Categories: News

Bitcoin Mixing Services Pose Certain Risks

The topic of using coin mixers to anonymize Bitcoin transactions has been kicked around for quite some time now. While it may seem only normal for people to mix up their Bitcoin transaction history at some point, there is also the pressing question of which services can be trusted. The short answer to that question is absolutely none, as coin mixers are third-party centralized service providers.

Also read: Bitcoin Exchanges Comparison

Obfuscating Bitcoin History With Mixing Services

On paper, there is absolutely nothing wrong with mixing your Bitcoins through one of the many coin mixing services available in the world today. One thing to keep in mind when using such a service is how users are entrusting their funds to a random third-party anonymous stranger, in the hopes of getting their coins back from a different Bitcoin wallet address.

Some people might be wondering why anyone would want to anonymize their Bitcoin balance in the first place, as the underlying blockchain technology acts as a transparent public ledger. Most people see the upside of this level of transparency, as it creates a complete public overview of the funds in circulation, as well as the transactions being broadcasted to the network in real-time.

At the same time, there are people who want to see Bitcoin as a way to anonymously generate and maintain funds, If mainstream media outlets had a say in the matter, Bitcoin has always been used for nefarious activity due to its anonymity. So why keep associating digital currency with anonymity and illegal activities?

Anonymity on the Internet is far more important when it comes to financial matters. Bitcoin offers pseudonymity at its core, which is an important first step towards user privacy. But for certain users, this isn’t enough, as they want to keep their identity secret, as well as the true origin of their coins.

Coin mixers are a powerful tool to achieve the goal of truly anonymous sources of Bitcoin. However, every coin mixer is an independently operated third-party service, and users might never see their coins back. Keeping in mind how Bitcoin transactions are not refundable, it is important to keep in mind that losing funds by using a mixing service is one’s own fault.

There is a new type of mixing service called JoinMarket which unlike other coin mixers does not rely on entrusting your funds to a third party. Not only can you anonymize your bitcoins with that service, but you can also earn some satoshis while helping others. According to their bitcointalk thread, JoinMarket is for people who

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1. Want to use coinjoin to improve the privacy of their bitcoin transactions or reduce the miner fees they pay.
2. Want to earn an income from their investment bitcoins

You can find out more about Join Market / Coin Join by visiting their github repository

Using a Bitcoin Exchange Isn’t Much Better

According to a recent Reddit post, using a Bitcoin exchange to anonymize transactions would be a more viable alternative. While it is true that coins can be anonymized in a certain way when using a cryptocurrency exchange, users are still relying on third party service providers to return money to them. In the end, this renders the entire concept of financial control by the end user completely useless.

Unlike fiat currency, Bitcoin provides unprecedented transparency for everyone in the world to see. That core principle is both a blessing and a curse. The only viable option right now is to use Join Market to anonymize your bitcoins without relying on a third party to take care of your funds. Bringing the profit back to the consumer is what Blockchain technology is all about. Trustless escrow, smart contracts, multisig, etc. are all next generation services which beat the archaic centralized models of most services today.

Source: Reddit

Images credit 1,2,3

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JP Buntinx

JP Buntinx is a FinTech and Bitcoin enthusiast living in Belgium. His passion for finance and technology made him one of the world's leading freelance Bitcoin writers, and he aims to achieve the same level of respect in the FinTech sector.

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