Topic: How mixers work? ELI5 and other questions (Read 118 times)

KYC doesn't help an exchange detect funds from money laundering per se, KYC in centralized exchanges is in compliance with the laws of the country they operate in, and they collect KYC so they can hand over a customer's personal data to law enforcement agencies if they ever need it in their investigation of an address belonging to one of the exchange's customer. KYC also prevents criminals from using exchanges to launder money because they know the funds will be seized and their real identities will be linked with the coins.

Mixers are just like a secured escrow service providers that can be trusted, they would not require for your KYC informations before making your transactions, you make use of them to anonymize your transactions just for privacy sake, but some hackers are taking advantage in them to transfer huge and illegal transfer through them.


It's easy to track on the blockchain, once the address involved is seing, other transactions associated with that same address will be revealed.


Exchanges aren't the target on these for now because they already have a system that looks after money laundering through KYC and AML.

Yeah it is risky because if you have sent your funds to the pool (address) of the mixer then according to the time delay or congestion on the network, you have to wait for your funds to reflect in your wallet, till then the mixer can also flew away with your BTC but with small amounts they might not. And its not exactly how things works in mixers, it like a pool of funds where many other people are sending there funds and then those funds are mixed with each other like sending from one place to another then 10 other places then 20 other places then to your specific address.

The level of security and anonymity depends on the services of any mixers, well, the point is that's how they work.
If the BTC is coming from an address that is already tagged as of scammers then exchanges can easily check that, by blacklisting them, and when a transaction came from that address, the funds are not processed into that exchange and are stopped at the start. We can also do that to avoid any deposit from such address.
I don't think we should worry about it, but if we have to then I don't have any exact answer for this question other than trailing back the transaction history (origin) like from where the funds are coming from. It will took huge time manually but with tools we can do that and most of the tools are paid.

Do you believe the government and what their state-controlled media writes and publishes, you think that mixers and Bitcoin are so widely used for money laundering to warrant this sort of crackdown, there are much more "comfortable" tools people use to launder money, but the government chooses to fully focus on mixers as an indirect attact on Bitcoin. That being said, i don't think people who want privacy would avoid mixing their coins because of this, though it is better if they use non-custodial options like coinjoin.

Of course it's risky. What did you thought? You are sending your funds to a address which is owner by other people.

As far as I understand, when you send funds to a mixer all the funds are pooled in a single place. Now imagine thousands of people are using the service. All the funds are mixed together and sent back the same amount you sent previously. But this time there is no way trace back it's origin.

There is no dirty BTC or clean BTC. Its just BTC. Again yes, if your BTC came from a fraudulent source or address it can be called dirty BTC. The more cleaner term is "tainted money/crypto".

There are lists of blacklisted addresses. And if your funds are somehow linked to those address, the exchange might block or freeze your account. So yes, it is possible and it happens.

Nope, you cannot know if it's tainted or not 

There is no clear definition or method how they (or third party they use) to definte whether certain BTC is "dirty" or not. At best you get rough example such as "stolen, from dark web, mixer, etc.".


Assuming that CEX is legally registered, no.


There are several services which check "dirtiness" of an address. But you have to trust them to provide truthful result and take note each exchange have different way to check "dirtiness".


How do you obtain that image? When people use mixer, usually the destination/receiver is their own cryptocurrency address.

OP, hope you are aware that most mixers tend ro involve in some fradulent acts which was stated by the government. At first it was difficult to believe this but articles and blogs proving that point is all over the net. Soon people will avoid mixing their Bitcoin.

This is not mixing, but coinjoining.

The senders and the receivers are still same people because there's still a link. From this graph I still can guess if Dave is receiving from Alice, Bob or Carol, while mixing make you have no way to know if Dave received the coins from which person(s).

This is how the mixer works, it break the link between each UTXO.



1. Why you need to use scam mixer in the first place?

2. According to government high illicit funds are comes from: mixer, money laundering, hack, stolen, gambling, unregistered exchange etc.

3. The government can use CEX for money laundering, just like they laundering through banks. If you concerned about dirtiness, have you check every penny you have where they comes from?

Using a mixer is risky just like using a centralized exchange, you have to trust the mixer company before you send your BTC there for mixing. Mixers don’t send BTC back to an address different from the one you deposited your BTC from, they simply mix your BTC and send it back to your address from an unrelated link that will make it impossible to trace back to your wallet address.
 

Yes, most exchanges don’t accept BTC from mixers because they believe that’s were fraudsters deposit stolen BTC so that it cannot be traced back to their account.


There is no way you can check for that, and in the first place, if the exchange you use don’t accept BTC from mixers then, your BTC should be clean and not dirty unless the exchange is involved in another secret stuff that is unknown to its users and public.

The simple answer is here-


Of course it's risky. But in this case it also depends on your choice, if you use scammer mixers then no one can stop you from losing your funds here. And to avoid it, first you have to explore and select a reputable mixer.
By the way, did you know that the new law is going to start on January 1st on bitcointalk about mixing service-  Mixers to be banned .

Centralized exchanges can accomplish this by blacklisting wallets connected to mixers declared illegal. And dirty bitcoin refers to those bitcoins that have been acquired by doing criminal activities like- hacking, drug selling etc.

If you buy or sell Suspicious Amount Bitcoins they may send you a notice to show official documents from where the money or Bitcoins came from. This is one way to issue illegal checks and another option if funds come from blacklisted wallets.
example-
This is a screenshot of a recently seized mixer signatures campaign participants-

They do not forward your BTC to another address, the bitcoins you sent is mixed up and you receive the same amount from an unrelated transaction which ideally should not be possibly linked back to you.
It is risky and you need to be sure of the reputation of the service before using it.

They mostly check if it has passed through a mixer before or if it has been discovered to be involved in an illegal transaction or scam.

You should not be worried except for your privacy which is at risk by the exchange tracking you.

- Jay -

I am reading an article about mixers and how they work. While reading came up with these questions:

1. How mixer works in terms of blockchain and transactions? Is it like you sending your own BTC to address of the mixer and the same is done by other people, and they just forward your BTC to another address of your choice? As far as I understand the bitcoin and how it works, once you send your BTC to someone you lost it. Is  n't is risky?

2. The article also mentions that some exchanges might refuse to receive 'dirty' BTC. How they define and later find out if particular BTC is 'dirty'? I mean what makes BTC 'dirty' or 'clean'?

3. If you bought your BTC from well know CEX, should you be concerned? Is there a way to check for 'dirtiness'?

thanks.