Bitcoin is often viewed as an “anonymous” currency. People are often of the view that their transactions could never be traced nor their identities confirmed.
However, this is only partly true.
Although Bitcoin addresses are anonymous, all transactions on the blockchain can effectively be traced using blockchain audits. There are companies such as Chainalysis which specialise in tracking the flow of Bitcoin funds.
Therefore, the moment that someone tries to take the coins onto an exchange in their name, they have effectively de-anonymised themselves. This is exactly how the hacker who stole coins from Mt Gox was identified.
You may then be wondering how you can effectively anonymise your coins and break a link in the chain?
That is where transaction mixers come in.
Page Contents 👉
The Bitcoin protocol was developed such that all transactions are placed on a public and immutable ledger called the blockchain.
Unlike privacy conscious coins such as Monero and Zcash, your public address and the funds that flow to it are recorded on this public blockchain.
However, if you are able to mix the coins that you have with a number of other addresses, you are effectively obfuscating the origin of the coins.
This is how a Bitcoin tumbler works.
Think of it as one large pool where everyone will insert their coins. The tumbler will mix the coins through a number of runs and then send the coins back to the owner.
Given that the coins were mixed with a whole bunch of other coins, it would be nearly impossible for someone to trace your coins once they have come out of the tumbler.
ZeroLink is a CoinJoin tumble service that was developed by Adam Ficsor and is about to launch in a few days.
As part of the introductory offer, the developers are holding a live test on the Bitcoin network with beta testing subjects. In order to make the most of the tumbling test, they need between 21 to 100 test subjects.
These participants will then get a reward of $10 from the developers. The hope is that the test is a success and the product can they be released for the general public on the Bitcoin live network.
Can Tumblers Replace Privacy Coins?
Some may however be wondering if this Bitcoin tumblers will be a serious threat to other cryptocurrencies that were developed specifically for privacy.
This seems unlikely for a number of reasons.
Firstly, because tumblers are usually associated with money laundering activities, they are big targets for law enforcement agencies who want to limit malfeasance.
Indeed, tumblers have existed for a few years already on the dark web and some have been taken out by the agencies.
Secondly, tumblers are sometimes associated with scams. There have been a number of stories of individuals who have lost their Bitcoins when they have sent them to a nefarious tumbling service.
Lastly, Bitcoin transaction costs are quite high currently which means that tumbling the coins will cost the user.
Using privacy conscious cryptocurrencies means that your coins are always anonymous and you don’t have to go to great lengths to anonymise them.
Still a Need
Although privacy conscious coins are generally preferable, tumblers will still serve purpose if someone has Bitcoin and wants to anonymise them.
This happens on many occasions when they hold their coins in Bitcoin and do not effectively have the option for payment in other coins.
Hence, there is still a real need for the services offered by tumblers like Coin Join.
The test will take place once there are 100 users on the network or when the December 20th deadline has passed and there are already 21 users on it.
Featured Image via Fotolia