Mixing

Despite broad claims to the contrary, Bitcoin is not fully anonymous. All Bitcoin transactions are public and viewable on the blockchain . It is therefore possible to trace bitcoins and transaction histories. Mixing services are sites that pools a great many bitcoins together and then issue back bitcoins of an equal value. The mixing service mixes one’s bitcoins with someone else’s and returns bitcoins with different inputs and outputs. From the one’s sent in. This randomizes the bitcoin histories and makes it much more difficult to track them. The process of exchanging coins among other persons increases the privacy of one’s transaction history. A mixing service (also known as a “tumbler”) preserves one’s privacy because it prevents others from tracing a particular bitcoin to an individual owner. In traditional banking, a bank protects a customer’s privacy by hiding transactions from all third parties. With Bitcoin any merchant could do a statistical analysis of a customer’s entire payment history and determine, for instance, how many bitcoins the customer owns. While it is still possible to implement Know Your Customer (KYC) rules on a level of every merchant, mixing allows one to separate information about one’s history between merchants.

Reference:

Malone, J.A (2015). Glossary of Bitcoin Terms and Definitions. United States: Lulu Press, Inc

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