Blockchain

How is Bitcoin Mixing Done?

In light of a recent article published by Business Insider about Bitcoin mixing services, I thought it might be useful to give some background on how this process works. While it is not an ideal solution, it is one that will likely be discussed in business meetings and discussions in the future.

As any business people reading this, I’m sure you can imagine the situation. You’re trying to determine how to proceed with a client whose investment funds are being held offshore. Your question is: how do we move these funds to our clients’ account?

Of course, you’ll be keen to learn that with the advent of sophisticated web technologies, and easy to use open source software that’s been designed specifically for the purpose of conducting international transactions, we now have the answers to all of these questions. In other words, we have the means to move large amounts of money out of the country without raising suspicions or causing the client to turn their back on you as a viable business partner.

Thankfully, there are numerous options available today. Depending on your needs, you can provide either a commercial service or a service that is available to the general public.

One way to go is to provide a commercial service that provides a two way “mixing” system. In the “two way” part of the term, this refers to the fact that there is a third party involved, usually a payment processor that will conduct the actual bitcoin transaction.

The method here would be to allow you to run a website that is “free”, but which can be tailored to support SEO and integrate with a number of “up and coming” social media sites such as LinkedIn and Facebook. Since this third party will not have access to the client’s private keys, there will be no risk of the client stealing private information from you or misusing your services.

For those that require more security, your commercial service could take the form of encrypting the client’s private key, so that the third party cannot see the private key or “possess” it. This will obviously only be possible if the third party is able to transfer the funds into your customer’s account.

Obviously, the main and obvious problem with this approach is that if the third party becomes compromised, it could lead to the client losing their funds. You’ll need to assure your customers that the services they’re getting are secure and that the third party will not have access to their private keys.

>> How to buy Bitcoin in Indonesia

Another option available to you is to provide a commercial service that is supported by a payment processor that operates strictly according to the law. This may not be in line with your business philosophy, but it will certainly be much easier to run than a service that takes your clients’ money and runs away with it.

As an example, let’s say that your clients are in Kenya and Iran. Assuming that your clients operate a private bank account in the USA, you may have a hard time proving a link between the funds and your clients’ private information.

In this case, you may be able to link the actual mtgox transaction to the destination of the funds. This won’t help you in either preventing loss or recovering your funds, but it will at least prevent the loss of your clients’ funds.

In conclusion, even though both of these options are becoming more popular, the traditional methods of bitcoin “mixing” (which involve using a third party) may be just fine for your situation. You just need to ensure that you conduct due diligence and obtain all of the relevant information before you engage in this type of transaction.

About author

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A technology enthusiast since childhood, Ryan is known for his impeccable knowledge in the technology and gadgets niche. He has been working with TheTechly as a contributor for Tech/Gadgets category and his articles are always well-researched and accurate.
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