This article compiles the working principle, different types, and regulatory risks of mixing machines to help readers understand this cryptocurrency technology.
Table of Contents
What is a mixing machine?
The reason for the emergence of mixing technology
The principle of mixing machines
Types of mixing machines
Controversies surrounding mixing machines
What are some mixing machine projects?
Tornado Cash
Umbra
CoinMixer
Mixing Machine News Summary
May 27, 2024
Tornado founder of mixing machine Tornado renews “motion to dismiss lawsuit”: 3 reasons to question US prosecutors for violating procedures
May 15, 2024
The founder of the open-source software tragedy, Tornado Cash, was sentenced to 64 months in prison for money laundering charges.
April 25, 2024
The founder of the mixing machine Samourai in the United States was arrested on money laundering charges, and Snowden criticized: infringing on financial privacy.
March 13, 2024
The founder of the mixing machine Bitcoin Fog was found “guilty”, with the US jury suspecting him of laundering 1.2 million bitcoins on the dark web.
October 31, 2023
The US Treasury Department is considering “completely banning mixing machines,” with crypto experts fearing the eradication of the entire DeFi industry.
In the field of cryptocurrency, mixing machines serve as a unique presence, favored by privacy advocates for their ability to conceal the source and destination of assets on the chain. However, due to the frequent use of mixing machines by criminals for money laundering purposes, mixing machines face significant regulatory pressure in various countries.
This article compiles the working principle, different types, and regulatory risks of mixing machines to help readers understand this cryptocurrency technology.
What is a mixing machine?
The reason for the emergence of mixing technology
Since blockchains like Bitcoin and Ethereum are public decentralized ledgers, information such as user addresses and balances is transparent on the blockchain. As long as one knows a person’s cryptocurrency address, all the transactions they conduct on the chain can be traced. Therefore, mixing technology was born to protect user transaction privacy.
The principle of mixing machines
Simply put, the purpose of mixing is to sever the connection between the sender and receiver in cryptocurrency transactions.
Senders can use mixing machines to mix their money with that of many others. The contract automatically matches different wallet addresses and amounts, making it difficult for trackers to identify the corresponding fund flows of each person, thus achieving truly anonymous transactions.
Types of mixing machines
There are two types of mixing machines: centralized and decentralized. However, the latter is currently more popular, with the difference between the two being:
Centralized mixing machine:
Users submit their cryptocurrencies to a trusted third party, who then returns the cryptocurrencies with hidden sources. However, this process comes with risks, as the trusted third party may steal user funds.
Decentralized mixing machine:
This mixing method is facilitated by smart contracts. The process involves users depositing their cryptocurrencies from address A into the mixing contract, and then withdrawing the cryptocurrencies to address B after a certain time interval. The longer the wait time, the harder it is to discover the source and destination of the cryptocurrency addresses.
Operation mode of decentralized mixing machine
Controversies surrounding mixing machines
Supporters believe that mixing machines can protect user privacy, while opponents argue that they make it easier for criminals to hide fund flows and make it harder to trace, making it difficult for law enforcement officials to investigate criminal identities and recover illicit gains. Former Assistant Attorney General Brian Benczkowski of the United States once stated:
At the same time, mixing machines are also defined as money transmitters in the United States, therefore they are required to register with the Financial Crimes Enforcement Network (FinCEN) in the United States and apply for an operating license.
What are some mixing machine projects?
Tornado Cash
Currently, Tornado Cash is the largest mixing protocol on Ethereum. According to the official introduction, Tornado Cash is a completely decentralized non-custodial mixing protocol that allows people to conduct private transactions on the chain.
Tornado Cash accepts user cryptocurrency deposits through smart contracts and allows users to withdraw from different wallet addresses, enhancing transaction privacy by breaking the on-chain relationship between source and target addresses.
However, Tornado Cash was suspected of being used by North Korean hackers and was sanctioned by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) in August 2022. Tornado Cash’s three co-founders, Alexey Pertsev, Roman Storm, and Roman Semenov, were all indicted.
Umbra
Umbra is a protocol that allows users to make private transfers on Ethereum. The feature is that only the sender and receiver know who received the transfer. In terms of product operation, the logic of the Umbra protocol is:
The recipient authorizes and maps a new private address (this new address does not need to be backed up and is controlled directly by the original address private key);
When the sender makes a transfer, they only enter the recipient’s real address, and Umbra can automatically identify the private new address;
After receiving the funds, the user can transfer them from the new address to a secure address (such as an exchange address or another new address) to achieve privacy protection.
Since the receiving address has never been used on the chain, no external observer can know who controls it.
CoinMixer
CoinMixer is an old BTC mixing protocol that has been around since 2017. The protocol currently holds over $1.2 million worth of bitcoins, so there is no need to wait for others to trade together, and the mixing process is usually completed immediately.
Mixing Machine News Summary
May 27, 2024
The founder of the Tornado mixing machine Tornado once again proposed a “motion to dismiss the lawsuit”: 3 major reasons to question the US prosecutor for violating procedures.
May 15, 2024
The founder and developer of the Ethereum mixing protocol Tornado Cash, Alexey Pertsev, was convicted of money laundering in the Netherlands and was sentenced to 64 months in prison.
April 25, 2024
The founder of the Samourai mixing machine in the United States was arrested on money laundering charges, and Snowden criticized: infringing on financial privacy.
March 13, 2024
The founder of the Bitcoin Fog mixing machine was found “guilty” by the US federal court jury, with the Justice Department accusing him of operating the longest-running bitcoin laundering service on the dark web, helping to launder over 1.2 million bitcoins worth over $400 million.
October 31, 2023
The US Treasury Department is considering “completely banning mixing machines,” posing a serious threat to national security. However, this rule has raised concerns in the cryptocurrency industry as the target may include the entire DeFi industry.
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