Without equivocation, the rapid growth of digital trends has undoubtedly enhanced the embracement of innovations, including crypto mixer. Now, veteran investors deploy crypto mixers as mechanisms to privatize their crypto activities. However, to use crypto mixers, investors must be fully abreast of their features and functionalities. Accordingly, this article seeks to carefully analyze the workability of crypto mixers.
Defining the concept of a crypto mixer
For the purpose of clarity, crypto mixers are those services employed to make funds transfers between services anonymous. The crypto mixer needs no
“Know Your Customer” (KYC) checks to function effectively. In addition, the crypto mixer enables users to effectively keep their transactions away from the public domain. This, however, becomes feasible through mixing potentially known crypto funds with huge sums of other funds. Though in recent times, the crypto mixer being a tool for the concealment of crypto funds emerges as an avenue for money laundering. Many perpetrators of money laundering have continued to compromise the mixer to carry out their dubious activities.
According to a robust research, crypto mixers usually process a quarter of all potential illicit Bitcoin (BTC) each year. Just a few years ago, a user of a crypto mixer became indicted on conspiracy to launder crypto funds. The charges against the suspect ranged from utilizing unauthorized funds, conveying business, and administering the transmission of funds without a D.C. license. With this, the amounts vulnerable to laundering through exchanges become relatively constant (66 to 72%). In addition, the presence of a crypto mixer allowed the anonymous use of the darknet market easier and complicate the efforts of law enforcement operatives.
Categories incurred in crypto mixing
Accordingly, the services incurred in crypto mixing vary, particularly in categories. For the purpose of emphasis, crypto mixers can be categorized into custodial and noncustodial coin mixers. For custodial crypto mixing to manifest, investors usually submit their “dirty” coins to a reliable third party. Afterward, the third party then releases “neat’ coins after a successful timeout. However, this technique remains very risky as investors tend to lose control of their funds, particularly during the mixing process. With this, unreliable third parties tend to cart away the funds. The non-custodial crypto mixer on the other hand possesses openly checkable and transparent smart contracts. This feature activates the tendency to actively secure multi-party computation and thus serves as an alternative to the custodian mixers.
As required, every user of these crypto mixers usually submits their crypto assets into the mixer contract identified as Address A. Afterwards, the submitted funds become withdrawn after a time interval and into a new address, tagged B. More so, users become eligible to consistently verify to the crypto mixer that they submitted funds without getting to expose the transactions. To actualize this, users employ the ring signatures and zk-SNARKs features enveloped in the withdrawal transaction.
How crypto mixer works
How crypto mixer otherwise referred to as crypto tumbler works are grossly not farfetched. The innovation function uses a trade’s digital signatures derived from a “black box” that conceals them. All crypto mixer works by receiving coins to mix such funds with another. Consequently, it resends at least a small quantity of the crypto to the desired address of the user. Accordingly, firms offering the crypto mixing services take about 2 or 3 percent of the profit. To many crypto experts, crypto mixing remains another technique for money laundering in the digital space. While this controversy remains undeniable, the fact that crypto mixing becomes mostly used to enhance the privacy of crypto transactions remains provable.
The author of Financial Crimes, Jeffrey Robinson recently recommended the criminalization of crypto mixers. According to him, the technique remains a veritable tool for users to potentially indulge in illicit operations, particularly terrorism funding. However, the CTC in a report asserted that the usage of crypto mixing for terrorism-related activities remains “relatively limited”.
Furthermore, the crypto mixer possesses features that allow users to amend the transaction history associated with their crypto assets. This, however, becomes possible through the initiation of a custom blockchain, which grossly explores crypto funds. Through the custom blockchain, varieties of transactions become routed via a semi-random system of other imaginary exchanges. This development, however, makes it tedious for users to connect crypto funds with explicit exchanges. Whenever this manifests, it becomes impossible to trace the transacted funds.