What Is Bitcoin Mixer? And What Are the Reasons to Use It?
| Updated by Bhushan Akolkar · 3 min read
Bitcoin Mixer is basically an additional privacy layer protecting your identity by mixing the transaction trail to and from your crypto wallets.
Over the last decade, Bitcoin has emerged as a formidable cryptocurrency finding its use-case and application in multiple areas. However, we all know that Bitcoin’s distributed ledger is a public blockchain network. This means that anyone on the Bitcoin network can view the entire history of transactions.
While the Bitcoin network provides absolute transparency it also gives illicit players a chance to look into your transactions. It is well-know that Bitcoin transactions aren’t linked to real-world identities. However, by looking at the spending patterns, someone can decode that which addresses are controlled by the same wallets.
Note that not all time one’s guess can be correct but there is a fair enough chance that one can decode the link. This is where Bitcoin Mixers also called Bitcoin tumblers come into the picture.
What Is a Bitcoin Mixer?
Bitcoin Mixer is basically a software solution that allows users to mix their tokens/coins in order to preserve their privacy. Bitcoin mixer helps to obscure the ties between real-world identities and Bitcoin addresses. Thus, it adds an additional layer of privacy to your bitcoin transactions.
Thus, to explain it in simple words, the basic job of a mixer is to break the transaction trails between “incoming” coins and “outgoing” coins from a particular wallet. This will confuse illicit players trying to decode the trail and ensure privacy to users’ funds.
A number of Bitcoin mixing solutions are currently available in the market. These include fully centralized solutions as well as decentralized solutions wherein you don’t need to trust anyone. The process of Bitcoin mixing involves using third-party services to break the link between wallet addresses sending tokens and the receiving addresses.
The Bitcoin mixer will mix your Bitcoin tokens with other previous sent coins thereby sending different coins to the address you have specified. This is basically done to dodge the ones keeping a watch on the transaction trail.
Best Use-Cases of a Coin Mixer
Now you might be wondering that what is the necessity of using a Bitcoin mixer. Let us consider different scenarios where Bitcoin mixers or Bitcoin tumblers are useful:
Merchants across the globe have started accepting Bitcoin payments. Now, if you’re using the same wallet for every time purchase on a single merchant, it becomes easy to track your details. This way your user identity on a merchant website can also get exposed. Thus, a Bitcoin mixer turns out to be helpful in order to protect your privacy.
Suppose that your cryptocurrency wallets have a lot of funds in different digital assets. Now imagine that if such wallet ID gets exposed online, it becomes highly susceptible to attacks. Using a Bitcoin tumbler in such a case will help to conceal your wallet address.
Suppose that you’re a long-term investor and holding Bitcoins in your crypto wallet. Now if you are hodling a big investment, the attackers will always be hunting you. In such a case, a Bitcoin mixer provides additional privacy to hodlers by mixing tokens and sending them to a wallet that they haven’t exposed in the transactions.
Hot wallets that are always connected to the internet as highly susceptible to external threats. Using a Bitcoin mixer for transactions to and from the wallet will help to keep the owner identity anonymous.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.