One of the early magic of cryptocurrencies is that the sender or receiver can access this information anonymously. However, this is a common misconception in this industry.
In fact, Bitcoin (BTC) and many other cryptocurrencies are easy to find.
Earlier this week, on April 27, US authorities arrested the brain of Bitcoin Fog, a mixed BTC service based in Darknet. After ten years of analyzing the blockchain data, the authorities were able to register the operator.
You don’t have to be a forensic analyst to know that every transaction is linked to a blockchain address and it stays there forever. Government agencies cannot determine personal information by IP address or address, and this money is usually used to pay for products or services. This is the path leading to the sender and recipient.
In the case of Bitcoin Mist, law enforcement agencies were able to calculate the cost of server hosting paid in digital currency. Bitcoin blending services, such as Bitcoin Mist, allow users to mix their coins with other users so that the destination addresses are not recognized. This blocks communication between input and output addresses and ensures better data protection.
An example of a mixed transaction. Source: Tharush Tech-Central
Mixing services are provided for integrated mixers in various designs, including fully centralized solutions that require reliability, that work together simultaneously and depend on a large number of users to operate at the same time. There is even an option to trade on decentralized exchanges (DEX) to almost rule out traceability.
The mixer has a number of risks
The only obvious point of failure is that the middle mixer is there. If the service is willing to share its data or if it is compromised, users will lose their privacy, even if the company relies on using multiple user addresses.
CoinJoin has solved this problem by combining different user inputs per transaction. The service then takes these coins and processes them into a transaction and signs them to each participant before sending them over the network. These transactions are then aggregated into one transaction and each user is refunded. However, no one knows the origins of these coins, not even the company that brought the deal together.
While CoinJoin is not fully identifiable, it offers reasonable denial as no one can pinpoint what the problem is. The greater the number of participants, the greater the rejection.
Screenshot of the Wasabi Purse Coin Join feature. Source: Wasabi Wallet
Some cryptocurrency users request anonymity to send tokens to their wallets, and the Wasabi wallet has long been used for CoinJoin activation.
Although the infrastructure is technically centralized, the design prevents operators from identifying users or stealing money. At the moment, Wasabi Wallet is only available for desktop solutions. So, like all cryptocurrencies, watch out for copies!
A similar service is provided by Samorai Wallet, which also offers a Choumian Cain Join mixing service called Vermool. For a complete data protection solution, users must connect the Samurai wallet to their full Bitcoin node. However, desktop and mobile versions are offered.
These blending services are not illegal in most countries, but some exchanges and services may be refused by users associated with addresses associated with coin mixing activities.
As more and more people understand the importance of achieving a level of privacy for self-protection, they need less incentive companies to prevent their customers from using mixers.
The views and opinions expressed are those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading step is associated with risk. You must do your own research when making a decision.