Cryptocurrency transactions are all recorded on a distributed, public blockchain ledger, which means that anyone can access these records. By inputting a public address in a block explorer, one can get information about all transactions made to and from this address. But, some parties may still seek anonymity, which is why coin mixers were created.
Coin mixers are software companies which serve as a middleman between parties looking to send and receive cryptocurrencies.
- Person A is looking to send Person B one Bitcoin (BTC); however, they do not want this transaction to be traceable.
- Person A would turn to the services of a coin mixer company. They will send the amount of Bitcoin to the coin mixer.
- The coin mixer will then combine this transaction with numerous other transactions (other users employing the services of the coin mixer), accumulating a larger amount of the same cryptocurrency and then redistributing it to the selected receiving addresses.
Coin mixers are increasingly popular among cryptocurrency whales, who are looking to hide the amount of cryptocurrency they have. Large holdings of cryptocurrency can attract unwanted attention towards a holder’s address, thus putting them at risk.