Before we compare Bitcoin Mixers with Anonymizers, we'll take a look at Bitcoin privacy.
Bitcoin privacy and traceability
Bitcoin is not anonymous. The information about each Bitcoin transaction is permanently stored in Bitcoin's public ledger, known as the blockchain. Anyone can access the blockchain and inspect all transactions, amounts, and Bitcoin addresses recorded with each individual transaction.
If the Bitcoin address used in the transaction is ever linked to your real-world identity, all past transactions could be traced back to you. Therefore, if you don't want third parties to learn about your transactions, it is crucial to hide them. And the most common method to do so is through a Bitcoin Mixer.
The principle of a Bitcoin Mixer is to cut the tie between input and output. Bitcoin Mixer takes your Bitcoin (input), mixes it with a pile of other Bitcoins, and sends you "mixed" Bitcoin (output) to an address of your choice. After using a Bitcoin Mixer, the link between your original Bitcoin and the mixed Bitcoin gets erased.
Over the years, several Bitcoin mixing methods and dozens of Bitcoin mixers were introduced. Today, all these various methods have been reduced to a single cryptographical technique known as CoinJoin.
CoinJoin is a technique for joining multiple Bitcoin payments from multiple spenders into a single transaction. By doing so, it becomes more difficult for outside parties to determine which spender paid which recipient or recipients.
We can compare CoinJoin to a group of people who put their coins into one shared wallet and go shopping. While every person will spend only their amount of money, they won't necessarily pay with the exact physical coins they put into the shared wallet.
CoinJoin is excellent at mixing several inputs and outputs. However, it is not so great when combining unequal inputs. Let's say you put 1.10 coins to the mixer and receive the same amount back, reduced by the fee. While the coins you receive would be mixed, and thus untraceable, the flow of the coins is easily predictable. Bitcoin Mixers try to obfuscate this by dividing outputs into multiple addresses. However, the results are "mixed."
The following illustration outlines the principle of the CoinJoin. If you are curious how CoinJoin works, then we recommend you to read its definition on the Bitcoin wiki page.
Usually, using a Bitcoin Mixer is sufficient enough to conceal the history of your transactions or spending habits. Bitcoin mixing is excellent if you want to hide your wealth, business dealings, or your everyday spending habits.
However, if you need protection against authoritarian governments that suppress the freedom of thought and speech, then Bitcoin Mixer might no longer be sufficient.
With the rise of Bitcoin analytics and intelligence tools, such as Chainalysis or CipherTrace, the governments, and third parties can trace your transactions—even the mixed ones.
And this is where Bitcoin Anonymizer comes handy.
To truly anonymize Bitcoins, Anonymizer takes advantage of an anonymous cryptocurrency, such as Monero. Before we explain how Bitcoin Anonymizer works, let's take a closer look at privacy coins.
To deliver the highest level of privacy, dedicated privacy coins, such as Monero, employ dozens of sophisticated cryptographic methods, such as enforced privacy, stealth addresses, confidential ring transactions, ring signatures, bulletproofs, separate transaction units, and IP obfuscation.
There are dozens of privacy coins. However, the most secure and sophisticated of all is Monero. The fact that Monero transactions cannot be traced or recorded has even been confirmed by the European Union's Agency for Law Enforcement Cooperation, better known as Europol.
"Since the suspect used a combination of Tor and Monero, we could not trace the funds. We could not trace the IP addresses. Which means, we hit the end of the road. Whatever happened on the Bitcoin blockchain was visible, and that's why we were able to get reasonably far." —Jerek Jakubcek, Europol's Strategic Analyst
If you are curious about the individual security measures Monero employs, then we recommend you to read our article on Monero Privacy and comparison of Monero vs Bitcoin. For now, let's just assume that when you use Monero cryptocurrency, no one can trace your transaction history.
Now, let's return to Bitcoin Anonymizer.
First, the Anonymizer converts Bitcoins into Monero, making the funds completely untraceable. Next, it exchanges Monero back to Bitcoins. Once the transaction is complete, the link between the original Bitcoin and the new Bitcoin, anonymized through Monero, is erased.
While Bitcoin Anonymizer is the most effective way of concealing the transaction history, its downside is the high service fee. Anonymizer needs to pay both the transaction fees as well as exchange fees, making the cost of the service naturally higher. However, if you need an extra layer of privacy, then the additional cost is undoubtedly worth it.
Mixing or Anonymizing?
Tumbler.to offers both methods of anonymizing Bitcoins you can choose from — cryptographical mixing through CoinJoin as well as anonymization through privacy coin Monero. Click on the buttons below and get started with the Bitcoin mixing method of your preference.