The pseudonymity of Bitcoin is a core feature for most individuals that transact with it. However, for individuals who need a bit more privacy, the public and pseudonymous nature of Bitcoin is a major privacy issue that could pose more of a hindrance to adoption more than anything else.

However, there are ways of keeping your transactions completely private. This article will discuss the various ways you can keep your transaction footprint at the barest possible minimum.

What is a Bitcoin mixer?

One of the biggest misconceptions about Bitcoin is that user transactions are granted complete and total anonymity and privacy. As we will see in this article, Bitcoin isn’t actually private and anonymous; instead, it was designed to be pseudonymous.

The Bitcoin network is completely open-source and public. Simply log on to any blockchain explorer supporting Bitcoin and you will find a bulletproof ledger recording every single Bitcoin transaction that has occurred on the blockchain since its inception and launch in 2009.

However, there are workarounds to keep Bitcoin transactions completely private. One of the most popular methods to jumble up the source and destination addresses is to use a Bitcoin mixer (or Bitcoin tumbler). In essence, Bitcoin mixers obscure the origin and destination of the cryptocurrency by mixing it in a “bag” of numerous unrelated transactions before sending them out to their end recipient. In doing so, Bitcoin mixers obscure the audit trail, making it harder for third parties to identify the specific source and destination wallets of a particular transaction.

Types of Bitcoin mixers

There are two major types of Bitcoin mixers used as follows:

Centralized mixers. Centralized mixers are sites that accept your Bitcoin, mix it with others, and return it to you for a fee. However, while they might be the more convenient option, their centralized nature means they could still hold records of your transactions. This could make your transaction history prone to security breaches, unauthorized access, or hacks.
Decentralized mixers. Decentralized mixers perform the tumbling/mixing directly on-chain without requiring a centralized authority to oversee and process the transactions. While they offer a significantly greater level of privacy, using decentralized protocols have a steeper learning curve, making them more complex for non-crypto natives to use.

Why should you NOT use a Bitcoin mixer?

Bitcoin mixers aren’t without their flaws. After all, it is highly improbable that someone else using the mixer sent the exact same amount of Bitcoin as you have.

If, for instance, one would use the address used by its first person of interest, and the second person of interest is the only wallet to have received a slightly less amount from the mixer (minus its fees), it won’t be hard to recreate the audit trail. The more individuals using the mixer, the harder it is to trace.

On the other hand, a growing number of crypto exchanges such as Binance forbid the use of Bitcoin that has been mixed to enter or leave their exchanges if they have been identified as having been tainted as having gone through a Bitcoin mixer. Binance has gone further by blocking withdrawals to wallets that use CoinJoin, a popular Bitcoin mixing service. This includes privacy-focused wallets like Wasabi Wallet.

Another important thing to mention is that not all Bitcoin mixers or tumbling services are legitimate. Some are outright scams that will gladly part you from your Bitcoin, while others may be less effective in maintaining your financial privacy than others that could end up revealing your source and destination addresses. Tread lightly before using a mixer.

Moreover, despite the claims of anonymity, some Bitcoin mixers may retain user data, which could compromise your privacy.

Are Bitcoin mixers illegal?

The legal treatment of Bitcoin mixers varies widely across different jurisdictions. Some countries have imposed an outright ban on Bitcoin mixers, while other countries are more lenient in their approach.

The reality is that Bitcoin mixers have a bad rap due to their status as a hotbed for money laundering, drawing unsavory characters such as tax dodgers and criminal minds interested in leveraging them to hide the proceeds of their illicit activities.

The question of whether using Bitcoin mixers is illegal or otherwise largely depends on your present jurisdiction. For instance, back in February 2021, former Deputy Assistant AG Brian Benczkowski asserted that it was a crime to use mixers to hide crypto transactions.

Months after the declaration, US law enforcement agents arrested the founder of the Bitcoin mixer known as Bitcoin Fog, Roman Sterligov, for facilitating the laundering of over $335 million in February 2021. Not too long after, Larry Harmon, the founder of a Bitcoin tumbling service called Helix, pled guilty to helping darknet-linked criminals launder approximately $300 million.

With the advent of newer, more robust anti-money laundering rules being implemented across the United States and the European Union, Bitcoin mixers could be less viable options for individuals who wish to join the broader crypto economy—at least the one that uses centralized exchanges as on-ramps and off-ramps.

This has given rise to the need for a strictly better, fully compliant, and just as effective privacy solution—and that arrived with the advent of Houdini Swap.

Better privacy alternatives

Houdini Swap is a game-changing liquidity aggregator and private swap platform that has surged into popularity in recent years thanks to its unique dual-exchange architecture that uses a randomized L1 protocol as a privacy tunnel to different, wholly separate exchanges.

This architecture breaks the link between ultimate source and destination addresses, while remaining fully compliant with existing AML and ATF regulations.

With Houdini Swap, users can privately swap over 4,000 tokens across a multitude of blockchains, giving it the most coverage out of all existing privacy solutions.

To date, it has presided almost $1bn in trading volume, rising to prominence as the leading protocol offering the best possible privacy out of all existing solutions as the current technology allows for.

The best part? Houdini Swap simplifies the process to accommodate all users regardless of their experience working with blockchain apps—it is by far the easiest solution to use in the market today.

The final word on Bitcoin mixers and blockchain privacy

In conclusion, while Bitcoin mixers offer a decent degree of privacy, their associated risks, legal implications, and bad rap outweigh the benefits for most regular crypto users.

And that’s where Houdini Swap comes in. Experience the best-in-class privacy in crypto regardless of whether you’re sending, swapping, or bridging with Houdini Swap today.