Despite facing sanctions imposed by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) in 2022, an open-source privacy solution that originated from research conducted by the team behind the Zcash privacy coin continues to be one of the preferred tools for enhancing the privacy of cryptocurrency users. "In 2023 alone, we saw 342,042 ETH deposited and approximately 314,740 ETH withdrawn from Tornado Cash," the cybersecurity team SlowMist reports.
However, the legal implications associated with using this service, coupled with concerns about its effectiveness, are prompting an increasing number of users to transition to alternative tools. Fortunately, there are numerous Tornado Cash alternatives available. Yet, finding the best Bitcoin mixer or tumbler for other cryptocurrencies may prove to be a challenging task. To understand the crucial criteria to consider during your selection and determine whether you genuinely need such a tool, read this article.
Read also: Tornado Cash hacker may manipulate TORN price by proposing attack reversal
Why do crypto users need Bitcoin mixers and tools like Tornado Cash?
The primary motivation for many cryptocurrency users to utilize Bitcoin mixers is their desire to enhance privacy by obscuring the Bitcoin address of the sender and the Bitcoin address of the recipient.
Referring to Bitcoin as "anonymous" is a common misconception. While the oldest cryptocurrency does not directly disclose the identities of participants in financial transactions, there are methods by which real-world identities associated with Bitcoin transactions can be traced.
For instance, if one withdraws Bitcoin from an exchange where they have undergone identity verification, the exchange is aware that the withdrawal address belongs to them, as explained by Web3 news outlet Bitcoin Magazine. Additionally, individuals might inadvertently disclose their Bitcoin addresses on social media, public forums, or content monetization platforms.
Bitcoin Magazine also notes the existence of "more advanced techniques" for tracing Bitcoin addresses participating in crypto transactions such as blockchain analysis. Another option is tracking IP addresses, which can help identify the physical location of the address owner.
While sophisticated cryptocurrency tracking methods may be too challenging for regular users lacking domain knowledge, blockchain analytics firms provide advanced software readily available without requirements for advanced technical skills. Chainalysis Reactor is one such service that allows to detect and prevent illicit activity on the blockchain. This tool is capable of mapping not only addresses involved in malicious behavior but also those utilized for legitimate purposes.
These are only a subset of the methods commonly employed to trace individuals participating in Bitcoin transactions. Despite the variety of tracking methods, the primary reason many users opt to obfuscate the traces of their transactions is rooted in privacy concerns.
Criminals leveraging Bitcoin mixers and tumblers to hide crypto addresses
Associating Tornado Cash and Bitcoin mixers and tumblers with criminal activity and money laundering, in particular, is indeed a natural inclination. Malicious actors find the tools allowing them to participate in crypto transactions involving different coins including Bitcoin anonymously advantageous not only due to the possibility of concealing the traces of their funds but also for the ability to prevent their coins from being blacklisted or linked to illicit activities.
While the use of cryptocurrency anonymizing tools, and Tornado Cash in particular, by criminals, has consistently been high, this year has witnessed a notable surge in the popularity of Bitcoin mixers and tumblers. The Web3 cybersecurity team CertiK has observed a significant shift in cryptocurrency laundering tactics. Departing from Tornado Cash, an increasing number of cybercriminals, particularly those orchestrating large-scale heists, are now turning to Bitcoin mixers.
CertiK's findings reveal a remarkable transformation, with one-third of the stolen proceeds from the 50 largest exploits of 2023 either bridged to or laundered on the Bitcoin network, amounting to nearly $318.4 million. In contrast, funds sent to Tornado Cash accounted for less than a third of that sum.
The shift toward Bitcoin mixers is not solely attributed to increased privacy but is also influenced by the decline in Tornado Cash's use cases following a sanction announcement. Despite this, CertiK notes that Tornado Cash still serves as a viable channel for smaller-scale laundering.
Read also: Chainalysis: crypto mixers usage reaches all-time high in 2022
When may you want to use a Bitcoin mixer or tumbler for Bitcoin transactions?
Although criminals heavily rely on tools that allow them to enhance their privacy, which is crucial for successful money laundering, many regular cryptocurrency users also turn to a Bitcoin tumbling service to enjoy greater anonymity.
A significant number of regular users, who do not engage in illicit activities, seek greater anonymity, considering it a necessary component of their personal freedom. For some, obscuring one's financial activity is essential for maintaining this freedom.
In certain cases, the option of conducting anonymous financial transactions becomes a necessity as a means to resist financial censorship. This is particularly important for individuals living in regions experiencing political unrest or oppressive regimes. It is also crucial for those who wish to avoid asset seizure, discrimination, and stigmatization associated with certain transactions.
Tornado Cash vs Bitcoin mixers
While both Tornado Cash and Bitcoin blenders aim to secure the privacy of the transaction participants, they are empowered by different technologies.
First and foremost, they are designed for different networks, with Tornado Cash operating on Ethereum and Bitcoin mixers based on the Bitcoin blockchain.
Tornado Cash relies on a cryptographic technique known as zkSNARK, which stands for Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge. This technique is based on zero-knowledge proofs, making it possible to demonstrate the validity of a financial transaction without revealing the details of the transaction itself, such as its origin, destination, or the amount of funds involved.
While it is common to refer to tools based on the CoinJoin technique as Bitcoin mixers, some cryptocurrency users use the term "Bitcoin mixers" to encompass any type of services capable of obfuscating transactions involving Bitcoin, even if they do not employ CoinJoin. For instance, stealth addresses are one of the other techniques available to Bitcoin users.
The CoinJoin method used to blend multiple inputs and outputs from diverse users into a single transaction, obscuring the origin and destination of each coin involved, was regarded as one of the most effective techniques for mixing Bitcoin.
To enhance the privacy of Bitcoin transfers, the process requires a collaborative effort among participants to jointly create a transaction that mingles their coins, making it challenging for external observers to trace individual coins back to their sources. Prior to that, the participants have to agree on the amount of coins and fees.
CoinJoin is currently enjoying great popularity, and some of the best Bitcoin mixers including Wasabi Wallet, Whir, and UniJoin rely on its functionality.
Meanwhile, the stealth addresses technique uses a completely different approach to obscuring Bitcoin transactions. It involves generating a new address specifically for a particular transaction after its initiation. Furthermore, in the case of conducting several transactions between the same sender and recipient, the stealth addresses mechanism generates unique and unlinkable addresses for each of the money transfers.
The stealth addresses technique reportedly makes it nearly impossible to trace transactions on the blockchain if the observer does not have the recipient’s private key, even in the case of multiple transactions.
Unlike the CoinJoin approach, stealth addresses are available as a feature of some Bitcoin wallets focused on enhanced privacy, for instance, Electrum and Dark Wallet.
Despite the high level of privacy, this technique still does not hide such transaction details as the amount of coins transferred and the time of the transfer.
Why opting for one of the Tornado Cash alternatives might be better than sticking to this tool?
As has already been mentioned, Tornado Cash is officially sanctioned in the US, which makes the use of this service illegal in the country. The stance on the use of Tornado Cash in other countries may differ. However, regardless of the region you are in, there are concerns about the compliance of this tool with legal regulations.
The lack of effective control over the platform users, which in turn allows for maintaining their privacy, allows malicious actors to launder funds coming from illegal sources. This fact is sufficient for many authorities to scrutinize transactions handled by Tornado Cash, and despite using this tool for legitimate purposes, you are risking coming under scrutiny as well.
Although all efficient Tornado Cash alternatives including Bitcoin mixers are supposed to maintain the highest level of anonymity, not all of them have gained such popularity among criminals, and therefore, have not attracted as much interest from law enforcement.
Furthermore, some experts question the effectiveness of Tornado Cash as a transaction anonymizing tool. According to them, the effectiveness depends on the amount of funds processed, the network congestion, and the type of transaction.
Types of Bitcoin mixers and tumblers
To navigate the wide assortment of privacy-enhancing tools for Bitcoin available on the market, it is necessary to understand the types and differences between such tools.
Bitcoin tumbler vs Bitcoin mixer
The terms "Bitcoin tumbler" and "Bitcoin mixer" are often used interchangeably, but some users believe there is a slight distinction between the two concepts. According to the Bitcoin anonymizing tool Whir, the primary difference lies in the way these services handle transaction history and coin mixing.
Those who differentiate the two services explain that Bitcoin mixers are aimed at breaking up the transaction history of Bitcoin to disrupt the traceability of the transaction history associated with specific coins, whereas the process of mixing coins from several users to obfuscate coin ownership is called Bitcoin tumbling.
In practice, though, many services encompass features of both mixers and tumblers, as their major goal is breaking the link between the participants of Bitcoin transactions.
Centralized vs decentralized Bitcoin mixers and tumblers
Similarly to many other tools used in the Web3 space, Bitcoin tumblers and mixers can be centralized and decentralized.
The former operates under the control of a singular entity, whereas the latter relies on a distributed network of users. Centralized mixers generally offer a more user-friendly experience with enhanced features compared to their decentralized counterparts. However, they come with the caveat of potentially exposing user identities in the event of compromise or coercion.
On the other hand, many decentralized mixers utilize particularly effective technologies like CoinJoin, further described in more detail, to obfuscate transactions through coordinated or peer-to-peer methods, ensuring a heightened level of privacy.
Limitations and challenges of using Bitcoin mixers
While many cryptocurrency users are seeking the anonymity offered by Bitcoin mixers, many platforms are not free from limitations.
Legal risks
One of the most obvious challenges of using a Bitcoin mixer is legal implications. Besides the Tornado Cash sanction, other platforms might not be compliant with regulatory requirements in many countries. Even those regarded as legal can still be subject to legal scrutiny.
It is necessary to be aware of the potential legal consequences of using Bitcoin mixers in your region. For example, certain authorities may view them as explicitly illegal, despite the fact you would like to use them for a legitimate purpose. Moreover, even though in many regions Bitcoin mixers are not illegal, their use may be viewed as an attempt to evade taxes.
Scams and poor service quality
The interest in Bitcoin mixers also attracts many scammers who would like to capitalize on users of such services. Some of the coin-mixing platforms are downright frauds aiming to steal cryptocurrency sent to their pools, while others offer insufficient mixing quality.
Service fees
As a rule, to use a Bitcoin mixer, you will have to pay a fee, which often depends on several factors such as the amount of coins you would like to mix, the mixing method used by the platform, as well as the number of participants. Additionally, many Bitcoin mixers have a so-called "coordinator fee."
Considering all these service fees, in certain cases, you should be prepared to cover relatively high expenses for obfuscating your Bitcoin transactions.
Transaction delays
Mostly, Bitcoin mixers require time to process transactions, which is essential for effective mixing. Extra processing time can affect your experience, especially if you need to conduct a fast payment.
How to choose the best Bitcoin mixer?
Below you can find several criteria for choosing the best Bitcoin mixer to protect your privacy.
Techniques used by the best Bitcoin mixer services
As has already been explained, although the term "Bitcoin mixer" is often used for CoinJoin-based services, it may also describe a tool relying on another technology. Knowing this technology is necessary for estimating the efficiency of a service.
While CoinJoin is commonly believed to be one of the most effective methods, it is typical for technologies to have both advantages and disadvantages. For that reason, the choice of a tool should also be based on the particular requirements of a certain scenario, for instance, how much money and how fast you would like to send.
At the same time, it is important to keep in mind several general criteria such as the trustworthiness and reputation of the technique behind the tool and the level of privacy it offers. In addition to this, pay attention to the security level of the technique, as similarly to other Web3 platforms, Bitcoin mixers can also be exploited by malicious actors.
Tool trustworthiness
Do not mistake the reputability of the technology empowering the tool with the reputability of the tool itself. For instance, there are more and more Bitcoin mixers deploying the CoinJoin technique. Even though the technique itself has a high reputation among Bitcoin users, not all of the services that utilize it are equally trustworthy.
Remember the risks associated with using a Bitcoin mixer discussed earlier. Scam services, sanctioned platforms, or tools with a low level of security leading to hacks should be avoided.
Other privacy-enhancing measures
The technology behind the tool plays a significant role in maintaining the privacy of Bitcoin transactions. However, the best Bitcoin tumblers prefer implementing additional effective measures for further privacy enhancement.
For instance, strict no-KYC policies coupled with the resignation from storing log IP addresses ensure that details about users and their transactions are not stored by the platform, preventing retrieval by third parties.
Tor integration is another measure that helps users achieve greater protection of their privacy.
Such a mixer service as Whir also imposes limits on the maximum amount of coins accepted per transaction, claiming that this guarantees a higher level of privacy while maintaining the legal status of transactions.
Meanwhile, the UniJoin platform has introduced a special feature known as UniCode, which aims to prevent users from joining the same pool during the next mixing round, thereby enhancing anonymity.
It is important to note that some platforms also allow their customers to use a delay period after mixing is completed. According to such services, delaying transactions makes it even harder to link the sender with the recipient of Bitcoin.
Service fees
Bitcoin mixing platforms also vary in terms of their fees, with various fee systems in place.
Some tools implement a fixed fee structure. For instance, Whir assures its users will have to pay a consistent charge, irrespective of how much Bitcoin is transferred. However, this fee depends on the "mixing strength," ranging from 1% for the Standard mixing mode to 3% for the Anonymous mixing mode.
Other tools, such as Mixero, determine the priority of your transaction based on the fee you choose to pay. A lower fee, like 0.7%, corresponds to the lowest priority, while the highest fee of 4.7% ensures the highest priority.
In certain cases, platforms use fees as an additional privacy measure. For example, UniJoin employs a unique system of randomly generated fees, ranging from 1% to 3% for Bitcoin mixing operations. This approach adds an extra layer of difficulty in estimating the transferred amount based on the service fee paid for this transaction.
Hiding a Bitcoin address with coin mixers - bottom line
While a Bitcoin mixer can be a robust tool allowing you to achieve financial privacy, you should be aware of possible legal implications and other risks associated with using such platforms. The choice of the platform should be careful and based on the critical criteria discussed above, including the platform's trustworthiness as well as the reliability of its method, additional privacy-enhancing measures, as well as costs, limits, and speed of transactions.
Undeniably, it is better to start with small transactions when you find the service you would like to try. Yet, you should be aware of the minimum amounts of Bitcoin accepted. If you do not check these amounts beforehand and send your funds to the platform, you risk losing the money, as transactions below the BTC limit are commonly considered donations.
If you do not feel satisfied with CoinJoin-based tools, explore other Tornado Cash alternatives, for instance, those utilizing the stealth addresses technology.
Furthermore, you can opt for a completely different technology, for instance, confidential transactions supported by some of the Bitcoin forks, including Zcash and Monero. This cryptographic technique is used to obscure the details of the transaction amounts. With the help of a special mathematical formula used by the Pedersen Commitments cryptographic concepts, the participants of the transaction can prove it has been constructed correctly without revealing the number of coins involved in the transaction.
