Regulation really stepped up in 2016 when the European Union started one of many motions to get bitcoin transactions to be regulated. In other words, to require your identification to do any bitcoin transaction. And of course bitcoin mixers, and bitcoin mixer lists, would get outlawed in the process. Congress was in on it, too.
See, I don’t really have a problem for regulation for buying and selling bitcoins. You gotta prevent money laundering you know.
The problem comes when said regulation requires you to provide identification for performing any kind of bitcoin transaction, whether with a bitcoin mixer or not. This benefits nobody, because inevitably, the regulation is implemented by 3rd party KYC providers who require not just your ID and bank statement, but any or all of the following:
- Employment records as a proof of funds
- A mugshot of you holding your ID
- A picture of you holding your username and current date on a piece of paper
- A live picture of your ID taken from a phone running iOS newestVersion or later
- A live picture of your ID taken from a phone running Android almostNewestVersion or later
- Ditto but a selfie of you choreographically moving your head
- A video call
And even then your application can be denied for no public reason, leaving you stranded with no money, which is exactly what Bitcoin was created to solve. You see, nowadays you need one of the latest smartphones to perform any kind of verification, which is very silly – even banks don’t require that sort of thing!
As someone said over here when the news broke out: “How are they going to end the pseudo-anonymity of something that they don’t even understand?”
Atomic Swaps Are Invented
When you hear the phrase Atomic Swap, your first thought might be “smart contracts” or maybe “Uniswap”. Actually, you are close, but there can be atomic swaps across blockchains besides Ethereum.
Basically, an atomic swap is when two cryptocurrencies are exchanged with each other, without involving a fiat reserve currency. This is a very important pillar of private exchanges because it is very hard to secure millions of dollars in liquidity to operate a successful private exchange. Also, having dollar funds implies that the exchange has access to the banking institutions. But this was in 2017, during the ICO boom and crash, so banks weren’t exactly keen on working with random, unknown exchanges.
According to this site, 2017 saw the first ever atomic swap executed, between Decred and Litecoin. Although the idea existed since around 2012.
Now let me mention that you need the two cryptos to be on the same blockchain in order to make a successful swap. The reason why is because the smart contract feature of the blockchain has to understand what is being traded. So you can’t swap Bitcoin and Monero, for example.
However, what you can do, is write additional software to automatically send Monero, in the correct amount, when someone sends you Bitcoin. Just like how the dollar has an exchange rate with other currencies, you can actually make an exchange rate based on Bitcoin, Ethereum, and so on. The combination of smart contacts and external software would be the force behind the first rise of exchanges.
Mixer Ads
It was around this time that lists of bitcoin mixers were advertised on Bitcointalk, especially BitMixer. It happens to be one of the last major mixers that shut down on its own will. Nowadays it seems that bitcoin mixers would rather operate until they get seized than take their profits and run. For historical reasons, mixer advertisements on Bitcointalk were typically found in user signatures rather than banner ads. This was due to forum policies restricting certain types of advertising (at the time), and mixers preferred the flexibility and reach of signature campaigns to promote their services discreetly.
This is only relevant to this page because Bitcointalk has advertisements for all sorts of things, in the past you would usually see banner ads below the first post on the page, usually for some casino since they have tons of money. But if you’re wondering why you don’t see them anymore, you should read this post.
In particular, bitcoin mixers never bought banner ads (at least as far as I was a member), but they did rent signature areas on some “legendary” user accounts. And they bought a lot of them. These signatures could be rented out for a hundred or so dollars per week, and it was common to see a lot of bitcoin mixer ads when you browsed Bitcointalk. In fact they started off with a rate in BTC, but after the 2021 bull run, the rate became so extraordinary in some campaigns that they had to switch to dollar rates.
It is also around this time that more bitcoin mixers popped up and started to gain traction. Besides BitMixer, there were in this time period CoinMixer, ChipMixer, and the now-infamous Bitcoin Fog and Helix. The latter two were seized around this time.
Bitcoin Mixers and Extortion
In addition to cybercrime, which hackers were already savvy enough to pull off, in 2017 we saw a surge in physical robberies and extortion. While everyone was distracted by the block size debate, thugs heard about bitcoin’s meteoric rise in price. They started finding ways to intimidate wealthy OGs to fess up their fortunes. The ones who didn’t get caught either lived in a jurisdiction with an incompetent police force, or used a bitcoin mixer to cover up their tracks. This basically dominated the news all year.
Also as a result of this, more countries started to ban Bitcoin, in addition to Russia and China. Some of these countries have revised their bans in the wake of central bank digital currencies, probably because they want to catch the train before it leaves the station.
More bitcoin mixers keep popping up throughout 2017 and 2018, and this is when the rise of blockchain analysis truly takes center stage. For instance, Binance started a partnership with Chainalysis to detect coins coming from a mixer. To the casual onlooker of Bitcointalk’s archives, it looks as if the crime rate is getting out of control. And yet, the world governments were not too bothered to do anything about mixers, yet.
Jambler – Mixer Meets Minter
Jambler was launched in 2018, as a platform to bring mixers and coin suppliers such as miners and exchanges together. Its not a mixer itself, but it makes it easy for anyone to start their own mixer.
Recall that the purpose of a mixer is to obfuscate bitcoins. So how do you do that? Well, first you have to get your own coins, and you have to make sure that they are not flagged by any blockchain analysis. In other words, making sure they are “clean” and not “dirty”. Now that you know that, where do you get those coins from? The answer: Exchange withdrawals and miners.
When a bitcoin miner mines a block, it contains a coinbase transaction with some BTC inside it. This is what they call “clean” bitcoins, with no transaction history. Jambler sources coins from bitcoin miners and resells them to mixers. This allows the mixers to give their customers coins that are not flagged, and the next customer’s bitcoins are taken from the pool of previous customers’ coins, and so on.
Exchange withdrawals are perhaps sought even more than mined blocks, because they are easier to find than blocks. After all, miners mine a block every 10 minutes on average. The exchanges process hundreds of withdrawals during that time period. These coins go through a scoring system to make sure that they aren’t dirty. And if they are good, Jambler sends them to the mixers.
Remarkably, Jambler is still standing today, when almost all mixers from that time period have failed. A lot of mixers would piggyback on Jambler in the coming years.
The First Wave Of Private Exchanges
There are a lot of exchanges on many blockchains that are bloated and have useless features such as staking, and so on. I’m not talking about that stuff. Those platforms are very fragile and keep getting hacked (usually by the guys in the last section). Instead, I am referring to the simple ones that use atomic swaps and custom software to swap common coins like Bitcoin and Monero.
Private exchanges which let you privately buy and sell privacy coins without KYC emerged, such as Bisq, LocalMonero, and TradeOgre. These exchanges do not collect KYC and let you exchange different cryptocurrencies. As a corollary, none of these sites let you trade in fiat.
Exchanges are useful because privacy coins like Monero have an obfuscated blockchain which makes blockchain analysis impossible. So if you sell your bitcoins for Monero, send them to another exchange, and then buy someone else’s bitcoins with your Monero, you completely detach your transaction history.
However, it is important to note that in this regard, a exchange is like a bitcoin mixer. If someone looks at the Bitcoin transaction flow, it could de-anonymize you. In that sense, using more than one exchange is recommended as I described above, because the intermediate withdrawal and deposit of Monero cannot be traced. The same cannot be said about mixers. If all of the mixers used in a sequence are compromised, you might be de-anonymized.
Enhanced CoinJoins
It is around this time that the Wasabi and Samourai wallets were created. These two wallets are not like ordinary wallets – they have a service which automatically performs CoinJoins of bitcoins that you receive from your wallet. This provides a major advantage for users in that they don’t need to look at a bitcoin mixer list to pick a mixer. These services are generally called coordinators, and can be either private or centralized.
These wallets are different from JoinMarket by having many user-friendly features that a normal wallet would have, and they are very similar to mixers in that they obfuscate the source and destination of funds. But a key difference they have from bitcoin mixers is that it is impossible for the coordinators to identify you or steal your coins.
Samourai Wallet
Let’s start with the older of the two. Although Samourai Wallet itself was created in 2015, its Whirlpool Coinjoin implementation was not made until 2018. Whirlpool integrated post-mix tools within the Samourai Wallet, providing users with features like PayNym (payment codes that use unique addresses). It supported multiple rounds of mixing, allowing users to achieve higher levels of privacy by participating in subsequent mixing cycles.
Besides Paynym, it also used additional techniques to help bounce blockchain analysis away such as Stonewall and Ricochet. Users had the flexibility to choose between different fee structures for mixing, including “Fast,” “Standard,” and “Slow” options, depending on their preferences and urgency.
Already, this array of tools was much more than what traditional mixers provide. So by participating in Whirlpool mixing, Samourai Wallet users could significantly enhance the privacy and fungibility of their Bitcoin holdings. Whirlpool coinjoins were run by a central coordinator. Efforts were made in early 2024 to create decentralized Whirpool coordinators, but never really caught on.
Wasabi Wallet
Wasabi Wallet (not to be confused with the cloud storage service) is a newer wallet software that was created and announced on 2018. As explained in the post, Wasabi was a re-branding of another wallet called HiddenWallet, which used the ZeroLink coinjoin protocol, and they made their own CoinJoin protocol called WabiSabi. It is a BIP-157 light client.
WabiSabi is designed to be a non-interactive Chaumian CoinJoin protocol, meaning that users do not need to actively coordinate with each other during the mixing process. Just like Whirlpool. It uses Schnorr signatures introduced in Taproot, and unlike some previous CoinJoin implementations that used fixed denominations, WabiSabi allows for variable denominations, providing more flexibility in transaction amounts.
The WabiSabi coordinator is ran by a company called zkSNACKs, who also employ the Wasabi Wallet developers. Sometime around March 2022, a few months after the release of a brand new version 2.0, they announced that they would start developing an address blacklist to prevent mixing of laundered money. Remember what I wrote about address blacklisting? Yeah, the community didn’t take that well.
Ever since then, there has been endless arguing about the yet-to-be-developed blacklist on the old Wasabi Wallet ANN thread. If you ask me, I’m not a fan of blacklisting, but as long as it never pulls a Binance and prevents people from using their coins, I’m good.
There do exist alternative Wasabi coordinators, but they are as scarce as mixers. Anybody is able to run a Wasabi coordinator (as well as a Whirlpool coordinator) if they want to.
Disadvantages Of Enhanced CoinJoin Wallets
Well, there is only one important disadvantage: They are easy targets for law enforcement. Neither of the two coordinators I just mentioned exist anymore. There isn’t so much of a technological disadvantage as much as a legal disadvantage.
It is important to note that running a coordinator is completely legal. It’s only when money launderers use your service when the problem comes, as you don’t have the funds or resources to detect that. Besides, that would defeat the entire purpose of CoinJoin which is to make all bitcoins equal. Non-fungible in other words.
A few trivial disadvantages for using an enhanced coinjoin wallet:
- Bitcoin mixers make less money off of you
- There are less bitcoins for the feds to seize if they ever shut down a mixer
- Endless drama between competing wallet developers
- You won’t need to look at a bitcoin mixer list like this one (just kidding)
Hopefully none of these disadvantages put you off of these powerful wallets. Except maybe the last one, but you can always come back to my bitcoin mixer list at any time to see new updates about CoinJoin technology.
Meanwhile, bitcoin mixers became ever more popular thanks to them spending even more money on advertisement, especially on Bitcointalk. This would be the subject of a lot of infighting and disagreement.
