Keeping your cryptocurrency anonymous is absolutely necessary for the security of your coins. Using a bitcoin mixer is the only way to make this happen.
Anonymity is all a part of the foundational ideal of cryptocurrencies. Keeping your finances under the radar and clear from the prying eyes of third party entities is what brought such mass appeal to a whole new generation of traders. Bitcoin, coupled with the underlying blockchain technologies was a breath of fresh air in a very stale vault.
When using conventional methods of transacting funds, two people will provide their information to a third party intermediary (like a bank) and the funds will then be sent from account to account. The information supplied to the third party varies, but it almost always requires some sort of personal identification. Then that information, as well as information about each account’s holdings is fully viewable by the third party, as well as law enforcement agencies, governments, or tax bodies.
The Pseudoanonymity of Crypto
While cryptocurrencies like bitcoin have long been touted as anonymous financial services, without the use of specific wallets and bitcoin mixers, it’s unlikely that statement is true. “The ability to create full anonymity is there. But it’s not something that comes naturally just by owning bitcoin. It’s something that you have to plan for and be aware of.” Says Best Bitcoin Tumbler, a site dedicated to providing the best information on bitcoin mixers.
Cryptocurrencies are actually considered to be “pseudo-anonymous”, a nod to the fact that while the currencies are definitely decentralized, they’re not technically anonymous. The Pseudoanonymity of bitcoin is directly related to how the blockchain and it’s proof of work technology is set up.
Say you choose to purchase bitcoin using your personal bank account. The details that are connected to your bank account have to be transacted through a centralized power before you can exchange fiat for crypto. The cryptocurrency you purchase is then stored in an online wallet. While the wallet itself doesn’t necessarily require much more than an email address to set up, the blockchain has already stored the original purchase in its books.
Each crypto wallet has an associated address that works similarly to a bank account number. Anytime that crypto is transacted, the wallet address that the coins were sent from and the wallet address that the coins are sent to are both noted in the blockchain ledger.
Then you use this newly purchased bitcoin on a trading site, make some money. Pull that newly made coin back into your online wallet and use it to purchase some goods online. In order to get those goods to you, you provide your name and a shipping address. Now all of this information- from the money you’ve made to your home address- is tied indirectly to your online wallet address.
Allowing anyone with a superficial knowledge of blockchain analytics to follow who you are, how much bitcoin you own, and what you’ve been doing with it. While there is no centralized authority, blockchain ledgers are public. Meaning that anyone who has the skill and motivation can trace coins back to people.
Keeping Crypto Anonymous with Bitcoin Mixers
There really is no other way to break the blockchain crypto trail than to mix, blend, or tumble your coins. While the phrase “money laundering” definitely has some more than nefarious undertones, bitcoin mixing services are a must for anyone who wants to keep their crypto as it was meant to be- anonymous.
You don’t have to be involved in illegal activities or Silk Road trading to want to scrub the ties off of your coins. Easily traceable bitcoin trails are more than just a way for the taxman to get at you, they provide all the information necessary for hackers and big data to infiltrate your spending habits. Making you a target for coin robberies and identity theft.
“Bitcoin mixers work by taking coins from various users and pooling them alongside of freshly mined coins and bitcoin tumbler coins. The coins are then traded a number of times through tiny micro-transactions into a number of burner wallets. They are then redistributed to the original depositors, ensuring that no one gets the same coins that they deposited in the first place.” Best Bitcoin Tumbler says that using bitcoin mixing services in conjunction with multiple “clean” wallets ensures the anonymity of your coins, as the microtransactions make them near impossible to trace back to the original transacting wallet address.
“Just make sure that your depositing clean coins into a new wallet, because if you stick with your original wallet, all of the information is still tied to that address. Making it so you’ve just mixed your coins for no reason.”
Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.