How do Coin Mixers Operate and What are They?
In the ever-evolving world of bitcoin and blockchain, the debate over privacy rages on. Cryptocurrency mixers have captured the attention of both crypto enthusiasts and authorities, steering us into an exciting yet uncertain battle over anonymity.
Back in 2021, the creator of Bitcoin Fog, a well-known mixer service, found himself slapped with charges of money laundering and operating without a license. Fast forward to a year later, the U.S. Treasury Department threw apunch at Ethereum mixer Tornado Cash, labeling it as a means of laundering cash and imposing sanctions on it.
But what are these mysterious crypto mixers? Let's dive in!
Coin mixers are services that help users hide the origin and destination of their transactions, making it nearly impossible for anyone to track their digital breadcrumbs. By sending their coins to the mixer, having them mixed with other users' coins, and then receiving a batch of anonymized coins in return, users can keep their Bitcoin or Ethereum transactions hidden from prying eyes.
There are plenty of legit reasons for wanting privacy in the crypto world—just like in traditional finance. Perhaps you're a journalist, a rebel, or simply someone who values their financial privacy. No one needs their employer or nosey neighbors peeking into their bank transactions!
However, when privacy becomes quasi-anonymous, it attracts the wrong crowd – criminal elements who launder their ill-gotten gains. Law enforcement and government agencies anticipate the use of cryptocurrencies for unsavory activities and have been campaigning against crypto mixers' alleged role in money laundering.
In 2022, the U.S. Treasury Department accused Tornado Cash of laundering over $7 billion worth of virtual currency since its inception in 2019, with about $1.5 billion tied to illicit activity. Shady actors such as Lazarus Group, a state-sponsored North Korean cyber-criminal gang, were observed using Tornado Cash to launder stolen funds.
The conflict between privacy advocates and authorities reached its climax in November 2024 when the Fifth Circuit Court of Appeals found that the Treasury Department had overstepped its bounds by sanctioning Tornado Cash's immutable smart contracts, deeming them as not ownable. The court ruling called the Treasury's designation unlawful, and the mixer was removed from the sanctions list in March 2025.
Bitcoin Fog's founder, Roman Sterlingov, had his day in court in March 2024, resulting in a conviction for money laundering. The founders of Samourai Wallet, another Bitcoin mixer, were arrested and charged with money laundering conspiracy in April 2024. Wasabi Wallet, another popular mixer, blocked U.S. users from its services after the Samourai Wallet incident.
Despite the legal hurdles, privacy advocates continue to fight for the right to use cryptocurrencies without being watched under the all-seeing eye of the panopticon. In response, Mixers like Railgun aim to offer users on-chain privacy while maintaining legality. Will these efforts lead to harmonious coexistence between privacy and compliance in the future? Only time will tell.
- First written in August 2022. Revised in May 2025.
Let's take a look at some scenarios that showcase the utility of using coin mixers and key points from the cryptocurrency landscape:
- Crypto Royalty Supporting the Underdog 👑
Imagine a respected crypto investor named Alex wants to donate some Ethereum to a grassroots activist group. Of course, they don't want their philanthropic act to be traced back to them, so they decide to use a mixer.
Alex heads to the mixer's website, deposits the Ethereum, and sends it to the mixer's smart contract. The funds join a pool with other transactions, leaving no trace of where the funds initially came from. Alex later withdraws the anonymized Ethereum to the recipient's address, ensuring their identity remains confidential.
- Standing Citizen vs. Adversarial Authorities
- Crypto activists safeguarding freedom 🏔
In a dystopian future, a group of digital-rights activists are faced with oppressive governments that seek to suppress their activities. To continue their work without detection, they opt to use a mixer service to fund their operations anonymously.
By sending their crypto funds to the mixer, having them mixed with other users' contributions, and then receiving a batch of anonymized coins in return, the group ensures their financial transactions remain untraceable. This allows them to continue their valuable work without fear of being targeted by adversarial authorities.
- Privacy-conscious Americas at odds with finance 👇
Many Americans are deeply concerned about their personal financial data being sent to big institutions like banks and credit card companies. They value their right to privacy in this area yet wish to participate in the digital currency revolution.
Coin mixers can help in this context by anonymizing transactions, allowing individuals to trade cryptocurrencies without revealing their identities or banking details to third parties. In essence, these services provide peace of mind for privacy-conscious Americans while opening up a world of crypto possibilities.
- Education and self-development in the grayscale zone 📚
In some parts of the world, access to traditional financial services is limited, making it difficult for individuals to fund their education or engage in self-development activities. Cryptocurrencies offer a solution, as they can be sent anonymously through mixers to help bypass restrictions and support personal growth.
- Gambling, entertainment, and general-news platforms 🎲
Online casinos, entertainment platforms, and general-news outlets often require users to make purchases or donations. Some people may want to maintain their privacy while participating in these activities. Coin mixers can help by providing anonymous transactions, thereby preserving users' financial privacy and ensuring their enjoyment of these services remains discreet.
- Disobedience in the crypto arena
