Why Tumble Bitcoins?
Recently there have been complaints on forums about Coinbase after using gambling sites, and this has been happening for a few years now. Coinbase explicitly states in their user agreement that sites like this are not acceptable. Then there are also those who use the Dark Net to visit marketplaces, which is not only frowned upon by some Bitcoin service providers, but also puts these users at risk of jail time and criminal penalty.
Precaution must be taken when using Dark Net Markets (DNM) and visiting gambling sites by staying anonymous on a transparent and public blockchain. There are many methods of anonymity one can take by obfuscating their IP address, using a VPN, and surfing the net with an anonymizing browser.
However, today we will discuss another method of privacy called coin tumbling, coinjoin, or coin shuffling. There are also altcoins that practice this natively within every transaction, but we will focus on using tumblers with Bitcoin.
Coin tumbling platforms basically shuffle a bunch of transactions together like a deck of cards where eventually everyone gets the money back while obfuscating the origin of the funds.
There are tons of websites that will mix your bitcoins on the clearnet or over the hidden web using Tor, for example. Some sites include Bitcoinlaundry, Bitmix, Bitlaundry, and even Blockchain.info has offered a mixing service within their interface. Then DNM’s such as the Dream Market and Alphabay have coin tumblers at their marketplaces, among many other mixing services found on the deep web.
Mixing Coins via the Hidden Web
Those who want to add more privacy to their transactions should probably do so over the deep web with multiple layers of obfuscation. The first thing to do is send bitcoins to a wallet using clearnet and also create a wallet under the cloak of Tor using wallets like Electrum.
The second process is sending the Bitcoin you want to mix from the clearnet wallet to the one created via the hidden web. This method is called the first hop and adds just another layer of confusion.
Next, using the last wallet you created you can continue creating a few wallets over Tor and completing hops depending on how far you want to go with privacy.
Lastly, a user simply chooses a trusted Bitcoin mixing service and takes precaution on making sure the URL is 100% correct.
Nearly all mixing services will charge a fee for using their platform to do a mix, and some of them can be rather substantial. However, some provide a really good layer of anonymity with their pricier services. But when using these services you really have to make sure the URL is correct because you may fall victim to a scam or phishing site.
After the mixing is complete, funds should be sent to the addresses created with Tor and some people would say you should send the funds to multiple addresses rather than just one. Everything is based on preference, and one can choose whatever methods they feel is best to protect themselves.
Another thing worth noting is is what can happen when someone enters the wrong information. Recently, one user sent the wrong fee of 291 bitcoin after tumbling. That was a pretty big mistake, and ordinary users most likely don’t send an amount that large, but you never know.
Double checking every step you make is a good way to avoid mistakes like this when it comes to fee rates or website URLs.
Tumbling Still Not 100% Secure
One thing to consider is there is no software or cryptographic framework to date that is 100% anonymous. Users can mess around with altcoins such as Dash or Monero if they believe these tokens do a better job at obfuscating transactions.
Dash uses a coin-mixing method based on the CoinJoin protocol, and Monero uses what’s called ring signatures, which shuffle tokens in an entirely different manner. But even the privacy-centric altcoins are not perfect and very popular mixing services for Bitcoin like JoinMarket have been known to be vulnerable.
Alongside these platforms, people believe other methods should be taken to protect privacy like VPN use, and hopping or splitting funds among addresses. Just recently Bitcoin.com reported on a tracking service called BitCluster, which can track user activity if all funds are sent to one address, even after tumbling, according to the software creators.
At the same time, Bitcoin tracking services are becoming more prevalent these days as companies like Elliptic and Chainalysis are building protocol that monitors the Bitcoin blockchain for illegal activities.
Bitcoin.com supports privacy and believes users should take precautions when using Bitcoin on DNMs or gambling platforms. Please perform due diligence and research prior to using any of the above-mentioned methods for mixing Bitcoins.