With crypto mixers under scrutiny and sanctions, it’s important for anyone who uses these tools to do their due diligence. This includes understanding what they actually do and why people use them.
One of the most popular mixing services is Helix by Grams, which can be accessed on the DarkNet. But is this service safe to use?
What is it?
A bitcoin mixer is a service that allows cryptocurrency users to obscure their transaction trail. By mixing tainted coins with clean ones, these services can prevent their customers’ identities from being linked back to their blockchain activity via the transparent ledger.
By default, blockchain transactions are completely public, meaning that every purchase, donation, or p2p payment made in the cryptocurrency is linked to a real-world identity on a comprehensive and transparent database called the blockchain. This has lead to a number of issues, including the use of crypto for money laundering and other illicit purposes.
However, it is not possible to fully anonymize transactions using the blockchain. In order to avoid being linked to illegal activities, users of the blockchain need an alternative method to ensure their transactions are private. This is where mixers come in.
Mixers are online services that combine cryptocurrencies from multiple users, then send them back to the original depositors in amounts proportional to their initial deposits. This is meant to make it difficult for investigators to track tainted coins, and in turn, prevent them from being used for money laundering or other illegal activities. In addition to their privacy features, these services also offer a fee for using their service. This fee covers the costs associated with the transactions that they facilitate.
How does it work?
Cryptocurrency mixers (also known as tumblers) obfuscate the trail of Bitcoin transactions to make it difficult for law enforcement or others to link specific coins back to their original owners. They do this by mixing the users’ cryptocurrency with other cryptocurrency from the mixer pool.
The mixer then returns the cleaned coins to their original owners minus the platform fee. The more rounds the mixing service processes, the harder it is to trace the original user.
While these mixer services offer a useful privacy solution, it is important to remember that they are centrally run by third parties. This means that if the mixer service is dishonest or poorly mixes the coins, investigators can still follow the trail of coins back to their original owner.
Additionally, using a mixer can have unforeseen side effects. Criminals often use the same mixer services, so if a non-criminal uses the same mixing service as a criminal, the criminal’s tainted coins will be returned to the non-criminal. This can cause issues with fungibility since the tainted coins will be worth less than untainted ones. For this reason, it is important for users to thoroughly research any service before deciding to use them. In addition, it is also important to understand the legal and regulatory implications of using these services. For example, the use of these services may be illegal depending on your country’s laws regarding money laundering or tax evasion.
Are they worth it?
Many users of crypto mixers want to maintain a degree of anonymity in their transactions, just as they might not want their employer to know details about their bank accounts or credit cards. But blockchain technology makes it easy to link real-world identities with cryptocurrency addresses on a transparent, distributed ledger. That’s why crypto mixers exist.
Mixers obscure the origins of cryptocurrency transfers by combining them with other coins from a pool and redistributing the result. The more sources of “clean” crypto that are mixed into a customer’s end product, the more difficult it is to track where the original crypto originated.
But mixers also make it easier for criminals to launder illegal proceeds in crypto. That’s why regulators often view them with suspicion, and they’ve even banned some of them. For example, in August of 2022, US financial law enforcement agency FinCEN banned Tornado Cash for allowing the laundering of $7 billion worth of illicit funds.
The creator of Tornado Cash has since launched a new service called Privacy Pools, but it isn’t clear whether regulators will be more receptive to this kind of solution. Ultimately, the question of whether mixers are worth it will depend on how regulators and other stakeholders think about the value of user privacy in the context of cryptocurrency. That’s a debate that will probably play out in the courts, at conferences and meetups, and on social media in the months to come.
Are they a scam?
Mixers are a method of obscuring one’s trail on the Bitcoin blockchain. They combine a user’s coins with other users’ money, and then send out the new, mixed funds in a series of transactions. This makes it much harder to trace the original source of a given coin, a useful tool for people paying ransom to cybercriminals.
However, this practice is still widely viewed as illicit. A report from Chainalysis, a crypto analysis company, shows that by far the largest share of mixer usage comes from “illicit addresses.” It also notes that some services charge extra fees for mixing, and can have issues with security or reliability.
In addition, the use of mixers can be a red flag for regulators, as it can indicate that the coins are being used for money laundering or other illicit activities. As such, many countries restrict their use or require them to be registered as money transmitters. Furthermore, some cryptocurrency exchanges are wary of mixers, and may ask questions if a user sends in suspicious-looking coins that have gone through a mixer.
Despite these concerns, mixers can be used legitimately to protect privacy on the Bitcoin blockchain. Just make sure to choose a reliable service with good reputation and PGP-encrypted guarantees, and to check the terms of service before using them.