Perception of Association with Crime
Mixing services have the attraction of enabling users to maintain a level of anonymity in the use of Bitcoin. Although these services have often been criticized as being patronized mainly by criminals, this is not really the case.
There are many users who just need anonymity with their transactions that are as legitimate as any other. For instance, some gambling services prefer having coins sent to them mixed before they are used on their platforms.
The reason for this is obvious, there is no way of determining the people behind any transactions. Truth is that like any other monetary instrument, Bitcoin and other digital currencies have attracted cyber criminals who take advantage of its pseudonymous nature to perpetrate crimes.
Possibility Government Intervention
Money laundering and other economic sabotage actions are the reasons why governments are against coin anonymousness which for Bitcoin has been enhanced by bitcoin mixing services such provided by Bitcoinmix.org.
The Japan is among the most adoptive countries in terms of cryptocurrency adoption. The most recent regulatory framework released by the Financial Services Agency (FSA), the country’s main regulator has shown that the agency frowns at the use of the so-called privacy coins such as Monero.
This may extend to bitcoin mixing services over time if the belligerent attitude towards privacy is sustained. In any case, tumbling services enhance privacy of cryptocurrencies such as Bitcoin.
The fact remains that aside money laundering, governments are keen to have statistical data of monetary instruments for policy formulation and planning.
There are fears also that people having access to digital currencies may enhance tax evasive tactics and deprive authorities of needed funds.
Nevertheless, these are issues that could be solved through effective monitoring of crypto to fiat transactions and having effective taxation policies in place.
Fraudulent Blending Services
Like any internet based service, there are risks associated with using blending services which if not addressed could lead to losses.
Scammers are known to set up platforms meant to be used as channels to steal people’s coins. This is why it is of essence that users patronize only blenders that are known to be legitimate and have built reputation over time.
Random use of Bitcoin mixers will certainly lead to losing the coins to scammers as seen with the case of drgonzo from Bitcointalk who sent 2 bitcoins to a random mixer to be mixed.
He never got his coins back while the mixer claimed that his PIN was compromised. It took hours before he even got the message, “Hi, sorry for the late reply. The withdrawal was made from IP 184.108.40.206. Looks like someone got your password/PIN.” On investigating the IP address, he found out it was a TOR exit node.”
“I checked and this IP is a TOR exit node, so nothing helpful can be done with the information. After replying that my password was very long and complicated and it’s impossible someone cracked it, and I’m sure I’m not infected with any malware, I raised the possibility their service is compromised. Two days later I got another reply promising “they’ll look into it but so far I’m the only one reporting such an issue”.
So far I know another user who had the same issue.
To avoid issues like this trusted Bitcoin tumblers such as Bitcoinmix.org are recommended. This is the mixer I personally use and recommend to clients.
Not every Bitcoin blender out there is reliable, the earlier you realize this, the safer your coins.
Bitcoin Blending Services Are Not Free
Blockchain has mostly made financial transactions cheaper and faster. Bitcoin transactions are known to be relatively cheap. Sending large volumes of the coin sometime cost less than $10.
Imagine making a payment of $500,000 and paying fees less than $50. That is the power of blockchain. However, Bitcoin tumbling services are not free.
Users sometimes pay between 1 to 3 percent of the volume of bitcoin being mixed. This is the cost of having your bitcoins anonymized and dissociated from former transactions.
Companies Are Embracing Bitcoin Payment for Staff
Bitcoin adoption has increased substantially over the past few years. Many employers now pay their workers with bitcoin. To enhance the privacy of the employees and obfuscate the salaries paid to them, these companies employ the services of bitcoin mixers to do this.
Masking the salaries paid the employee is essential to protect individual privacy. This trend will likely increase in future as more organizations adopt Bitcoin for salary payments.
Not Every Bitcoin Tumbler Does The Job Well
One thing you have to understand while selecting a Bitcoin blender is that not all do efficient job at dissociating the transactions made with your wallet.
To have a good mixing, always use mixers that have good mixing techniques or algorithms that obfuscates your bitcoin transaction history.
Remember that blockchain analysis companies are well funded and backed by governments so if your bitcoin tumbling service doesn’t do a good job, you won’t be able to stop these blockchain analysts from spying on your wallet.
To understand the challenge bitcoin mixers have to surmount, here is a comment from Bitcointalk:
“Not so long ago a New York blockchain startup ‘Chainalysis’ announced the launch of a real-time transaction analysis tool. A new tool called ‘Chainalysis KYT’ (Know Your Transaction) allows real-time transaction analysis. In particular, the new functionality allows cryptocurrency companies to find out instantly how reliable their counterparty is, and whether it operates with funds that were previously used in illegal financial transactions. In connection with this news, we decided to divide our reserves into three pools, each of which will fulfill its goals”.
You may have come across reports of people whose digital assets were frozen by exchanges “for security reasons”. There are simply individuals that received funds from sources that are ‘tainted’.
This is why whenever you receive coins from transaction, especially large sums, it is a good idea to have it blended with a reliable blender such as Bitcoinmix.org.
Your privacy protection effort will be futile if people easily trace your coins or you get then locked up by an exchange for no fault of yours.