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I want to buy service Z.

I have 2 addresses in my bitcoin wallet: aaa and bbb.

I buy 1 bitcoin from coinbase and tell coinbase to send them to aaa.

Now I send them from aaa to bbb. No one else knows that bbb is also in my wallet.

I buy service Z by sending my bitcoin from bbb to Zwallet.

I'm safe. Yes? Safe ish? Not safe at all? Dead already?

I couldn't find this question asked in such stupid terms. I'm an idiot and need simple questions and answers.

Thanks for your understanding.

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    Nobody knows... but they can certainly suspect, and it would be obvious to them that you might try this. So to some extent it depends on your requirements: is it necessary that nobody even suspect that you sent funds to Z, or just necessary that nobody can prove it?
    – Nate Eldredge
    Sep 18, 2016 at 21:08
  • Is there a way of preventing people from even suspecting? Am I right in thinking that coin tumblers just do the same thing, but a bit more?
    – tobuslieven
    Sep 19, 2016 at 7:58

1 Answer 1

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Let's assume you're the outside observer. You see 1 BTC go from aaa to bbb, then from bbb to ccc, then from ccc to ddd, and them from ddd to zzz (zzz being associated with service Z). Can you see how easy it is to figure out that addresses aaa, bbb, ccc, and ddd belong to the same person?

It doesn't even get much better if you split the money to different addresses and then reunite it. How often do you think some money flow like happens without aaa and ddd belonging to the same person?

That's why people use so-called mixing services. A mixing service collects money from several people, as well as addresses to pay the money out to.

As an outside observer, even if you know who the respective owners of addresses 111, aaa, ααα, and 字字字 are, you cannot determine who paid money to zzz, whereas in the first 2 examples, it's pretty obvious what probably happened.

This, of course, is simplified. Similar to how a criminals hiding the origin of their fiat money wouldn't move it to a single bank account in a different country and then back to where they live, mixing services don't give the users their money back after a single iteration. Instead, the money is mixed several times. A graphic showing many iterations and funds of many people, however, wouldn't get the point across very well.

This doesn't help, of course, if an outside observer can match which addresses belong to whom based on how much money went from aaa through the mixer to ΨΨΨ. To prevent such a mapping, the mixer may send money of equal amounts to many addresses. Of course it's a bad idea to reunite the funds afterwards because this makes the owner trackable by amount again.

Note that using a mixing service might be illegal under money laundering laws where you live, especially if it's done with a large amount of money.

Furthermore, a mixing service may just be a scam and the owner will run off with the money given to them.

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  • one notice to your graphic: wouldn't a mixer also use various (onetime) addresses (instead of one like suggested in the graphic)?
    – DJCrashdummy
    Nov 20, 2016 at 11:33
  • @DJCrashdummy This wasn't intended to be implied but I can see how one would take this from it and will clarify it.
    – UTF-8
    Nov 20, 2016 at 13:42

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