With the development of ICT technology, bitcoin is losing its anonymity and being tracked. Anonymity is decoded by linking the owner’s wallet with his name/address. The loss of anonymity and the ability to establish authorship forced the crypto community to use other crypto coins and simultaneously solve the problem of anonymity since all transactions with Bitcoin and other cryptocurrencies can lose anonymity. Today, various technologies are used to ensure and enhance the anonymity of the production and use of crypto coins, including Bitcoin mixers or tumblers.
Algorithms of crypto-mixing
It is quite challenging to trace the path of the cryptocurrency that has passed through the Bitcoin mixer in the blockchain. Although the quality of mixing depends on the algorithm of the service. There are two common ways to mix coins:
- Simple mixing
It works on the principle of exchange. Clients send Bitcoin addresses, and the mixer divides the money into parts, which it distributes among service users. The disadvantages of this approach to crypto-mixing are apparent: not all algorithms protect receiving your own money. And if they do, they keep the code tied to the client, which increases the chances of deanonymization. Asset scoring is also not carried out: receiving money with a dubious past is possible. Another factor is the presence of the mixing code associated with the transaction. It can be attributed to identification information, which reduces the degree of anonymity.
- Difficult mixing
The sent funds enter the mixer, where they are crushed into parts. Further, the blocks are not sent to other clients but to the exchanges. New coins come from the service’s funds, from private investors or traders. The algorithm protects from receiving your Bitcoins and checking the “purity” of the received coins.
Accordingly, the higher the level of privacy you need, the more serious the algorithm should be.