Many Bitcoin users, especially those who have limited experience in this field, think that crypto transactions are fully anonymous. In reality, this is sadly untrue, because blockchain can be explored by anyone with the help of specialized software. For example, if someone sends a transaction to you, they have the address of your Bitcoin wallet. Even with this small piece of information, they may be able to find out:
- How much is your current balance?
- Who else have you exchanged transactions with?
- How often do you spend cryptocurrency and in what amounts?
This information can be further used to identify the user or for targeting cyber-attacks. For example, someone, who often spends large amounts of crypto, can be seen as a promising target by fraudsters. Just imagine, how would you feel, if the contents and history of your bank account were viewable by anyone. It doesn’t matter whether you are rich or have a tiny amount of money in your account – in any case, if such information is publicly accessible, it is unpleasant and potentially dangerous.
Luckily, there is a method to eliminate the risks. If you use a Bitcoin tumbler to conduct your transactions, you will obscure the addresses of the sender’s and recipient’s wallets, as well as other significant details, protecting the privacy of your data.
What is a Bitcoin Tumbler?
A cryptocurrency tumbler is a service, which helps you to remain untraceable while conducting cryptocurrency transactions. There are multiple types of crypto mixers, but the principles of their operation are similar. True to their name, they pool the coins of their users together and mix them before sending them out to the target wallets. As a result, it becomes hardly possible to deduce who was the sender and the recipient in a particular transaction.
You can compare the operation of a Bitcoin mixer to a VPN service. The latter protects your privacy, functioning as a shield between the user and the final point it wants to reach. When you use a VPN, the middle party (such as your internet provider or some other controlling entity) is unable to know which web pages you are visiting. Similarly, a crypto tumbler relays the transaction. Someone may be able to tell, that you have used a particular coin mixer, but it will be entirely impossible to track your transaction further than that.
How to Find an Effective Bitcoin Tumbler?
The efficacy of a crypto mixer depends on its user base. The more people use a particular coin-mixing service, the harder it will be for an external observer to figure out where an individual transaction went. If there are only a few users making transactions through a particular tumbler at the same time, it becomes possible to figure out their transaction parameters by comparing the data, although it will require some effort. Consequently, it is critical to use reliable and reputable Bitcoin tumblers with a large user base to diminish the likelihood of your transaction being traceable. Study reviews and read other people’s advice, especially if you want to access a coin mixer for the first time.
Are Crypto Tumblers Legal in the US?
To answer this question, it is useful to further explore our comparison between crypto tumblers and VPNs. The usage of Virtual Private Networks isn’t illegal per se, but can be punished by law, if VPNs are used to cover some illegal activities, such as online piracy. Similarly, coin mixers stay in a legally gray area, as they aren’t prohibited in the US, but can attract legal scrutiny due to suspicions of money laundering.
Regulating laws regarding cryptocurrencies are constantly evolving, so you need to check the actual state of them in your country as well as in the country where the service is located. In general, governments aim to monitor financial transactions, especially the large ones, to prevent tax evasion and money laundering. Consequently, you can expect the regulating laws to become stricter in the future, for example, enforcing services that operate cryptocurrencies to implement Knoy Your Client procedures.
Are Crypto Mixers Legal in Hong Kong?
Similar to the US, the authorities in Hong Kong have implemented a law known as AMLO which aims to prevent money laundering and terrorist financing. To avoid being prosecuted following this law, bitcoin tumblers have to implement anti-money laundering measures themselves. It is possible that soon their clients will have to prove that the crypto coins they want to transfer through weren’t obtained illegally.
What Are Privacy Coins?
If you are concerned about the legal and other risks related to the usage of crypto tumblers but still want to protect your financial information from unwanted third parties, using privacy coins will be a working alternative. Privacy coins are a type of cryptocurrency, that functions similarly to bitcoin but obscure the path of each transaction. The two best-known privacy coins are Monero and Zcash.
As you can see, if you want to remain unseen while conducting crypto transactions, there are several methods to achieve this. You can use crypto tumblers to obscure your transactions or try out privacy coins, that are designed concerning the users’ desire for untraceable transactions.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
