For example, CriminalA sends 0.5 BTC to mixer. Then privacy conscious law abiding citizen sends his 0.5 BTC to mixer. Do the mixers basically just swap the coins? So the law abiding citizen who is privacy conscious could be actually hurting his privacy?
no it is way more complicated than that which makes it a bit hard to explain. the best way to understand it is to mix once and follow the transactions to see what is happening.
basically it is a lot of mixture of coins through a lot of transactions before the coins come back to someone else and it is never going to be 1:1 transfer either. it goes into somewhat of a pool of transactions and comes out the other end.
at the end of the day the law abiding citizen is going to have a much cleaner bitcoin (with or without mixing) than the dollar bill in his pocket. there is a higher chance of traces of drugs on his dollar bill.
