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Coin Mixing Services – An Informative Look

Coin mixing services allow people to trade their coins for others that have not been “tainted.” A way to look at this is to simply say that the coins are not able to be tracked back to you, or at least not without a lot of other information being needed as well. While the coin mixing services do not guarantee that you will never be related to the coins you have spent, it does work well and is genuinely seen as being trustworthy.

This article is to look at the coin mixing services, how they work and why they are a pretty important part of the Bitcoin (and other crypto currency) economy. The goal here is not to get people to start using them or anything, but rather to help give information on why the view many people have of coin mixing services is flawed.

So What is Coin Mixing?

Coin mixing is just a way to alter the traces of coins so that they are not pointed to you anymore. It is designed to increase the anonymity of sending and receiving transactions online while using crypto currencies, and is seen as a big part of what makes the currencies great. To better understand how all of this works, I am going to break it down in to a scenario that explains from beginning to end what is going on. This should help get a much more thorough understanding as to what is happening and why it works the way it does. Note, however, that I will not be going in to the technical aspects; I will just be giving the overview based on what the end user will notice and experience.

So you have installed your new wallet. You have run it, and now you have an address. You decided you want to get some Bitcoins, so you head on over to a site like Coinbase to purchase them, and you make your purchase. A few days later you have the coins in your Coinbase wallet, and you transfer them to your regular wallet. At this point, the coins are traced back to you and can even go as far (with government interference) as giving all of your identity information out as well. This includes your bank account, credit card information, and anything else you happened to submit. Pretty scary, huh?

So now you have decided that you want to break the link between your coins and your identity. So you head on over to a coin mixing website. You send in the value you want to mix, plus any fees (if there are any) and your destination address. You want for the coins to arrive in that address. Boom, they are here. You look at the addresses those coins came from, and you are completely baffled because you do not recognize any of them. And this is exactly what you wanted!

So how does all of this work? Well, when you send the coins to the coin mixer, they are added to a pool of addresses or wallets. The payments that are then sent out to you are from random addresses within, that are in no way associated with your previous address. So now people can see that you had sent off coins to an address, but they have no idea where they went from there. Someone else using the mixing service would end up getting the coins that you sent out, and the cycle continues. Pretty much you just traded your coins for other ones, but since the receiving address and the sending addresses are different there is no way to relate them together.

Are Coin Mixing Services Only Used By Criminals?

Not at all! In fact, many people use coin mixers just to keep their identity separate because they believe that we have the right to remain anonymous and spend our money without being stalked by other parties while we do it. For example, if you want to buy that new laptop or new television, why do other people need to know about it? Even though this is not even close to being illegal, it is still a breach of privacy that just should not be there. Through coin mixing, you are helping keep what you spend only to yourself, and keep your purchases to yourself.

I also want to stress the fact that while Bitcoins are an electronic currency, the vast majority of people who use them (and this includes those who use mixing services) do pay their taxes. Bitcoin was not created as a way to avoid any of this; it was simply made to be usable like an electronic form of cash. For example, if I buy my new television using cash there are no traces back to me. The same happens with Bitcoins and other crypto currencies. So it has nothing to do with hiding anything; it is simply about not wanting to be watched all the time.

Are Coin Mixing Services Worth the Cost?

Well, this really depends on you and what you are going for (and the “value” is really dependent on each person). What you may find being worth the value others might not, and vice versa. For some, the ability to remain anonymous while spending their coins is important, and for others there are different reasons for dealing with crypto currencies. There is really not a right or wrong answer here.

A big thing you might want to do before jumping in on a coin mixing service is to compare it to others. Different services will undoubtedly come with different prices. Even from a perspective that does not focus on the finances of the transaction, they have different costs in how long they take to go through. For example, some require enough people to deposit in order to cover the amount you are wanting to mix (effectively being like a sort of merged peer to peer mixing service). Others, on the other hand, instantly send out the funds if they have enough within their own wallet already. These two methods both pretty much working out the same way in terms of hiding tracks, but the time needed can be a huge problem if you need to send some funds and you need to send them now, rather than later.

Are Coin Mixing Services Safe?

When answering this question, I am doing so in two separate parts: one is in terms of whether or not you can get in trouble for using one of the mixing services, and the other is in regards to scams and ending up losing everything you send.

When it comes to getting in trouble, I see no reason why this would be a real concern (at least as of this point in time). Transferring coins like this is not illegal, and in many ways is no different than using cash for transactions; it is also not traced from person to person. With that said, it is entirely possible that at some point in the future there may be new legislation that decides it is not allowed. There is just no way to tell the future.

As for whether or not the mixing services are scams, it is important to remember that we are dealing with crypto businesses. As such, doing due diligence and researching any company you are thinking about putting money in to is important. Just as everything can work out fine, you can also lose everything. If you are not careful, you are bound to end up running in to problems at some point. So be sure that you search for reviews, learn more about the website you plan to use and how it works, etc. before you make any decisions. After all, if you lose all of your coins, the mixing service ended up not having any value for you anyways.

Does Coin Mixing Not Bloat the Blockchain?

This is a sort of tough thing to answer. In a way, it does in most cases (assuming that the service we are talking about solely deals in coin mixing. Exchanges, for example, usually mix but it is not their only purpose so it is a bit different). But at the same time, we can also look at it as being just like any other business. If I want to eat at your restaurant every day, I am adding up transactions on the blockchain. I could cut down on this by simply doing a payment every week or two weeks, but you probably want to be paid each day to ensure that you are obtaining the amount of money you should be. Coin mixing is pretty much the same as this in my eyes; while it does help add a bit of inflation to the blockchain, I do not think that it is enough to really worry about. And being that the coin mixing services usually take a fee for doing the service, I would argue that it is just like the restaurant mentioned earlier. Sure, they work in different ways, but the concept in terms of payments is still the same.

Conclusion

Coin mixing services are starting to pop up more and more in the crypto business sphere, although they are not often used. There are a lot of people that do not know what they are, and some that do feel like they may be unsafe. There should really be no problems with getting in trouble for using them, and they do have a lot of great benefits when it comes to having your privacy. As such, I think that as time goes along and people start to flesh out what Bitcoin (and other currencies) is and how it works, these mixing services will start becoming more and more popular as a form of obfuscation.

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