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Bitcoin mixing Privacy protection technology

Bitcoin mixing is a service that protects the privacy and anonymity of users by combining many coins . By mixing coins the mixer makes it impossible to track the sent history of bitcoin.That is its beauty.

What is coin mixing?

Bitcoin "mixing" is a technology that enhances anonymity. The aim of this mix is to hide the data from where it was sent. There may be a negative image that "increasing the anonymity of cryptocurrencies" may be a hotbed for money laundering, but the mixing was not born from that purpose. Since all Bitcoin transaction data is recorded on the blockchain, transaction history may be tracked and personal information may be linked to the Bitcoin address if left unmixed. In particular, long-term use or reuse of a particular private key increases the risk of being identified. Once an individual is identified, others can know when and where they used Bitcoin to pay and when they monetized. Also, if an individual who holds a large amount of Bitcoin is identified, it may be targeted for crime.
it is possible to protect the privacy of users and create a territory where they can be used without danger by enhancing the facelessness of Bitcoin by mixing.

How is the security of Bitcoin guaranteed?

Before giving a detailed explanation of mixing, let's explain how Bitcoin's security is guaranteed. As you know, Bitcoin is a currency that exists only in the data while having a value that can be converted into a real currency. Some people may be anxious about protection because there is no administration like a central bank. However, the security of Bitcoin is maintained by the transparency that all users who make a network can check the transaction details. All transactions are written to the ledger and checked by a third party to prevent fraud. For example, when there is a Bitcoin remittance, it is always clear where and how much Bitcoin was sent. This mechanism guarantees the security and transparency of Bitcoin. However, this high degree of transparency also carries the risk of being personally identified.

The privacy of transaction information

The main purpose of mixing is to increase anonymity and protect privacy in Bitcoin transactions where anonymity is low and there is a risk of personal identification. If someone knows that you have a lot of Bitcoin, you may be the target of a crime. Also, if you reuse the same key, the person who made the Bitcoin payment may find out what kind of shopping you are doing. Mixing protects your privacy by preventing others from tracking information about the flow of funds, such as where your Bitcoins were sent from and when you got them. However, if it is a large transaction, information may be provided to a specialized government agency, and it is said that the third party with technology can track it.

History of bitcoin mixer

Looking back on the history of Bitcoin mixers, it is said that they can be divided into three generations: the first generation "centralized mixing service," the second generation "P2P mixer", and the third generation "anonymous altcoin." Currently, mixing is performed using the technologies of "P2P mixer" and "anonymous altcoin," but in the past, "centralized mixing service" was also used. I will explain each generation's mixing method.

  • First Generation Centralized Mixing Service

    This is a method in which a specific organization with so-called centralization, such as a company, consolidates transactions in one place and then redistributes them. However, there is a huge issue with this mixing technique.That is, centralization carries the risk of leaking information and the risk of escaping property. Confidence in centralization is also an important service, as centralization must properly delete the mixing history. In fact, there are cases where Bitcoin deposited in centralization was taken away. In the "Mt. Gox Incident", there is an incident in which the centralized administrator side uses the bitcoins collected from users privately.

  • Second Generation P2P Mixer

    The second-generation "P2P mixer" is a mixing method that eliminates the risks of the first generation. Services that correspond to P2P mixers currently include "Cash Shuffle." There is no centralization in the P2P mixer, and participants who want to mix Bitcoin gather, and all the participants aggregate Bitcoin into a "mixing server" and redistribute it. This method also has its weaknesses, such as the need to gather people who can participate simultaneously and the need to prepare a place (mixing server) to use for matching.

  • Third Generation Anonymous Altcoin

    Using altcoin, which has an anonymous function as a cushion when sending money, is a mechanism to obtain the effect of mixing. However, the anonymous altcoin is a virtual currency that is not on the white list of the Financial Services Agency, and industry groups of virtual currency exchange companies are also moving to ban highly anonymous virtual currencies in the future, so future movements You need to be careful. It is a mixing technology to protect the anonymity of Bitcoin, but it is said that it is difficult to create a technology with complete anonymity. Protecting your privacy is important, but if you make your transactions too anonymous and you can't track your transactions, they could in turn be used for money laundering. It is feared that increasing anonymity will be a double-edged sword that will lead to the expansion of the dark market. There is still a lot of debate about Bitcoin's anonymity, and some argue that a new technology called "Schnoor signature" might be useful for enhancing privacy. We will continue to pay attention to new movements regarding Bitcoin's anonymity.