What The Heck Is A Crypto Tumbler And Is It Even Legal?
While you may assume that a decentralised currency like Bitcoin or Ethereum is anonymous, that isnt entirely the case. Thanks to the blockchain, which is essentially the conveyor belt upon which all cryptocurrency is built. And thanks to analysis tools and specialist investigators, its possible to trace back a transaction, or a coin itself, right back to its inception. Unfortunately, this isnt great if you are partaking in illegal activity, or trying to cover your tracks for a non-criminal reason. But thats where tumblers come in. No, not Tumblr. Were talking about Bitcoin (and other crypto) tumblers. For obvious legal reasons, nothing in this article is suggesting that you should partake in criminal activity relating to cryptocurrency. Sorry rims  were not Crimemodo. Also, this article is not to be taken as legal and/or financial advice. Gizmodo Australia is not suggesting you should use a cryptocurrency tumbler. The Bitcoin blockchain is a completely open platform, which means anybody can download the entire chain and read every transaction, coin and wallet address that has ever been linked to the cryptocurrency. Most cryptocurrencies operate on a similar system, which means that youre never truly anonymous. While most of us arent scouring through the blockchain archives reading each transaction, this information is out there and can be used to track down exactly which wallet sent or received a specific coin. And if your wallet is linked to you IRL identity documents like your bank account or drivers license, this could eventually be traced back to you. READ MORE Bitcoin's Price Plummets as China Cracks Down on Trades  What Is A Cryptocurrency Tumbler  A cryptocurrency tumbler  also known as a crypto mixer or crypto mixing service  is a paid service in which you can mix potentially traceable coins (for example, stolen coins) with other, clean coins in an effort to make it harder to trace them. To put it simply, lets first take a look at how normal, un-tumbled transactions look on the blockchain. If I were to send one Bitcoin to Steven, who then sends the same Bitcoin to John, who then sends it to Alex, you would still be able to link Alexs 1x Bitcoin to me through our wallet address transactions. While this is fine when youre doing regular, non-shady business, there are plenty of times in which people would prefer this information not to be so easily traced back to them. And thats where tumblers come in. This is exactly what we saw happen with some $3 billion worth of cryptocurrency that is currently M.I.A as a result of the developing Africrypt situation. Basically, a tumbler service is like a blender. You input the coin in which you wish to hide, it gets chopped up into pieces and mixed with a bunch of other, clean coins, and then spat back out to random addresses. To make it even more hard to trace, most tumblers also randomise the amount that they pay you back. Youll still get your full value back (minus the transaction fee) but instead of being one Bitcoin, it might be four or five fractions of a Bitcoin in separate transactions. Sure, so long as youre not doing it to hide otherwise illegal activity. If youre going to this effort purely to protect your own privacy (at the cost of the transaction fees, of course), go your hardest. There are no specific laws that prohibit cryptocurrency tumbling. However, using a cryptocurrency tumbler to conceal other illegal activity could still land you in hot water. Additionally, you really dont want to be trying to hide your capital gains using a crypto tumbler because crypto is treated as legal property in Australia and is therefore subject to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF 2006). Secondl, blockchain forensic tools can usually still catch you, so youd be spending money for no reason, really. If youre genuinely just doing it to protect your privacy on the blockchain, you should be fine, but its well worth looking into your legal obligations in regards to money laundering before you decide to do this. While cryptocurrency tumblers arent necessarily illegal, its still considered quite risky, even if youre not personally doing the wrong thing. Because these mixers work by distributing coins at random, theres no telling where your coin actually came from. While you wouldnt be guilty by association if your coin was obtained illegally, your coins could still be seized (depending on where in the world you are) if theyre found to be stolen. While cryptocurrency tumblers can obscure your information and make it harder to trace your transactions, it simply cannot be stressed enough that they dont make your coins completely untraceable.