Mixers and their reason to exist in the bitcoin ecosystem

[alani123]

Months ago someone had posted here with some evidence that the mixing of the a mixing service was inadequate to mask transactions but nobody seemed to take it seriously.

It's weird how many users on this forum were ready to overlook on-chain evidence while the platform in question was pumping thousands of USD every week in advertising directly towards forum users at the time. Now that there's some credible accusations of fraud it's hard to ignore these older accusations.

Admittedly I've never made any transactions that I would feel need mixing... But not to tout any supposed ethics from my side, it's very likely that if I knew of a mixer's mixing being bad while I was getting paid a substantial salary by them to make some forum posts, I'd likely also avoid contributing to their downfall. But maybe also if we apply hanlon's razor here (Never attribute to malice that which is adequately explained by stupidity), since most people probably don't care or don't need to use mixing, they probably wouldn't bother to check either.

But this begs the question, if such basic blockchain forensics had exposed this mixer months ago, how did they stay operational till now?
Are the majority of people who transact with bitcoin, even users of this forum, completely unable to do even the most basic blockchain forensic research? Because according to the post I linked, it was really obvious to pick up the trail of the lackluster mixing going on.

The real cost of mixin'

One has to also consider, at what cost are mixing services operating? Many of them end up having their Admins arrested with unknown fates in international trials and jails. Others end up exit scamming. And would they do so if they were making profits in the first place? Thinking about it, is there ANY fee that would make it worth it to give out bitcoins in exchange for potentially tainted coins that are possibly connected to crime and fraud? Especially given how easy BTC transactions are to track? Based on the above knowledge, many suspicions can be raised. What motivation would someone have to provide a mixing service if he was to risk life in jail or even running it at a loss?

Credible suspicion against mixers

Could mixers be honeypots? It's not an unlikely possibility that mixers are created and operated by state agencies as a way to catch high-profile criminals that are under the impression of "masking" their transactions. But in fact these services could be used as evidence later.

Another really suspicious event that happened only around a month prior to the aforementioned mixer's demise is the revelation that the infamous Lazarus hacker group appears to have been using the mixer's coins for their own benefit. This revelation gives some credence to theories that mixer services might not just be government honeypots, but rather hacker honeypots. Where hackers gather a bunch of coins that definitely must be cleaner than their ill-gotten fraudulent coins, attracting users under the illusion of "mixing" only to hand out their very tainted coins to regular users in exchange for coins they can easily deposit into exchanges without issues. And after they're done exchanging everything, they can just start using the service for exit scamming to gain even more money.

[1714565420]

1714565420

[1714565420]

1714565420

[1714565420]

1714565420

[AbuBhakar]

Not gonna lie, Mixer is very helpful to me ever since I join the casino signature campaign and earn some Bitcoin because the local exchange the I use frequently to received this funds is very suspicious and doesn’t allowed deposits from casino or from any wallet that has a connection to a crypto casino transaction.

I encounter an issue in the past about this that makes me more cautious and embrace the use of mixer to hide the trace of gambling activity to my Bitcoin. I stop using mixer after the multiple seize on popular mixer and decided to use P2P exchange instead.

[PrivacyG]

Thinking about it, is there ANY fee that would make it worth it to give out bitcoins in exchange for potentially tainted coins that are possibly connected to crime and fraud?

Who guarantees the Bitcoin you are receiving from Stake are not also 'tainted'?  Maybe they have been 'tainted' years ago.  Maybe they came directly from a criminal source.  Who knows!

Why fear this stupid invention named 'taint'.  It is worthless and pointless to think about it.  All the bank notes you own have likely been in some sort of illegal activity at some point in the past.  Time to burn it all, what if I taint my pockets with illegality!

Can you prove that all of the Coins you own have a 100 percent legitimate source?  You can not.  Why spread this stupid fear then.

Yes.  You can track your Bitcoin easily most likely.  But most of us here who have used Bitcoin Mixers in the past are just normal people who do not like others to track our Coins down.  We are not serial killers, nor are we drug dealers or traffickers.  I just want my Privacy to exist.

[Solosanz]

Why fear this stupid invention named 'taint'.  It is worthless and pointless to think about it.  All the bank notes you own have likely been in some sort of illegal activity at some point in the past.  Time to burn it all, what if I taint my pockets with illegality!

Because the world is full of double standards, if people not want to follow the regulations, they're criminal. But if the government take the money from criminals, it's allowed and they're not criminals.

The key to know if the coins are no longer considered as tainted is how far they trace the coins, unfortunately no government or blockchain analysis would want to reveal the criteria since they know people will take advantage if they declare to public.

[Jay Johanson]

Not gonna lie, Mixer is very helpful to me ever since I join the casino signature campaign and earn some Bitcoin because the local exchange the I use frequently to received this funds is very suspicious and doesn’t allowed deposits from casino or from any wallet that has a connection to a crypto casino transaction.

I encounter an issue in the past about this that makes me more cautious and embrace the use of mixer to hide the trace of gambling activity to my Bitcoin. I stop using mixer after the multiple seize on popular mixer and decided to use P2P exchange instead.

Absolutely right. We are also deeply convinced that the use of mixers is primarily associated with basic household caution.

[Medusah]

Thinking about it, is there ANY fee that would make it worth it to give out bitcoins in exchange for potentially tainted coins that are possibly connected to crime and fraud?

The mixer admins you're discussing don't get arrested solely for handling "tainted" bitcoins.  We all get those sometimes without facing legal consequences.  Consider this: What if a criminal deposited money into Stake, and then you got them for your weekly payment?  Highly plausible.

Mixers get shut down and their admins arrested because they frequently operate unlawfully.  Yes, authorities aim to shut them down for assisting criminals in mixing their coins, but they typically target them for failing to comply with regulations as money transmission services.

Could mixers be honeypots? It's not an unlikely possibility that mixers are created and operated by state agencies as a way to catch high-profile criminals that are under the impression of "masking" their transactions.

Perhaps.  However, let me pose a question to you.  Considering recent events, do you believe criminals will continue to trust mixers?  ChipMixer, SinBad, YoMix, and numerous others have been effectively targeted by authorities.  If you were a criminal, would you risk trusting a potential trap instead of simply sending everything through the most secure and decentralized mixer available, Monero?

As someone working for the NSA and proposing to establish a honeypot, how would you address this question?

[NeuroticFish]

Admittedly I've never made any transactions that I would feel need mixing...

This being said... well, sorry to say, but "you know nothing, Jon Snow".
Imho mixers have their use for people more privacy conscious than you.

Of course, my initial part was a bit harsh, some points you posted are real and known. You don't (ever!) know for what is behind a centralized service, including mixers and imho CoinJoin coordinator too. Heck, even Electrun servers are spying on us nowadays.

But for some, taking a risk is necessary. I still remember a post from somebody who was struggling to hide his coins from somebody hollowing every move in his wallet and threatening him. Would you still consider a mixer bad in such a case?

Yes, there's always a risk that some idiots may consider those coins of you "tainted", a risk some are willing to take and some not. But the fact they may be govt honeypots?! Well, if the govt is after you... you better start using proper privacy coins instead of mixers... (and not because mixers would be honeypots!!)

[m2017]

Not gonna lie, Mixer is very helpful to me ever since I join the casino signature campaign and earn some Bitcoin because the local exchange the I use frequently to received this funds is very suspicious and doesn’t allowed deposits from casino or from any wallet that has a connection to a crypto casino transaction.

For some time now (some) exchangers have been reacting negatively to transactions received from mixers (blocking crypto assets) and openly declaring (warning) about it. It seems that the trend of “persecution” mixers will continue and this type of service will cease to exist (or transform) or go underground. Although mixers can't necessarily be used for criminal purposes, but, for example, to anonymize transactions from addresses that are in the public domain. For example, for participation in signature campaigns.

I encounter an issue in the past about this that makes me more cautious and embrace the use of mixer to hide the trace of gambling activity to my Bitcoin. I stop using mixer after the multiple seize on popular mixer and decided to use P2P exchange instead.

I would like to believe that at least P2P exchange will continue to exist as in the good old days. But even here, not everything is developing positively, because popular services like localbitcoins have ceased to function. On the other hand, a holy place is never empty and alternatives appear, like Bisq.

Curious, do decentralized mixers exist or it even feasible?

[AbuBhakar]

Not gonna lie, Mixer is very helpful to me ever since I join the casino signature campaign and earn some Bitcoin because the local exchange the I use frequently to received this funds is very suspicious and doesn’t allowed deposits from casino or from any wallet that has a connection to a crypto casino transaction.

For some time now (some) exchangers have been reacting negatively to transactions received from mixers (blocking crypto assets) and openly declaring (warning) about it. It seems that the trend of “persecution” mixers will continue and this type of service will cease to exist (or transform) or go underground. Although mixers can't necessarily be used for criminal purposes, but, for example, to anonymize transactions from addresses that are in the public domain. For example, for participation in signature campaigns.

Yeah, this is main reason why I stop using mixer for my campaign earning and choose to embrace the CEX P2P. I read the issue about exchanger freezing an account from a forum member here that use mixer funds since that specific mixer seized.

This incident can become very serious especially if the exchange does a background on your previous transaction that involves mixer. So I stop immediately after that.

I encounter an issue in the past about this that makes me more cautious and embrace the use of mixer to hide the trace of gambling activity to my Bitcoin. I stop using mixer after the multiple seize on popular mixer and decided to use P2P exchange instead.

I would like to believe that at least P2P exchange will continue to exist as in the good old days. But even here, not everything is developing positively, because popular services like localbitcoins have ceased to function. On the other hand, a holy place is never empty and alternatives appear, like Bisq.

Curious, do decentralized mixers exist or it even feasible?

I really like decentralized mixers if possible. I’m not knowledgeable on how Bitcoin technicalities work but there’s something like a smart contract which we can stake our Bitcoin as liquidity pool for mixer then this might be possible just like how DEX work with their liquidity. No one controls the wallet holding the balance since it’s run by smart contracts.

[FatFork]

Admittedly I've never made any transactions that I would feel need mixing...

This being said... well, sorry to say, but "you know nothing, Jon Snow".
Imho mixers have their use for people more privacy conscious than you.

Ah, yes. And yet he felt prompted to share his wisdom about something he doesn't know much about or understand people's need for such services. 

Yes, there's always a risk that some idiots may consider those coins of you "tainted", a risk some are willing to take and some not.

And these same idiots don't think twice about whether the banknotes they receive every day from strangers are tainted or not. Just because Bitcoin transactions are easily traceable on the blockchain, someone in the government thought it would be a good idea to limit its usability. The whole concept of "tainted" coins is a scam in itself, organized by governments.

[alani123]

The whole concept of "tainted" coins is a scam in itself, organized by governments.

Lucky you never having received a payment from tainted coins. People who used mixers in this forum either indirectly by being paid through signature campaigns or as a paying customer have in the past faced issues.
Tainted coins aren't just an issue when having to deal with state authorities, civil society often enforces filters voluntarily also. And if banknotes could be traced back so efficiently as bitcoin I'm sure many institutions would refuse transactions with them too.

There's no denying that traceability is a feature of bitcoin. That can be good or bad at times. But not that great for criminals who seem to meet their fate one one way or another with mixers. So no, the concept of "tainted coins" isn't a scam. It's a real thing. Ethics is also a thing and money doesn't always trump it either. I remember in this forum people used to get tagged as scamers if they accepted payment to promote ponzi schemes for instance. And well, by the notion that ponzi schemes are unethical, one might as well say the same for coins taken away from someone else via means of hacking etc. So when the traceability of BTC is used to catch criminals and seize their ill-gotten gains, we should consider it a great feature imo.

[Medusah]

So no, the concept of "tainted coins" isn't a scam. It's a real thing.

It is both scam and unreal, because chain analysis is a scam itself.  As soon as a transaction is made, you can't tell if the coins have changed hands.  Moreover, if a criminal mixes their coins with innocent people, you have to either treat them all as "clean" or all as "tainted", given they are part of an unbreakable coinjoin.  Deeming everyone involved as criminals is an irrational logic.

So when the traceability of BTC is used to catch criminals and seize their ill-gotten gains, we should consider it a great feature imo.

Giving up your privacy to "protect the children" is not a notion I'd expect from a 11 year old Bitcoin user.  What's next?  That we don't need privacy, because we have nothing to hide?  

[alani123]

Giving up your privacy to "protect the children" is not a notion I'd expect from a 11 year old Bitcoin user.  What's next?  That we don't need privacy, because we have nothing to hide?  

So by me saying that bitcoin is traceable you deduct that I'm an NSA supporter?
aight  
On a more serious note though, have you considered that passing your coins through a centralized "mixer" service isn't a real privacy enhancement?

It is both scam and unreal, because chain analysis is a scam itself.  As soon as a transaction is made, you can't tell if the coins have changed hands.

I take it that it's pretty unlikely for a known service address such as from a mixer or from an exchange to be of the same ownership as a third party sending coins to it. So chain analysis is pretty real and has been quite handy for many uses, one of which has been catching criminals.

[darkangel11]

It is both scam and unreal, because chain analysis is a scam itself.  As soon as a transaction is made, you can't tell if the coins have changed hands.  Moreover, if a criminal mixes their coins with innocent people, you have to either treat them all as "clean" or all as "tainted", given they are part of an unbreakable coinjoin.  Deeming everyone involved as criminals is an irrational logic.

So is the whole concept of "lost coins." They decide on the time that has to pass which is arbitrary and if the criteria is met the address is considered lost. It can be 2 years or 5 years, or whatever. I have addresses with coins that haven't moved for over 5 years and wallets also had no inflows. That money is lost according to blockchain analytics
Coins will always get mixed because there won't be a time where every single exchange and centralized business checks deposits for taint. It will never work with or without mixers. The difference is that without them analysts will have to allocate less resources to track the same transaction, but why should we make it easy for these companies and governments. I feel like the harder for the government is to assault my privacy, the better.

[OgNasty]

Months ago someone had posted here with some evidence that the mixing of the a mixing service was inadequate to mask transactions but nobody seemed to take it seriously.

It's weird how many users on this forum were ready to overlook on-chain evidence while the platform in question was pumping thousands of USD every week in advertising directly towards forum users at the time. Now that there's some credible accusations of fraud it's hard to ignore these older accusations.

It was proven that mixers are useless for large amounts.  They're basically used for people here to launder their signature funds so they feel safe evading taxes or for small time scammers to deposit money with 3rd parties without worrying about having their accounts traced back to the scam.  

The amount of gaslighting from paid signature campaign members was crazy though.  Still is.  I even told them right before ChipMixer shut down that it was going to be shut down and instead of praise I received attacks for the warning even after I was proven right.  That's when I realized these people are insane and willing to do or support anything for a paycheck.  The fact the forum had to ban these programs to get users to stop promoting money laundering is crazy in itself.  Unfortunately, Default Trust was owned by ChipMixer basically, so they were able to get away with anything here.  It will take a long time and a lot of new members before the Mixer crowd gets diluted enough in DT for anything to change.  A lot of people here will do or say anything for money.  Don't forget that.  They'll even try to convince you they didn't sell out to support a money laundering organization and will try to tell you it's a privacy thing, which after the first sentence I quoted above should be nonsense to anyone paying attention.

[Medusah]

So by me saying that bitcoin is traceable you deduct that I'm an NSA supporter?

You're the one who's making the claim that privacy erosion is sometimes beneficial. 

On a more serious note though, have you considered that passing your coins through a centralized "mixer" service isn't a real privacy enhancement?

I know.  I'm a proponent of decentralized mixing, like Monero.  I didn't argue about that.

I take it that it's pretty unlikely for a known service address such as from a mixer or from an exchange to be of the same ownership as a third party sending coins to it. So chain analysis is pretty real and has been quite handy for many uses, one of which has been catching criminals.

Chain analysis is based on false positives.  Just because it might work sometimes, it doesn't mean it isn't dangerous to implement on a whole.  Just read this topic:  https://bitcointalk.org/index.php?topic=5464886.0.  Even the directors of chain analysis acknowledge this viewpoint:

Elizabeth Bisbee, head of investigations at Chainalysis Government Solutions, testified she was “unaware” of scientific evidence for the accuracy of Chainalysis’ Reactor software used by law enforcement, an unreleased transcript of a June 23 hearing shared with CoinDesk shows.

Bisbee said she was unable to provide the court with statistical error rates for Chainalysis’ Reactor software. She further denied being aware of any scientific peer-reviewed papers or “anything published anywhere” attesting to the accuracy of Chainalysis Reactor.

There is no evidence that it works.  It is not about catching criminals.  It is about controlling the Bitcoin users and discouraging them from respecting their privacy. 

[dothebeats]

Not gonna lie, Mixer is very helpful to me ever since I join the casino signature campaign and earn some Bitcoin because the local exchange the I use frequently to received this funds is very suspicious and doesn’t allowed deposits from casino or from any wallet that has a connection to a crypto casino transaction.

I encounter an issue in the past about this that makes me more cautious and embrace the use of mixer to hide the trace of gambling activity to my Bitcoin. I stop using mixer after the multiple seize on popular mixer and decided to use P2P exchange instead.

This was the reason why my account in a local exchange got banned: the funds came from a gambling platform, and it is a substantial amount back then. I asked for the reason why they banned my account knowing that these coins I received may very well come from different origins, but they never answered. I never used a mixer to 'obfuscate' my traces, but I did use Binance to trade my bitcoins to XMR or any other accepted coins of another local exchange and I never encountered such a problem again.

I see why people would want to use mixers, though the risk of getting your coins washed with some other tainted coins is very high, which may implicate you to some crime you did not commit. This is why I avoided using mixers even though the idea fascinated me before, and boy was I right after seeing news reports of people being questioned on where their coins came from after using a mixing service and getting tainted coins on their end.

[Vincom]

It was proven that mixers are useless for large amounts.  They're basically used for people here to launder their signature funds so they feel safe evading taxes or for small time scammers to deposit money with 3rd parties without worrying about having their accounts traced back to the scam.  

The amount of gaslighting from paid signature campaign members was crazy though.  Still is.  I even told them right before ChipMixer shut down that it was going to be shut down and instead of praise I received attacks for the warning even after I was proven right.  That's when I realized these people are insane and willing to do or support anything for a paycheck.  The fact the forum had to ban these programs to get users to stop promoting money laundering is crazy in itself.  Unfortunately, Default Trust was owned by ChipMixer basically, so they were able to get away with anything here.  It will take a long time and a lot of new members before the Mixer crowd gets diluted enough in DT for anything to change.  A lot of people here will do or say anything for money.  Don't forget that.  They'll even try to convince you they didn't sell out to support a money laundering organization and will try to tell you it's a privacy thing, which after the first sentence I quoted above should be nonsense to anyone paying attention.

Liquidity of Mixers is limited and they are not really effective with large amounts of BTC required in a short time, I think this is one of the limitations of Mixers, usually they only allow up to 50 BTC per mix.

I am not clear about the purpose behind the people who use Mixers: maybe they want to maintain anonymity, or maybe they want to hide the origin of BTC. But when Mixers exist, it means that there are many people who really need them, willing to pay 5% fee to get "cleaner and safer" BTC. I do not support money laundering but I cannot do anything to stop them, after all the market is free and people can do what they can. Bitcoin blockchain can be used by all of us!

[alani123]

So by me saying that bitcoin is traceable you deduct that I'm an NSA supporter?

You're the one who's making the claim that privacy erosion is sometimes beneficial. 

On a more serious note though, have you considered that passing your coins through a centralized "mixer" service isn't a real privacy enhancement?

I know.  I'm a proponent of decentralized mixing, like Monero.  I didn't argue about that.

Well I'm sorry it took so long but that's the main point I'm trying to get across here.
Mixers are risky, trust based and to a large extent negate the whole point of bitcoin's existence.

It's part of bitcoin's functionality however that transactions are public. We knew this since day 1.

We need a way for the payee to know that the previous owners did not sign any earlier
transactions. For our purposes, the earliest transaction is the one that counts, so we don't care
about later attempts to double-spend. The only way to confirm the absence of a transaction is to
be aware of all transactions. In the mint based model, the mint was aware of all transactions and
decided which arrived first. To accomplish this without a trusted party, transactions must be
publicly announced

Source: Satoshi's bitcoin.pdf

Passing bitcoins through a so called mixing service introduces risks and likely doesn't even solve the issue of traceability that well. Because the reasons someone might want to use a mixer is disassociation coins from certain activities. Even through many false positives though, coins through mixers might even be easier to detect as "suspicious" to those looking. And the only reason I'm examining from this approach is because when talking about the disadvantages of using mixers, I believe that one has to also address the thought process of a likely user of such services.

[tbct_mt2]

Not gonna lie, Mixer is very helpful to me ever since I join the casino signature campaign and earn some Bitcoin because the local exchange the I use frequently to received this funds is very suspicious and doesn’t allowed deposits from casino or from any wallet that has a connection to a crypto casino transaction.

I encounter an issue in the past about this that makes me more cautious and embrace the use of mixer to hide the trace of gambling activity to my Bitcoin. I stop using mixer after the multiple seize on popular mixer and decided to use P2P exchange instead.

Bitcoin Q&A: Blacklists, Taint, and Wallet Fingerprinting

Andreas M. Antonopoulos talked about basic steps from centralized platforms to detect tainted coins and understand about it can help you to avoid problems with exchanges and casinos from your deposits. You can do it by yourself and don't have to use mixers for it.

I understand your concern because casinos with licenses have obey to regulations and one of them is AML. Exchanges can have problems from DOJI like Binance, Kucoin with accusations and charges from DOJI recent months.