Is There a Place For Crypto Mixers?

July 22, 2020 01:14 PM
Twitter hackers used a crypto mixer
Wasabit and ChipMixer
There's potential to support both legitimate and illegitimate transactions
Crypto and Bitcoin Market Cap Story of Day

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CRYPTO MOVERS AND PRICES

 

 

 
 
Crypto was flat again as the space's as the space's crazy record of low volatility continues. Needless to say, volumes remain depressed.

CRYPTO STORY OF THE DAY

Last week’s Twitter hack sparked discussions surrounding crypto mixers. These are services that obfuscate past transactions of a coin. In the Twitter situation, the hackers managed to receive about USD 120,000 equivalent of bitcoin (BTC). Immediately observers of the space began to watch how the perpetrators would attempt to cash out the stolen coin. Blockchain analytics firm Ciphertrace noted on Monday that the hacker had moved, “…funds to exchanges, peer-to-peer marketplaces, mixing services, and gambling sites in an attempt to cash out and further obfuscate funds.”

Crypto mixers are software or organizations that hide past transactions of a coin, thus introducing greater privacy to transacting on the network. Mixers employ a variety of techniques and can be centralized or decentralized. Centralized mixers receive one batch of coin and return a new and different batch. Decentralized mixers, on the other hand, usually involve software that lets several users collaborate and mix coins with limited trust. The mixers in question are Wasabi, a noncustodial, open-source wallet that utilizes CoinJoins for enhanced privacy, and ChipMixer, a tool for users to obfuscate their funds by either splitting, merging, betting, or withdrawing “chips” - pre-funded tokens in the sum of the value of the originally deposited funds. The hacker’s ongoing attempts to launder the illicit funds have been closely watched by firms like Ciphertrace, Chanalysis, or Elliptic, which offer deep analytics of blockchain transactions. 

The Twitter hack has brought mixers into the peripherals of a highly-publicized event. It appears they are likely to receive fresh scrutiny. Previously though, mixers have seen differing action from global regulators. For example, in February 2020 an Ohio man was arrested for “…his operation of Helix, a Darknet-based cryptocurrency laundering service.” However, FINCEN’s 2019 guidance on crypto clarified that an “anonymizing software provider is not a money transmitter.”  The guidance, though applicable only in the U.S., shows the legal durability of open source and decentralized mixing services. While any focus around the technology has often focused on anti-money laundrying vulnerabilities, crypto privacy tech has found credible support beyond use in illicit circumstances. For example, the New York-based Human Rights Foundation, awarded a $50,000 grant to a developer working on CoinJoin mixing technology, ostensibly for victims in regions suffering from oppression in an effort to restrict oppressors' ability to track coins. Moreover, one could easily imagine circumstances where a legitimate business chooses to obfuscate its BTC transactions, i.e. a BTC payment processor wishing to keep financial results private. Ultimately, the use case of mixing technology is nuanced and has the potential to support both legitimate and illegitimate practices.

 

 

About the Author

FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets. You can subscribe to FRNT Financial Morning Note at https://www.frnt.io/morningnote