One of the oldest and most popular Bitcoin “mixing” services, Bitmixer, has announced it’s shutting down operations. While operators were vague on reasons, it appears they may be spooked by recent law enforcement activity against dark net marketplaces.
Bitmixer Shuts Down Despite Large Profits
Bitmixer’s named account posted the following statement on BitcoinTalk. Shutting down was a “really very hard decision”, they said, “because of incredible high income”.
“When we started this service I was convinced that any Bitcoin user has a natural right to privacy. I was totally wrong. Now I grasped that Bitcoin is transparent non-anonymous system by design. Blockchain is a great open book. I believe that Bitcoin will have a great future without dark market transactions. You may use Dash or Zerocoin if you want to buy some weed. Not Bitcoin.”
“I hope our decision will help to make Bitcoin ecosystem more clean and transparent. I hope our competitors will hear our message and will close their services too. Very soon this kind of activity will be considered as illegal in most of countries.”
In response, some asked if Bitmixer had kept any logs of its activity, or if the service had been seized by law enforcement. The poster denied all this, but again expressed concerns that Bitcoin is becoming too transparent.
Bitmixer mixed “about 1 million bitcoins” in 2016, they said.
What’s a Bitcoin Mixer Anyway?
Bitcoin mixers, also known as “tumblers”, have existed for almost as long as people have used BTC for transactions. Due to Bitcoin’s public ledger that records a full history of all transactions.
Should you be transacting Bitcoin to engage in illegal or politically-sensitive activity, data analysis makes it possible to unmask you and all your spending. Mixers take coins and “tumble” them through various amounts and addresses, before returning them to a “fresh” wallet address not connected to the original user.
In theory, this obfuscates the trail of transactions. However, the returned coins are still not “clean” by Bitcoin standards. It’s one reason freshly-mined coins often sell at a premium.
In recent years, blockchain forensics and big-data analytics firms have developed increasingly sophisticated techniques to link Bitcoin addresses to each other. They may also use external time, spending-pattern and many other data to match addresses to individual users.
They may also keep a list of addresses that mixing services have used in the past, flagging any BTC that passes through them.
Mixers usually charge a fee. Reputation matters, as users need to trust an anonymously-run online service to return their funds. Many haven’t. Nor can users ever guarantee the funds are mixed sufficiently to protect them.
Law Enforcement Efforts Getting Better
Given Bitmixer’s recommendation to use more anonymous currencies to buy weed, it appears the sudden to decision to close was a practical rather than moral one.
In the past month or so, co-ordinated international law enforcement efforts shut down Hansa and Alphabay, two of the dark web’s most popular marketplaces. This also led to the suicide death in a Thai jail of Alexander Cazes, Alphabay’s alleged administrator.
Notably, this means the authorities have seized another large trove of buyer/seller data, forum posts, BTC and Bitcoin addresses. All this will no doubt be gobbled up by the blockchain analytics machine, and add to its abilities.
It’s also possible law enforcement agencies operated the sites for a short time prior to shutting them down, posing as admins to gain even more valuable knowledge. This technique has allowed them in similar cases to extract information from unaware and trusted contacts.
Be Warned, Bitcoin Is Not Anonymous
Bitcoin is often called “pseudonymous” rather than “anonymous”. Users should assume anything they use BTC for can be revealed. It’s not as explicit as a credit card statement in your wife, boss or local detective’s hands, but a determined investigator has an increasingly decent chance at finding who you are.
Some dark net markets have recognized this, and at times some have accepted cryptocurrencies designed to be more anonymous — such as DASH (formerly Darkcoin) or Monero. Some also use these coins as mixers themselves, by buying them with BTC, making a transaction, then converting back. However KYC-compliant exchanges make this difficult, and authorities are no doubt watching the “anonymous” ones as well.
Have you ever used a Bitcoin mixer? Please don’t write it here! But we’d like to hear your general thoughts anyway.
Images via Pixabay, Alphabay, Bitmixer