Bitcoin is a decentralized digital currency that was designed to be used like cash. Unlike fiat money, which is issued by governments, bitcoins are issued by anonymous individuals and regulated by a peer-to-peer network. This is why bitcoin is often referred to as a cryptocurrency. Bitcoin users can use the cryptocurrency to buy and sell goods and services, or hold onto their bitcoins and hope that they increase in value over time. Blog Post Body: Unfortunately, bitcoin transactions are recorded in a public ledger, which means that anyone can trace a bitcoin to any other transaction on the network. If someone knows your bitcoin address, they can track your entire transaction history and see what other people or businesses you do business with. For this reason, many bitcoin exchanges ban the
One of the initial appeals of cryptocurrencies is the claim that their use guarantees the anonymity of the sender or receiver, but this is a common misconception in the industry.
In reality, bitcoin (BTC) and many other cryptocurrencies are easily traceable.
The evidence is that at 27. In April, the organizer of Bitcoin Fog, a BTC shuffling service on the darknet, was arrested. Authorities were able to catch the operator after analyzing a decade of blockchain data.
You don’t have to be a forensic expert to understand that every transaction is linked to addresses in the blockchain and will remain there forever. Although government agencies cannot identify IP addresses or personal information from an address, these tokens are typically used to pay for goods or services over time. This is the trail that leads to the sender and the receiver.
In the case of Bitcoin Fog, law enforcement was able to identify server hosting fees paid with the digital currency. Bitcoin shuffling services, such as Bitcoin Fog, allow users to shuffle their coins with those of other users, making it nearly impossible to track down target addresses. Thus, the links between the incoming and outgoing addresses are confused, which allows for better privacy protection.
Example of a mixed transaction. Source: TarushTech Medium
Mixing services exist in several methods, including fully centralized solutions that require trust, or coinjoin-like mixers that rely on the self-collaboration and simultaneous actions of a large group of users. It is even possible to trade on decentralized exchanges (DEX), which makes tracking virtually impossible.
Blenders carry a degree of risk
With centralized mixers, there is the obvious problem of a single point of failure. Even if a person trusts an organization to use multisig addresses, if a service is willing to share its data or is hacked, its users lose their privacy.
CoinJoin solved this problem by combining deposits from multiple users into a single transaction. The service then takes these documents, turns them into a transaction and asks each participant to sign them before sending them to the network. These transactions are then merged into one, and each user is refunded the original amount. However, no one can see the origin of these coins, not even the organization that announced the transaction.
While CoinJoin cannot be traced, it offers a plausible deniability because no one can identify which organization each withdrawal belongs to. The greater the number of participants, the greater the degree of discretion.
Wasabi Wallet CoinJoin Feature Screenshot. Source: WasabiWallet
Some cryptocurrency users also need anonymity to send coins to their wallets, and Wasabi Wallet has long been used thanks to CoinJoin’s built-in features.
Although the infrastructure is technically centralized, the design ensures that operators cannot de-identify users or steal money. Wasabi Wallet is currently only available for desktop solutions, so as with any other crypto-currency, beware of cloning!
A similar service is offered by Samurai Wallet, which also offers a Chaumian CoinJoin blending service called Whirlpool. Users must connect the Samurai wallet to their own Bitcoin hub to achieve complete privacy. However, it does offer a desktop and a mobile version.
While these coin-op services are not illegal in most jurisdictions, some exchanges and services may refuse users whose addresses are associated with coin-op activities.
The more people become aware of the importance of a certain level of privacy to protect themselves, the less incentive there will be for companies to deny their customers the use of blenders.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph.com. Every investment and every transaction involves risk. So you need to do your own research before making a decision.
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