Today, a fan's coin was stolen, and after helping him trace it, we found that the coin entered a mixing pool. He was quite confused, so I spent half a day explaining what a mixing pool is. Let's write an article to educate everyone!
A mixing pool, also known as a Cryptocurrency Mixer or CoinJoin (a specific technique), is a service or protocol in the cryptocurrency field aimed at enhancing transaction privacy and anonymity.
Core purpose: Break the link between transactions
Blockchain (especially public chains like Bitcoin and Ethereum) uses addresses instead of real names, but its transactions are public, transparent, and traceable. Through complex on-chain analysis, the source and destination of funds can be traced, thereby removing the anonymity of addresses.
The core function of the mixing pool is to disrupt the on-chain correlation, thereby severing the tracking chain of funds.
The operating principle of the mixing pool
The principle of mixing pools typically involves two steps: aggregation and dispersion.
1. Aggregation
Multiple users (Alice, Bob, Carol...) send the same amount of cryptocurrency they intend to obfuscate (e.g., 1 ETH) to a central pool or a smart contract.
This central pool or smart contract now holds a large sum of mixed funds (e.g., 100 ETH).
2. Dispersion and Output
After a delay, the mixing service will send new, unassociated cryptocurrencies back to each user from this pool.
Key mechanism:
New address: Users will receive funds at the new address they provide.
Randomization: Ensure that what Alice receives is the coins deposited by Bob earlier, or at least coins deposited by other users in the pool, rather than the coins she originally deposited.
Time delay: Introduce a random delay between deposit and withdrawal to make on-chain analysis more difficult to associate transactions through timestamps.
Result: Severing association
For external observers, they can see:
Funds flow from Alice's old address to the mixing pool.
Funds flow from the mixing pool to Alice's new address.
However, analysts cannot determine whether the funds Alice received from the pool are from her own deposits or from other users' deposits in the pool, effectively obscuring the source of the funds.
Risks and controversies of mixing pools
The mixing pool is one of the most controversial technologies in the cryptocurrency world.
1. Privacy protection (positive)
Protecting benign users: For ordinary users, journalists, or political dissidents who wish to protect personal financial privacy, mixing pools are an important tool. For example, users do not want their transaction records of donations to an organization or large purchases to be tracked by the public or the government.
2. Regulatory and security risks (negative)
Money laundering and illegal activities: Mixing pools are widely used by criminals for money laundering, to clean stolen funds or funds from illegal transactions. This has led many countries (such as the United States) to impose severe sanctions on some large mixing services (like Tornado Cash).
Custodial risk: If using centralized mixing services, users need to trust that the service provider will not run away with the funds (Exit Scam) or record and leak transaction information.
Smart contract risk: If a decentralized mixing service based on smart contracts is used, funds may be stolen by hackers if the contract has vulnerabilities.
Mainstream technology types
CoinJoin
A decentralized mixing technology where multiple users collaborate to create a joint transaction. All inputs and outputs of the transaction are mixed together and cannot be distinguished. Commonly used in the Bitcoin ecosystem.
Smart contract-based mixer
Users deposit funds into a DeFi smart contract and withdraw from the contract later. The larger and more active the contract, the stronger the anonymity. Commonly used in the Ethereum ecosystem, such as the former Tornado Cash.
Due to regulatory intervention and technological development, many exchanges and wallets are now beginning to integrate MEV protection or privacy transaction channels, which to some extent also provide anonymity for transactions, but they differ in mechanism from traditional mixing pools.
