Bitcoin, by design, is a public database. Every transaction since 2009 and every active address on the network can be scrutinised using a blockchain explorer. This transparency is part of what makes Bitcoin so valuable: no one can cheat by double spending or minting more coins because the ledger records everything. Even if you could broadcast a false transaction to the network, the nodes tasked with enforcing Bitcoin’s consensus rules would check it against existing copies of the blockchain and then reject it.

This highly public way of moving money comes at a cost though in terms of privacy. Although Bitcoin is pseudonymous, when combined with off-chain data (e.g., exchange accounts, KYC’d services), it is relatively trivial to de-cloak bitcoin users whose coins have intersected with heavily scrutinised end-points. Just consider the Twitter hacker whose Coinbase account was suspended once connected to the bitcoin giveaway scam, and who had chain analysts the world over watching his every move.

You don't have to be a criminal to desire greater privacy when using bitcoin. Whether trying to play at a bitcoin casino, purchase legitimate items on the darknet, or simply store your wealth away from prying eyes, bitcoin mixers can restore the cloak of anonymity that its ledger lays bare. A number of custodial and non-custodial solutions have been developed that obfuscate transactions, putting distance between you and the blockchain watchers who would deny you your right to hide.

Here’s how the leading coin-mixing solutions stack up.

Whirlpool by Samourai is designed to remove deterministic links that can be used to correlate on-chain transactions.

Source: Samourai

The power and limitations of mixers

As explains, "mixing services are not a silver bullet for privacy. When used as their developers recommend, however, they can significantly enhance the fungibility of your coins." With a coin mixer, "tainted" coins pass in one end and "untainted" coins emerge, which in theory cannot be connected to your identity. This is achieved through a combination of obfuscation and misdirection, to throw off chain analysts.

With custodial mixers, you deposit the BTC you wish to have cleaned and your sum is mixed with similar size deposits by other users. You're then returned the same quantity of BTC, minus a mixing fee, but this time your coins are made up of someone else’s UTXOs (unspent transaction outputs – basically the loose change in your wallet that comprises your account balance). With a bitcoin mixer, your coins are replaced with someone else's, confusing all attempts to monitor the money flow.

With non-custodial mixers, you don't actually relinquish control of your coins and swap them with other participants. Instead, you create an identical looking input by splitting your transaction into a uniform amount using the software. This is then combined with other UTXOs of the same size in a pool, where it's mixed with other inputs before emerging with its origins obfuscated. Non-custodial mixers utilise the principle of privacy in numbers: if everyone's transactions look virtually identical, no one stands out.

Popular bitcoin mixers

The most popular non-custodial bitcoin mixers use a version of CoinJoin, a popular coin-mixing protocol, which is integrated into various privacy-centric wallets. The leading custodial mixers, meanwhile, tend to have generic names such as "BTC Mixer" and are accessed via a website on either the clearnet or darknet. You deposit BTC and pay a fee which is determined by the amount of coins you want mixed and the speed with which you want the job done. Then, within anywhere from 30 minutes to a few hours, your clean coins are ready.

There are pros and cons to using each approach. With custodial mixers, you need to trust the entity doing the mixing not to run off with your BTC, or to be a honeypot operated by law enforcement or some bad actor seeking to weaken your on-chain privacy. Non-custodial mixers remove the need for trust, but are typically slower, and require a reasonable degree of technical knowledge. That said, the leading non-custodial mixers have gotten a lot more user-friendly as their developers have focused on lowering the barriers to owning untainted coins that have no history attached.

The following mixers are summarised for informational purposes only, and you should perform your own due diligence before using these or similar tools.

Bitcoin Mixer: A custodial mixer that accepts BTC, ETH and LTC, Bitcoin Mixer allows you to set a custom time delay of 30-1,200 minutes and charges 2-5% in commission. The site promises to retain no logs, but due to the nature of such operations, this is impossible to verify. The best way to determine the legitimacy of custodial mixers is by reading online reviews to see what other users have to say about them.

Samourai Whirlpool: Whirlpool is a non-custodial mixer built into the Samourai desktop and Android wallet. It's designed to break the deterministic links between coin history and future coin transactions. Whirlpool provides three liquidity pools, based on transaction size, and splits inputs into equal size parts (e.g., 0.05 BTC) to confuse chain analysts. Cycles take a few hours to complete, with each input providing almost 1,500 possible inputs, making it virtually impossible for your coins to be identified.

Wasabi: Another CoinJoin-based non-custodial service, Wasabi is a desktop-only wallet that incorporates mixing and uses smart selection of UTXOs when sending funds to maximise your privacy. Up to seven UTXOs can be mixed at a time, with a minimum mixing amount of 0.1 BTC.

Cash Shuffle: BTC isn't the only version of Bitcoin to have a mixer. Cash Shuffle is a non-custodial mixer for bitcoin cash (BCH) that's integrated with wallets such as Electron Cash. It gives bitcoin cash users the ability to reclaim their on-chain privacy, and fees are extremely low thanks to the design of the BCH network. As a result, you can mix coins for just a few cents.

Whatever mixing service you use, be aware that these tools do not guarantee untraceability thereafter: it's important to avoid tainting your clean coins by sending them to services that can be associated with your identity. Nevertheless, mixers can provide an effective means of regaining some of the privacy that blockchain analysts strip away.

Bitcoin’s blockchain might be public, but that doesn’t mean your BTC holdings should be. Mixers help fix that.

Aug 7, 2020
Crypto 101

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