Despite Bitcoin mixers being used by dark market users for illegal activities, they have many other legitimate uses. They disable hackers and third parties from tracking your Bitcoin transactions. Using a mixer is almost the same as exchange platforms.
Bitcoin mixer companies charge a reasonable fee of 2-5% for transactions. It serves as an intermediary between the sender and the receiver. The transaction made is considered random, it will not be traced back to the user’s bitcoin wallet. So, what does a bitcoin mixer do?
Disabling Tracing of Transactions
Bitcoin mixers deal with anonymity for transactions. However, anonymity depends on two factors which include; the time of the delay that the longer coins are mixed and the number of wallets to deliver clean coins. When you send a number of coins in your wallet, the bitcoin mixer moves the coins to another address you provided.
They make it impossible to trace the coins since they are first delivered with other coins from different wallets and reserves. The one receiving the money will get it but from other addresses, not yours. This is high-level anonymity that the chances to trace the transaction are impossible.
Breaking the Chain
Any bitcoin exchanges are recorded in a permanent public record which is traceable from one bitcoin address to another one. The blockchain is broken by having two independent wallets receiving bitcoins to one wallet and sending them to another wallet. The transaction is no longer a public record, the bitcoin mixer is the only one who knows where the bitcoins came from and where they’ve been sent.
Distributing Funds among Numerous Wallets
The algorithm which a Bitcoin mixer uses is coins are mixed with transactions of other people or either distributed among thousands of wallets that belong to a mixer. Upon completion and the bitcoins are “clean” they are either moved back to the sender or to the new owner. It is also easier for a user to break the transaction input denominations and hide the real amount.
The Bitcoin mixer charge from 0.5-3% transaction fee. The distribution of funds to different wallets makes it impossible to identify the link between the sender and the receiver. The distribution allows replacement with new coins with a different trail on them.
It lets users mix their coins with other users in a large pool of funds. Bitcoin mixers swap the coins previously sent by other users back to you in the same amount.
Normal bitcoin transactions as kept as records, which is not easy to protect your privacy. A Bitcoin mixer doesn’t store and logs, a hacker will not figure the amount you transacted and the reason for the transaction. Most Bitcoin mixers erase all logs after every 72 hours and others 24 hours.