Crypto mixers became popular through the tornado cash fiasco. But bitcoin mixers existed long before, actually, they've existed since the dawn of bitcoin. But what are they exactly? And do they really work? This post discusses everything you need to know about bitcoin and crypto mixers.

What is a crypto mixer?

A bitcoin or cryptocurrency mixer is a third-party service to provide you with additional anonymity and privacy on your bitcoin or crypto transaction. People use them for a variety of reasons since the dawn of bitcoin. You may consider your financial privacy as important, and as such, you can use a bitcoin or crypto mixer to 'anonymize' yourself.

How does a bitcoin mixer work?

A bitcoin or crypto mixer works by operating a centralized server and receiving payments from multiple different sources. These sources offer this server a set of instructions, namely where to send the funds, and how much to send. Then the mixer processes the instructions and receives the cryptocurrency you wish to mix. Later, the goal of the mixer is to send the cryptocurrency back to your new wallet. This creates a form of 'pseudo-anonymity' as money is sent through a middle party. Thus, it is no longer provable who owns the funds. However, these can still be visible and traced on the blockchain, it just adds a layer of "reasonable doubt". These days, most crypto mixer wallets are known. Therefore, it is no longer above 'reasonable doubt'. Therefore, for an added layer of privacy, some crypto mixers offer you the ability to send funds in random amounts until a specific date. Or even to send different amounts to different wallets. For this service, they take a small fee.

Downsides of bitcoin mixers

Using bitcoin mixers requires the use and trust of a third party, and is therefore not decentralized. Particularly when transacting over prolonged periods, using a crypto mixer can result in the loss of your funds.

Often, when it comes to money laundering, people use Bitcoin and crypto mixers. As per FinCen, the first bitcoin mixer received a fine of 60 million USD. Therefore, when selecting your crypto mixer, it is important to check that they comply with your local AML regulations as to not raise any flags.

Disclaimer: Resh does not offer financial services or advice on your personal finances. We simply help educate the broader community on what is available. We do not endorse the usage of crypto mixers unless they comply with your local regulations.