When Bitcoin, the pioneer cryptocurrency, was launched, one of the heaviest rocks that it lifted from the hearts of its users was the issue of anonymity. Powered by the blockchain, Bitcoin is designed to undergo public verification of transactions without revealing the identity of individuals behind the settlements.
However, is Bitcoin completely anonymous? In reality, Bitcoin users are identified by public keys, unique personal addresses shared within the blockchain. Through proper network analysis, public keys can be traced down to a particular IP address and exchange account.
Therefore, Bitcoin is pseudo-anonymous. And if the public address is used on an exchange that promotes a KYC (know Your Customer) policy, then the address can easily be linked to the person behind a given transaction.
Most popular crypto exchanges have the KYC policy in place (source Coinformant).
What is a Bitcoin tumbler?
If you do not like the idea of some Bitcoin users piecing together various components of Bitcoin and tracing the origin of a Bitcoin transaction, then a Bitcoin tumbler is the solution to your quest.
A BTC tumbler is a tool that mixes Bitcoins. Thereby obscuring their origins. The tool hides, disguises, and makes it difficult for anyone to trace the roots of Bitcoins.
How does a BTC tumbler work?
Let us take this example. Suppose I send you a Bitcoin. You send the Bitcoin to Peter. And Peter, in turn, sends the Bitcoin to Mary. Based on the fact that the blockchain is completely open, anyone who downloads it for scrutiny can find a direct link between Mary and I. Furthermore, if we made the transactions on a KYC platform, then the entity carrying out analysis on the chain of transactions that took place between the four of us can track us down, thereby bursting our real-world identities.
However, if I first send my BTC to a bitcoin tumbler, before sending it to you, and we repeat the same “mixup” of transactions across our chains, our identities are obscured. A BTC tumbler routes transactions to different addresses. Splitting them into smaller tokens, which are reassembled to varying times before forwarding them to a recipient. Consequently, the link between two parties engaged in a Bitcoin transaction is broken. There is no chain between incoming tokens to outgoing tokens.
How to use a Bitcoin tumbler
To use a Bitcoin tumbler, you need:
- A tor browser or tor-enabled interface to connect to the mixing service
- A Bitcoin Wallet with the Bitcoins you will be mixing
- Transition wallets
Connect to a tor browser and create a new wallet (transition wallet) from a wallet-provider of your choice.
Fund your transition wallet (not in any way connected to you) with your market wallet holding your Bitcoins. The reason why you need your transition wallet is that sending your Bitcoins directly to a tumbling service looks suspicious.
Create a second transition wallet, which is your third and final wallet.
Mix your Bitcoins.
This entails sending your Bitcoins from your first transition wallet to the mixing address. The mixing service will require you to set various parameters, including the address where you will receive the new Bitcoins (the second transition wallet), the amount you wish to mix, and the duration in which the mixing should last.
Send payment to the address provided (your second transition wallet). After you can spend or send the amount, you wish.
Is Bitcoin tumbling safe?
Just like any other service run over the internet, Bitcoin tumbling can be plagued by a number of risks. For instance, most law enforcement agencies work against Bitcoin tumbling services. With the view that they facilitate transactions of criminal funds. A notion that is not entirely correct as most tumblers are used for lawful activities.
Notable, before settling for a tumbler, always ascertain the legitimacy of its operations to avoid losing your hard-earned coins to scammers.
Is Bitcoin tumbling legal?
We cannot deny the fact that tumbling can be a useful tool for someone to launder illegally acquired tokens. However, tumbling your legitimately earned Bitcoins to erase its origins is never a bad idea. There are no specific laws that restrict the tumbling of Bitcoins or any other cryptocurrencies.
Do you need to tumble your Bitcoins?
Overly, if privacy is one of the utmost priorities you consider while transacting with Bitcoins, then tumbling is a necessity for you. You can leverage on a Bitcoin tumbler to erase the origin of your BTC tokens and enjoy anonymous transactions.
However, as aforementioned, you should be extra-cautious of the tumbler you choose to avoid entrusting scammers with your coins. There are plenty of tools to help you learn more and invest in Bitcoin, such as https://bitql.org/ for example.