Chainalysis research reveals: only a small percentage of mixed coins are illegal

[1miau]

Chainalysis has done some research about the origin of mixed coins:


Source

Only 11% of the mixed coins are illegal funds (8.1% stolen funds, 2.7% from the darknet market, whereby the 26.8% from mixing probably also contain some illegal funds so I guess it's around 14% overall). Most mixed coins are coming from centralized exchanges (around 40%).

Finally, it's a good sign to have an official confirmation that mixers are indeed widely used for privacy reasons to anonymize Bitcoins and only a small fraction is used for illegal purposes. So, the arguments against Bitcoin mixing seem not as valid as often claimed that mixing is mainly used for criminal activities...

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[LeGaulois]

For once Chainalysis doesn't publish something to say bad things about mixers...

We can see that there are many different user types that use mixers, (and some use multiple mixers to mix their bitcoin, for obvious reasons) but I would have thought the gambling rate would be much more significant. Knowing that exchanges platforms do not accept TXs coming from betting sites & co, I wonder how gamblers deal with it (or they all lose their money on betting, the house always win, it's true lol)

[jseverson]

Another thing to note is that mixers might not even be the biggest enablers when it comes to criminal activity, contrary to popular belief:

CipherTrace found criminals have laundered approximately 380,000 BTC ($2.5 billion), and 97 percent of the Bitcoin criminals send for laundering is to unregulated cryptocurrency exchanges.

I hope these enlighten those who somehow don't believe that mixers have legitimate uses just because a random mixer got shut down.

[PrimeNumber7]

I would be curious to know where the mixed coins end up, specifically the percentage of mixed coins that end up at DNMs. The article briefly touched on this, but it doesn't appear to be addressed in the chart; I would also like to know the percentage of mixed coin that is proceeds from ransomware. 

[hugeblack]

It is limited to how the word is defined as illegal, most of the mixing services are used for tax evasion, money laundering and other activities that cannot be analyzed accurately so I don't think the word illegal is appropriate for this article.

Also, the definition of stolen currencies is inaccurate as some platforms report their currencies as stolen in order to steal depositors' coins.

The strange thing is the proportion of mixing coins that comes from gambling.
And how do you trust the central platforms mixing service? I don't think they would use services like Chipmixer/bestmixer without getting enough guarantees.

[AdolfinWolf]

The strange thing is the proportion of mixing coins that comes from gambling.

Yeah, i for sure thought that would be higher considering Coinbase et al don't seem to accept coins from certain gambling sites, or so have i read, while they don't have a problem with mixers.
You'd think more people would mix their coins coming from gambling sites.

But perhaps it's a very niche market and they don't take up a big % as a whole either.

I would be curious to know where the mixed coins end up, specifically the percentage of mixed coins that end up at DNMs. The article briefly touched on this, but it doesn't appear to be addressed in the chart; I would also like to know the percentage of mixed coin that is proceeds from ransomware.  

I know there was a website which displayed all of Chipmixer's outputs. Combine that with some wallet identifiers (Walletexplorer etc) and i'm pretty sure someone could make a nice statistic. I'm quite curious too, but i don't think it'll be much different from the graph linked in the OP (minus the illicit and illegal markets) => mainly exchanges probably.

[Slow death]

Source

funny that when I clicked on the news link, I saw it:

If Chainalysis is right, only a small fraction of coins sent to and from bitcoin mixers are used for illicit purposes.

It sounds as if the author of the news had many doubts that Chainalysis's analysis was not very reliable. It's good to do such analyzes and come to the conclusion that mixers are not as bad as some people think. This brings a good image to the mixers, everyone has a right to privacy and mixers do a good job

[JeromeTash]

Yeah, i for sure thought that would be higher considering Coinbase et al don't seem to accept coins from certain gambling sites, or so have i read, while they don't have a problem with mixers.

Maybe it's hard for them to detect that the coins are coming from a mixing service.

About the likes of Coinbase not accepting coins from gambling sites, What could be the reason for this kind of restriction?
I have always sent crypto from gambling websites to the likes of Binance, Kucoin etc but I haven't met any challenges so far, so i guess most gambling chaps do the same too.

[leowonderful]

Yeah, i for sure thought that would be higher considering Coinbase et al don't seem to accept coins from certain gambling sites, or so have i read, while they don't have a problem with mixers.

Maybe it's hard for them to detect that the coins are coming from a mixing service.

About the likes of Coinbase not accepting coins from gambling sites, What could be the reason for this kind of restriction?
I have always sent crypto from gambling websites to the likes of Binance, Kucoin etc but I haven't met any challenges so far, so i guess most gambling chaps do the same too.

I've never really seen a good explanation as to why Coinbase doesn't allow you to use your coins on gambling sites, but I assume it's just something to do with all the regulations that they have to deal with. It's been like this for quite some time as I've seen these sorts of posts up to three or four years ago as well.

[bitmover]

Finally, it's a good sign to have an official confirmation that mixers are indeed widely used for privacy reasons to anonymize Bitcoins and only a small fraction is used for illegal purposes. So, the arguments against Bitcoin mixing seem not as valid as often claimed that mixing is mainly used for criminal activities...

The problem is that darknet + stolen funds are 11%, which is still very high. Stolen funds being mixed is terrible...

I believe that if the mixer is able to track down stolen funds, it should refuse to mix. Criminal activities should not be encouraged by the blockchain technology, which were not made for criminals, but for regular people.

[figmentofmyass]

The problem is that darknet + stolen funds are 11%, which is still very high. Stolen funds being mixed is terrible...

I believe that if the mixer is able to track down stolen funds, it should refuse to mix. Criminal activities should not be encouraged by the blockchain technology, which were not made for criminals, but for regular people.

i don't think mixers are in a position to be judge, jury, and executioner. they aren't multi-million dollar VC-backed companies with the mission of blockchain analysis like chainalysis and ciphertrace. they shouldn't be held to the same standards IMO. they have one job---to exchange your taint with other peoples taint.

at least with a significant super majority using mixers for legit purposes, we can put the "only criminals use mixers" mantra to rest.

[PrimeNumber7]

I would be curious to know where the mixed coins end up, specifically the percentage of mixed coins that end up at DNMs. The article briefly touched on this, but it doesn't appear to be addressed in the chart; I would also like to know the percentage of mixed coin that is proceeds from ransomware. 

I know there was a website which displayed all of Chipmixer's outputs. Combine that with some wallet identifiers (Walletexplorer etc) and i'm pretty sure someone could make a nice statistic. I'm quite curious too, but i don't think it'll be much different from the graph linked in the OP (minus the illicit and illegal markets) => mainly exchanges probably.

I believe the website you are referring to was run by the now defunct Bestmixer that was seized by EU government authorities a few months ago. Hosting may have been prepaid for a few months, but probably will not last much longer if it is still online. Based on how slow walletexplorer is, I don't think the operator wants people scraping his site, and the creator of the website actually works for chainanalysis.

I would hypothesize that some people, being afraid of exchanges like coinbase closing their accounts, use mixers to hide the fact they are using purchased coins for gambling and purchases on DNMs. Some users of mixers may also use intermediary addresses after receiving coin from a mixer and before depositing the coin they receive to wherever they will spend their coin.

[AdolfinWolf]

About the likes of Coinbase not accepting coins from gambling sites, What could be the reason for this kind of restriction?
I have always sent crypto from gambling websites to the likes of Binance, Kucoin etc but I haven't met any challenges so far, so i guess most gambling chaps do the same too.

I'v read that it was because the gambling sites were actually illegal in most jurisdictions (the US etcetera), due to them not having any licenses whatsoever.

This was some time ago though, so i'm not sure this is actually still the case for most sites. (I imagine Nitrogensports and those kinds of sites have a license by now.)

It was also in their prohibited business list? https://bitedge.com/blog/coinbase-restricts-users-for-gambling-transactions/ (Doesn't look like that's the case anymore though)

[ABCbits]

I believe that if the mixer is able to track down stolen funds, it should refuse to mix. Criminal activities should not be encouraged by the blockchain technology, which were not made for criminals, but for regular people.

And no one would use such mixers, imagine what would happen if their system made a mistake or they use such excuse to selectively scamming their users.

And if blockchain technology could stop criminal activity, that means it could be used for censorship tools which defeat the purpose of using blockchain technology (at least on cryptocurrency usage).

[bitmover]

I believe that if the mixer is able to track down stolen funds, it should refuse to mix. Criminal activities should not be encouraged by the blockchain technology, which were not made for criminals, but for regular people.

And no one would use such mixers, imagine what would happen if their system made a mistake or they use such excuse to selectively scamming their users.

And if blockchain technology could stop criminal activity, that means it could be used for censorship tools which defeat the purpose of using blockchain technology (at least on cryptocurrency usage).

There is some truth in this. Probably nobody would use it... Because they could make a mistake.

But blockchain technology can stop criminal activity, because blockchain is open and public. Blockchain tech was never made for criminals, as far as I understand this tech.

[figmentofmyass]

But blockchain technology can stop criminal activity, because blockchain is open and public. Blockchain tech was never made for criminals, as far as I understand this tech.

bitcoin was designed to be permissionless---to eliminate the need for any authority or middleman in financial transactions. as such, i think it's rather philosophically indifferent about the notion of crime, money laundering, and so on. each transaction is only the business of sender and recipient.

bitcoin's blockchain was made transparent to verify the integrity of the supply (no double spending, additional inflation etc), not as a crime fighting mechanism.

[bitmover]

But blockchain technology can stop criminal activity, because blockchain is open and public. Blockchain tech was never made for criminals, as far as I understand this tech.

It's fully possible, but it'd be public permissioned blockchain and censorship (as i mentioned earlier) will be possible.

Bitcoin won't be fungible at all since an UTXO can't be spent and Bitcoin transaction is reversible, that would be a nightmare.

Mixers are centralized services built on top of blockchain technology. They have absolutely nothing to do with Bitcoin's resistance to censorship, regulations, irreversible transactions, etc.

If mixers refuse to mix stolen coin, this has absolutely nothing to do with reversible transactions or censorship on Bitcoin network

Bitcoin will continue existing without any modifications if mixers disappear.

I think that if mixers just go on mixing stolen coins, they will soon be all shut down by authorities. And for good reason. Do you support drug dealers? International weapon traffic? This has nothing to do with Bitcoin. This is  a centralized service built on the top of it.

Edit: people some times get a little delusional about this. Imagine a physical store with a sign "money laundry for criminals, come and make your money clean! Fighting censorship!"
This is just ridiculous. Criminals are specially the ones who censor us the most. Criminals make us afraid to walk at night, they force us to put bars on windows, alarm in our houses, lock our doors.... criminal activities should never be encouraged.

Maybe you live in a country where criminal activity is near zero and you have some crazy ideology about criminals,but they are not nice.

[AdolfinWolf]

Mixers are centralized services built on top of blockchain technology. They have absolutely nothing to do with Bitcoin's resistance to censorship, regulations, irreversible transactions, etc.

If mixers refuse to mix stolen coin, this has absolutely nothing to do with reversible transactions or censorship on Bitcoin network

Bitcoin will continue existing without any modifications if mixers disappear.

I think that if mixers just go on mixing stolen coins, they will soon be all shut down by authorities. And for good reason. Do you support drug dealers? International weapon traffic? This has nothing to do with Bitcoin. This is  a centralized service built on the top of it.


Edit: people some times get a little delusional about this. Imagine a physical store with a sign "money laundry for criminals, come and make your money clean! Fighting censorship!"
This is just ridiculous. Criminals are specially the ones who censor us the most. Criminals make us afraid to walk at night, they force us to put bars on windows, alarm in our houses, lock our doors.... criminal activities should never be encouraged.

Maybe you live in a country where criminal activity is near zero and you have some crazy ideology about criminals,but they are not nice.

Yeah i think you're the one who might be a bit delusional about this concept. Or perhaps i am.

The idea that there's some sort of morality you need to support about stolen or laundered coins in the first place is just crazy in my opinion. Do you have any idea how much drug dollars each year is laundered through central banks (Deutsche is a prime example, but almost every bank does it.) They get some minor fines compared to the amounts that they actually laundered and go on about their day.

Most of these (partly state-owned) banks thrive on such business, and yet they want to burn down every mixer because ~11% may contain funds from illegal sources?

the government puts on a facade but in the end they're the one who perpetrated certain crises such as the opioid one to get black budgets, (not to mention the money they make from these fines, and stimulations of the economy due to the laundering money. etc.). (CIA)

I'm a bit of a lolbertarian so perhaps that's why i think this way. Anyhow...


A mixer is simply a tool to get absolute privacy and freedom of transacting money without worrying about someone investigating certain things about these transactions. An absolute "Right To Financial Privacy Act"- Something i would perhaps deem a human right. That such a tool is misused by criminals is an unfortunate side effect, but doesn't mean that we all of a sudden should give up our right to privacy.

Comparably is the spying on law-abiding citizens by looking at their ISP data etc. Just because there might be some terrorists out there we shouldn't just give up all of our personal privacy, and rights to private communications.

I think that if mixers just go on mixing stolen coins, they will soon be all shut down by authorities. And for good reason. Do you support drug dealers? International weapon traffic? This has nothing to do with Bitcoin. This is  a centralized service built on the top of it.

Why isn't every major bank shut down by now... because they have "regulations in place" which gives them a carte blanche when caught?

Anyway, note that i absolutely do not support any of the above mentioned, hackers, laundering etc, and that i am also not aware chipmixer is used as a vehicle on a grand-scale for these types of people.

[squatter]

I think that if mixers just go on mixing stolen coins, they will soon be all shut down by authorities. And for good reason. Do you support drug dealers? International weapon traffic? This has nothing to do with Bitcoin. This is a centralized service built on the top of it.

The issue is more complex and nuanced than that.

Do you really have a problem with people freely buying and selling drugs? Who are they hurting? The principles that early adopters like Ross Ulbricht stood for -- are they lost on you? Did you ever consider how important the Silk Road was in proving Bitcoin's utility?

Whatever Bitcoin was made for, it wasn't for bowing down to the authorities. On the contrary, it was made precisely so we could avoid them. Sadly, later adopters often take this for granted.

Edit: people some times get a little delusional about this. Imagine a physical store with a sign "money laundry for criminals, come and make your money clean! Fighting censorship!"
This is just ridiculous. Criminals are specially the ones who censor us the most. Criminals make us afraid to walk at night, they force us to put bars on windows, alarm in our houses, lock our doors.... criminal activities should never be encouraged.

Criminals are going to exist no matter what.

The only thing you'll accomplish by arguing against mixers -- and in favor of blockchain analysis and law enforcement -- is attacking Bitcoin's fungibility. That only hurts you and everyone around you.

[CoinClarity]

Chainalysis has done some research about the origin of mixed coins:

The problem is, they didn't say "only a small percentage of mixed coins are illegal." They just said 8.1% are stolen coins.

I'm cross posting this from another thread on the subject:

I listened to the entire Chainalysis webinar and nowhere did they say "most mixed bitcoin is not used for illicit purposes."

https://register.gotowebinar.com/recording/8980410054773689612

What they did say was this:

While stolen funds only represent about 8% of the funds received by mixers, mixers are by far the biggest destination of funds after they've been stolen.

They also had these slides in their presentation:





So, however you want to interpret their findings is up to you; my conclusion is they don't have a very high regard for bitcoin mixers.