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đ„ The Secret of Bitcoin Mixers
Bitcoin mixers, also known as tumblers, allow users to anonymize their Bitcoin transactions. While Bitcoin was initially seen as a way to make anonymous payments online, its public blockchain can reveal transaction histories. KYC regulations further complicate privacy. Bitcoin mixers address this by rerouting transactions through complex networks, making it harder to trace the original sender and recipient.
Users send their coins to a mixer, which blends them with other transactions. This breaks the link between the sender and the recipient. For example, coins sent from Wallet #W are first directed to a mixer at Wallet #X, mixed with other coins, and then sent to Wallet #Y before finally reaching the recipient at Wallet #Z. This process ensures thereâs no direct connection between Wallets #W and #Z. Note that a small fee (0.25%-3%) is deducted for the service.
Types of Bitcoin Mixers
- Centralized Mixers: Centralized or custodial mixers are third-party services that mix Bitcoin transactions. While straightforward and often cheaper, they have significant drawbacks: they can log users' transaction details and may be compelled to share these logs with authorities. Thereâs also a risk of the service refusing to return funds.
- Decentralized Mixers: Decentralized or non-custodial mixers use smart contracts or protocols like CoinJoin to mix transactions without a third party. They pool transactions from many users and redistribute the funds, ensuring privacy without keeping logs. However, they can be complex and require many users to function efficiently.
Bitcoin mixers can be misused for illegal activities, making it difficult for law enforcement to track criminals. High fees and the risk of services closing down and taking users' coins are additional concerns.
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