find a guide to preserving privacy when sending payments through the Tor network. For that, a user needs several wallets in both anonymous and open networks, the Tor browser, and mixing services supporting Tor.