Cryptocurrency mixing has been hailed as the prescription drug that all crypto dealers and holders need to be secure in the blockchain space. It serves its purpose by obscuring your transactions and in so doing, hinders the process of blockchain analysis. Read on for more…
Bitcoin, Litecoin, Ethereum, Monero, Tether, EOS, name them. All these are cryptocurrencies and almost all of them have one thing in common; they are hedged on a blockchain network of some sorts.
The first of these coins, Bitcoin, was created a decade ago in January 2009 by an anonymous identity known to the world as Satoshi Nakamoto. One of the key goals Satoshi and his/her ilk had in mind when thinking up the premise of cryptocurrencies was privacy.
As Samuel Falkon, the Chief Revenue Officer at the online wallet Paywize and a FinTech guru in his own right aptly said, “cryptocurrencies are a dream for privacy and freedom lovers because they restore transacting power back to whom it belongs — individuals who have a right to control their own money.”
Though cyberpunks hail cryptocurrencies as the greatest innovation to counter the diminishing privacy in the currency transaction space, these coins have a limitation. Anyone with half a brain and adequate motivation can still un-anonymize a user by applying the principles of blockchain analysis as well as off-chain analysis.
Bitcoin developers, for instance, whose flagship coin most cryptocurrency enthusiasts first assumed was anonymous, have admitted that the technical details of every transaction are a matter of public reference in the Bitcoin blockchain.
This fact makes the transactions a potential for analysis. And, the online space is teeming with analysis tools such as Wallet Explorer, Chainalysis, Blockseer, to name just a few. And, more work is ongoing in this space.
The Bitfury Group recently made public a whitepaper for their Blockchain Analysis algorithm which purports to identify the user behind a particular cryptocurrency transaction. Calling this un-anonymization algorithm Bitcoin Clustering algorithm, the tool serves to identify the addresses that belong to a particular user by scouring through the data on the blockchain.
The aim is to group the addresses together to enable investigators to link a single user to all his/her transactions. This is not shocking since Bitfury has played the devil’s advocate in the Blockchain Analysis for some time now. Their intentions are to let cryptocurrency enthusiasts know what it would be like to have an adversary pour on a set of data seeking clues.
The shocking bit about their algorithm, however, is the fact that aside from factoring the information available in the blockchains, it also scours the online domain to further its clustering efforts; an approach the company calls “off-chain tag collection.”
Blockchain Analysis and the Privacy Challenge
People desire privacy for various reasons. A cyberpunk, for instance, believes that one should be identified only if or when he or she chooses to be. Money matters are a little different. Most people prefer that no one else knows the amount of cryptocurrency they hold. And, this is for safety reasons, both physical and monetary.
In some cases, an individual may be hiding his or her transactions and stash from a corrupt third-party such as a government body or law enforcement agency. As TrustNodes, an online magazine on cryptocurrency explained in this article, finding out about an individual’s spending habits can be very useful to corporations, businesses, and government agencies, but for the wrong reasons.
Knowing how much you have in your wallets can direct criminals where to target. Cases of kidnappings have been reported. In an instance, a cryptocurrency dealer and analyst was kidnapped and his release secured only after a $1 million ransom was paid.
Such an incident speaks of the importance of privacy in digital transactions. However, Blockchain analysis is by no means the end game. There are several anonymization techniques at your disposal that include the traditional Bitcoin mixers, shared coin joiners, and Monero.
Curtailing Blockchain Analysis Using Cryptocurrency Mixing
According to the Bitcoin Blender, mixing cryptocurrency refers to the process of disguising the source of your coins, making your digital trail too cumbersome to follow. Most cryptocurrency mixing solutions support Bitcoin only. There are a few like SmartMixer, that take in about four cryptocurrencies, including Ethereum, Bitcoin Cash, and Litecoin.
Hopefully, the other platforms in the market will soon follow suit.
Choosing a Mixing Service
The three factors you need to consider when looking for a mixing service are; the level of trust the platform has, tools and accessories such as DIY, and whether the platform uses Clearnet or Darknet.
Both Clearnet and Darknet solutions work well. You should note, however, that Darknet mixing solutions providers typically adhere to shorter data retention policies, and are less likely to share your information with third-party.
While Clearnet providers may adhere to similar data holding policies, they may be subpoenaed to comply with authorities and release your mixing transactions data.
Trust is a little hard to ascertain so you must be ready to do thorough due diligence. Ensure you find a publicly reputable provider who has a verifiable clean track record. Do not shy away from asking around if you have to.
If you have limited knowledge, experience and technical understanding of cryptocurrencies, do keep away from any DIY mixing method.
Qualities of a Preferable Mixing Service Provider
• Data retention policy – less or none
• Cryptocurrency support – Several coins
• Reputation – Trustworthy
• Delay duration> – The longer the more private
• Service fee> – Anywhere between 1% and 5%
As long as crooks and government agencies are interested in cryptocurrency dealings, blockchain analysis will remain relevant. The process, however, need not make you feel vulnerable. You can still protect yourself in the face of emerging un-anonymization algorithms. Ensure you get a good cryptocurrency mixing service that will obscure your cryptocurrency transactions all the time. And, choosing a credible mixing service should not necessarily be complicated. Identify your coin mixing needs and align them with the service provider whose qualities resonate with your objectives.