Difference between revisions of "Mixing service"

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A mixing service can be used to mix one's funds with others', with the intention of confusing the trail back to the funds' original source. In traditional financial systems, the equivalent would be moving funds through banks located in countries with strict bank-secrecy laws, such as the Cayman Islands, the Bahamas and Panama<ref>[http://en.wikipedia.org/wiki/Offshore_bank Offshore bank]</ref>.
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{{outdated}}Using bitcoins is an excellent way to stay anonymous while making your purchases, donations, and p2p payments, without losing money through inflated transaction fees. But Bitcoin transactions are never truly anonymous. Bitcoin activities are recorded and available publicly via the blockchain — a comprehensive database which keeps a record of bitcoin transactions. And when you finally use Bitcoin to pay for goods and services, you will of course need to provide your name and address to the seller for delivery purposes. It means that a third party can trace your transactions and find ID information. To avoid this, such mixing service provide the ability to exchange your bitcoins for different ones which cannot be associated with the original owner.
  
Mixing helps protect privacy, but can also be used for money laundering - mixing illegally obtained funds. After laundering, the funds appear legitimate<ref>[http://en.wikipedia.org/wiki/Money_laundering Money laundering]</ref>. Mixing large amounts of money may be illegal, being in violation of [[Wikipedia:Structuring|anti-structuring laws]].
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Prior to the advent of trustless alternatives, '''mixing services''' (also called '''tumblers''') were used to mix one's funds with other people's money, intending to confuse the trail back to the funds' original source. In traditional financial systems, the equivalent would be moving funds through [[Wikipedia:Offshore bank|banks located in countries with strict bank-secrecy laws]], such as the Cayman Islands, the Bahamas and Panama.
  
There has been at least one incident where a Bitcoin exchange has blacklisted "tainted" deposits descending from stolen bitcoins<ref>[http://bitcointalk.org/index.php?topic=73385.0 Mt Gox thinks it's the Fed. Freezes acc based on "tainted" coins.]</ref>. Manual or lightly automated mixing methods can make detection of taint more difficult unless the exchange follows the trail<ref>[http://bitcointalk.org/index.php?topic=79079.0 Blockchain-based betting services function as mixing services?]</ref>, but this approach does protect privacy like a true mixing service would.
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When mixing bitcoins, you send your money to an anonymous service and, if they are well-intentioned, they will send you someone else's tainted coins. So, now, whatever those coins were used for may now be traceable back to you. Additionally, mixing large amounts of money may be illegal, being in violation of [[Wikipedia:Structuring|anti-structuring laws]].
 
 
<span style="color:red">Caution: Mixing services may themselves be operating with anonymity.  As such, if the mixing output fails to be delivered or access to funds is denied there is no recourse.  Use at your own discretion.</span>
 
  
 
==See Also==
 
==See Also==
  
 
* [[Anonymity]]
 
* [[Anonymity]]
* [[:Category:Mixing Services|Mixing services]]
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* [[:Category:Mixing Services]]
 
* [http://www.bitcoin.org/smf/index.php?topic=2893.0 RFC: Bitcoin Mixnet]
 
* [http://www.bitcoin.org/smf/index.php?topic=2893.0 RFC: Bitcoin Mixnet]
  
==References==
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<references />
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{{wp|Cryptocurrency_tumbler}}
  
 
[[Category:Financial]]
 
[[Category:Financial]]
[[Category:Anonymity]]
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[[Category:Privacy]]

Latest revision as of 22:35, 22 February 2019

Using bitcoins is an excellent way to stay anonymous while making your purchases, donations, and p2p payments, without losing money through inflated transaction fees. But Bitcoin transactions are never truly anonymous. Bitcoin activities are recorded and available publicly via the blockchain — a comprehensive database which keeps a record of bitcoin transactions. And when you finally use Bitcoin to pay for goods and services, you will of course need to provide your name and address to the seller for delivery purposes. It means that a third party can trace your transactions and find ID information. To avoid this, such mixing service provide the ability to exchange your bitcoins for different ones which cannot be associated with the original owner.

Prior to the advent of trustless alternatives, mixing services (also called tumblers) were used to mix one's funds with other people's money, intending to confuse the trail back to the funds' original source. In traditional financial systems, the equivalent would be moving funds through banks located in countries with strict bank-secrecy laws, such as the Cayman Islands, the Bahamas and Panama.

When mixing bitcoins, you send your money to an anonymous service and, if they are well-intentioned, they will send you someone else's tainted coins. So, now, whatever those coins were used for may now be traceable back to you. Additionally, mixing large amounts of money may be illegal, being in violation of anti-structuring laws.

See Also