An estimated 25% of bitcoin users are associated with illicit activity. However, a mere 8% of mixed Cryptocurrencies are processed for illegal purposes
Governments and law enforcement agencies have stepped up the surveillance process to trace Bitcoin transactions linked to cybercriminals and bad actors who are turning to Bitcoin mixers and other forms of privacy tools to conceal their illicit proceeds. Currently, the popular method deployed by cybercriminals and black hat hackers were ransomware attacks. The most notorious ransomware incidents include SamSam ransomware and the GameOver Zeus botnet. During such an attack, the computer used by the victim was injected with the malware which could track his or her Bitcoin transaction activity. A thorough blockchain analysis could then reveal the Bitcoin address of the victim, which could be used to demand a ransom in Bitcoins. Although many early users of Bitcoins thought that the cryptocurrency is anonymous, it is far from the truth. Bitcoin transactions are actually not anonymous, as anyone with access to a blockchain explorer could have a complete overview of the targeted Bitcoin address. Law enforcement agencies and other investigative bodies have also acquired the knowledge and know-hows of tracing Bitcoin transactions that are linked with criminal activities. Although there are now more than 5,000 known cryptocurrencies in the market, Bitcoin remains to be the most popular form of cryptocurrency targeted by bad actors.
Over the last decade, Bitcoin has achieved mainstream acceptance of the concept of cryptocurrency, similarly bad actors have also recognised Bitcoin as an appealing asset class to launder their profits gained through illegal purposes. Initially, they would use the largely unregulated cryptocurrency exchanges to process these stolen funds. However, as governments and law enforcement agencies learnt to detect illegal transactions on the blockchain, these cybercriminals have adapted to the change by embracing privacy-enhancing tools for their crypto laundering activities in order to evade detection by the authorities. Of which, the privacy-focused Bitcoin mixing service has been used to make sure that ransomware payments cannot be traced back to them.
Blockchain transparency poses a threat to users
Before we begin to debunk the myths of the widely popular privacy-oriented Bitcoin mixer, we have to understand the reason behind the creation of the Bitcoin mixing service. It is known that Bitcoin transactions can be traced using blockchain analysis tools and blockchain explorer platforms. Anyone who obtained a specific Bitcoin address would have the capability to view the entire transaction record that occurs within the address. Bitcoin was created back in 2008 by Satoshi Nakamoto, who envisioned a future that shifts the control of power from governments back to the people. Bitcoin was a by-product of a decentralised blockchain network which did not allow a single authority to control the wealth of the people. While Bitcoin could serve its purpose in the foreseeable future when mass adoption occurs, it does lack the much needed privacy feature which could protect the Bitcoin owner of his or her personal information and transaction records since every Bitcoin recipient would have to disclose their bitcoin address to the sender, thereby permitting the sender a full look at their transaction in the Bitcoin wallet.
In recent years, centralised cryptocurrency exchanges and payment services are subjected to the government’s legal compliance. Thus, in order to use their service to buy or sell Bitcoin, users will have to undergo a mandatory Know-Your-Customer (KYC) process, which could allow relevant authorities and these service providers to identify every transaction happening to one’s account. Likewise cybercriminals can track the user’s wallet and plot ransom or similar attacks on the user. Crypto advocates and cypherpunks were aware of the rampant problems pertaining to the lack of security and privacy in Bitcoin and other cryptocurrencies that they began to develop solutions that prevent their transactions from being traced against one’s will. One of these solutions is known as Bitcoin mixers, or Bitcoin tumblers.
Keeping your anonymity with a mixer
At the time of writing, there are no other means to conceal a Bitcoin transaction other than to mix your coins in an anonymous environment (aided with VPN, Privacy wallet and TOR browser). While governments and law enforcement agencies branded Bitcoin mixing service as an illegal “money laundering” tool, it is far beyond the truth. In reality, removing the trace of cryptocurrency using a Bitcoin mixer used by ordinary people, is not at all as scary as government organizations are trying to suggest. A legally compliant blockchain analysis firm Chainalysis has found that a mere 8.1% of all mixed coins were stolen from illicit activity, while only 2.7 percent of coins had been used on the darknet.
While authorities are trying to dissuade users from engaging in the nefarious undertone of “money laundering” mixing service, Bitcoin mixers are a necessity for anyone who seeks anonymity and privacy for their Bitcoin transactions. The aforementioned finding by Chainalysis has concluded that users of the Bitcoin mixing service are mainly individuals or entities who wish to protect their identity and Bitcoin asset online. Since these transactions can be traced by both the government and cybercriminals for tax or theft purposes.
Protect the user from unnecessary troubles
As mentioned in earlier paragraphs, anyone who has access to a user’s Bitcoin address will be able to monitor and track the balance and movement of the Bitcoin funds. In addition to that, all blockchain nodes are able to identify the user’s IP address if the user does not deploy any privacy-enhancing means like VPNs, TOR browser or through Bitcoin mixers. Some well-educated hackers were able to create a node to match their victims data with the IP address. This is where Bitcoin has lost its privacy and anyone dealing with it might be susceptible to attacks. Without the use of a Bitcoin mixer, for instance, will result in anyone who has the skills required to track the user down to their physical location and the entirety of their personal information. This information may then be used against the user, beaching the user’s safety and a chance for bad actors to exploit such opportunity to perform malicious attacks to the user. Bitcoin mixer offers a way to obfuscate transactions and prevent any unwanted individuals from watching your spending activity.
It is not illegal to use a Bitcoin mixer
Despite governments and regulator efforts of convincing ordinary users that the Bitcoin mixing service is a malevolent creation for criminals and terrorists, most crypto advocates understood the importance of using a Bitcoin mixer to protect their identity online. In the past, cryptocurrencies like Bitcoin were also deemed as illegal due to the participation of cybercriminals in the crypto transaction. Fortunately, Bitcoin mixer has been increasingly viewed as an essential tool by the cryptocurrency space in order to ensure the security and privacy of the user’s activity involving Bitcoin. The blockchain’s transparency and immutability serve no purpose in protecting the identity of users, thus a need for good third-party tools like the Bitcoin mixer complement the lack of privacy found in most cryptocurrencies today.
Users’ privacy is of significant importance in the highly connected world that we are currently living in. That is the main reason that the European Union has passed a regulation known as the General Data Protection Regulation Act (GDPR) which addresses the online privacy issue for users anywhere in the world. Owing to the voice of citizens from many countries, governments around the world have been pressured to come up with privacy laws to protect the integrity of personal information and the privacy of financial information of an individual.
Bitcoin Mixer is a remedy to the lack of privacy in Bitcoin
In an ever changing world where the pace of technological progress is followed by everyone on the planet, ordinary people, regulators and bad actors continue to adapt to the evolution of technology and the benefits emerging technology like blockchain and cryptocurrency could deliver to the world. Meanwhile, the adoption of Bitcoin and other cryptocurrencies are set to grow amidst the ongoing global economic crisis. More people will be learning about the pros and cons of blockchain and cryptocurrency, such as Bitcoin's lack of privacy. Therefore, privacy solutions like Bitcoin mixers aim to provide Bitcoin users with a peace of mind when transacting in the pseudonymous cryptocurrency, since no one should be susceptible to the disclosure of the transaction against one’s prior approval.
Anyone with a basic knowledge on using a blockchain explorer and the grit to track the Bitcoin transactions via blockchain analysis, could identify personal information and more details linked to the owner of the Bitcoin address, and could use this information to harm their victims. Thus, solutions like the Bitcoin mixer aim to fill the gap that Bitcoin is lacking so far, enhancing the overall Bitcoin experience securely and anonymously.