Coin Mixer

Updated on January 5, 2024
Article byJyotsna Suthar
Edited byShreya Bansal
Reviewed byDheeraj Vaidya, CFA, FRM

What Is A Coin Mixer?

A coin mixer is a service or company that enables users to combine their cryptocurrency tokens, mix them, and then send them to the designated recipient’s address. The primary objective of such a mixer is to enhance the security of transactions and safeguard the privacy of the parties involved, namely the sender and recipient.

Coin Mixer

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Crypto coin mixers, also known as tumblers, function by intermingling various cryptocurrency tokens within the mixer, effectively obfuscating the identities of the associated addresses. Consequently, different mixers are available, categorized based on their operational model, such as decentralized and centralized.

Key Takeaways

  • Coin Mixer is a company or service that provides a coin-mixing facility to crypto users. It allows them to deposit funds in their wallets and send them to the recipient’s address with enhanced privacy. 
  • Different users pool their funds, shuffling happens, and coins reach their destination address. However, a fee of 0.1 to 3% is charged. 
  • The duration of the mixers ranges from a few minutes to a week. Afterward, the user can withdraw the coins by providing a private key and mixing code. 
  • A few popular crypto mixers include Coin Mixer, UniJoin, Tornado Cash, and others.

Coin Mixer Explained

Coin Mixer provides privacy features and obscurity to those users who wish to obscure their identity in the blockchain ledger. They usually invite users who want to pool their tokens in a transaction. Once the pool receives tokens, the mixer rotates and shuffles the entire batch of tokens belonging to different users. The shuffled tokens are distributed among the destination addresses per their original quantity. However, the original sender gets replaced here with another user within the pool. This process is known as coin mixing.

These mixers enable smart contracts for deposit and tumbling of the crypto tokens. Users usually connect their wallets to the platform and pool their money. As the coin mixing ends, they can withdraw their money. However, the users must provide a recipient address and private note (or private key) to ensure end-to-end encryption. Many crypto coin mixers use zero-knowledge proof systems or zk-snarks for privacy concerns. It allows the verifier to confirm the transaction securely.

Ultimately, the recipient may receive a partial amount; a certain percentage will be deducted as fees. This fee ranges from 0.1 to 3%, depending on the amount deposited. The more the amount, the larger the fee that gets charged on the total amount to the user. Yet, some platforms charge lower fees for more quantity. However, the only intention of this fee is to ensure anonymity within the transaction. For example, the minimum amount for mixing in Blender is 0.001 Bitcoin (BTC) with a service fee of 0.6% to 1.8%. Likewise, its duration can range from minutes to even a week.

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Examples

Let us look at some examples to understand the concept of a coin mixer.

Example #1

Suppose Jenny wants to compensate George in cryptocurrency for the services she has received but wishes to maintain her privacy on the blockchain. To achieve this, she utilizes a BnB coin mixer for peer-to-peer payment.

Jenny begins by visiting the platform and entering George’s recipient address. She deposits 10,000 BTC into the wallet and selects a mixing duration, ranging from 30 minutes to a maximum of 10 hours. After verifying the details, the coin-mixing process commences.

One hour later, George finds the coins in his wallet. Notably, the BnB coin mixer levies a fee of 0.1%, which is relatively low compared to other providers. However, meeting the minimum token requirement of 0.1 BTC is essential to avoid the potential loss of all deposited coins.

Example #2

Tornado Cash, a widely used cryptocurrency mixer, is central to a significant legal and regulatory dispute. The United States Treasury Department has imposed sanctions on the service, citing privacy concerns and its alleged involvement in laundering over $7 billion in illicit funds since its launch in 2019.

Co-founders Roman Storm and Roman Semenov faced criminal charges, including money laundering and sanctions violations, with Storm’s arrest in Washington state and Semenov, a Russian national, remaining at large.

This case shows how coin mixers can offer privacy benefits but pose risks when used for criminal activities. It also highlights the growing role of blockchain analytics in tracing transactions through mixers, indicating that anonymity may only sometimes shield illicit actors from investigation.

Importance

Coin mixer is most important among crypto whales and sharks trading high-worth coins. It allows them to trade large quantities of coins securely and privately. Besides, various other factors make the concept more prevalent.

Let us look at them:

#1 – More privacy-enabled transactions

The foremost reason to include coin tumblers is to solve privacy issues. In cryptocurrency, most transactions are transparent on the online ledger, which is visible to the public. So, if a person sends 4000 BTC, the hacker may easily trace the digital footprints of the sender. As a result, many crypto whales use tumblers like Solana coin mixers to send tokens privately.

#2 – Protection against thefts

As many organizations are now accepting crypto as a mode of payment, the hackers also participate in the race. According to the reports, more than 15000 businesses have accepted cryptocurrency. Therefore, cyber attackers hack the blockchain via phishing methods and steal coins. Thus, mixers allow users to shuffle their coins to create anonymous addresses.

#3 – Anonymity

The coin mixer pools the crypto tokens of different members, mixes, and changes the output address. So, if Mr. A has sent ten tokens to an address, the mixer will mix and transfer these tokens as input to Mr. B. The latter then sends the tokens of Mr. A to the assigned address. As a result, it becomes tricky for the hackers to track the original sender, as the sender’s address remains obscure.

#4 – Avoiding unwanted control

As no intermediaries are involved, users can transact freely in this crypto space. The tumblers create a decentralized arena without any authority or control. Thus, the amount of fees charged to users is also minimal.

Advantages & Disadvantages

Although coin mixers are a boon for crypto whales, certain disadvantages are associated. Let us look at them:

AdvantagesDisadvantages
It prevents cyber attackers from targeting or tracing the users.  The legality of the tumblers is unstable in the crypto market.
Mixers enable privacy and anonymity within the transactions. There is a limit on the quantity of tokens transacted in the pool. 
Large organizations can secure their private transfers and dealings. The percentage of fees charged may be inappropriate for smaller transactions.  
Besides Bitcoin, some other coins are also allowed in the coin-mixing process. Threats of cyber-attacks still exist within these mixers. 

Frequently Asked Questions (FAQs)

1. Are coin mixers illegal?

No, coin mixers themselves are not inherently illegal. They are a technology designed to enhance privacy in cryptocurrency transactions. However, their legality can vary by jurisdiction, and their use for illicit purposes, such as money laundering, is illegal. Users should always adhere to local regulations and use coin mixers for legitimate privacy and security reasons.

2. Does a wasabi wallet have a mixer?

Until mid-2022, the Wasabi wallet only focused on coinjoin services. However, in September 2022, Trezor and Wasabi announced a partnership to create a coin-mixing service.

3. Can crypto mixers be traced?

The traceability of crypto mixers depends on various factors. While the mixing process is designed to enhance privacy and make it challenging to trace transactions, it could be more foolproof. Some blockchain analytics firms claim to have methods to trace transactions that have gone through mixers. The effectiveness of such tracing methods can vary, and it’s crucial to understand that while mixers enhance privacy, they do not guarantee absolute anonymity.

This article has been a guide to what is a Coin Mixer. Here, we explain the concept along with its examples, importance, advantages & disadvantages. You may also find some useful articles here –

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