Blockchain analysis explained - why you need a bitcoin tumbler
Blockchain analysis is a form of blockchain data discovery that is popular with regulators, exchanges, and private institutions, but little known to everyday investors.
What is blockchain analysis, you ask? Essentially, it is the act of parsing freely available blockchain data into actionable information. Usually, this actionable information is useful for law enforcement agencies who are looking to enforce rule of law, compliance, and tax regulations on crypto investors.
It is, therefore, necessary for you to use a bitcoin tumbler to protect your privacy from this very powerful – and popular – analysis method. However, it isn’t only governments who are using blockchain analysis.
Cryptocurrency exchanges like Coinbase and Binance are employing top blockchain analytics companies like Chainalysis to help them enforce compliance with KYC and AML measures. In effect, the blockchain is becoming smaller and smaller. Whereas it started out as Satoshi Nakamoto’s vision for an economic system free from tyranny, it is rapidly becoming another big brother controlled financial system.
Bitcoin tumblers, however, are the only route available to you if you seek privacy and to reside in the crypto sphere within the original vision set up by Nakamoto. Before understanding this point, though, let’s take a deeper look at what blockchain analysis is.
Blockchain analysis uncovers your blockchain secrets
Bringing up blockchain analysis amongst the crypto faithful these days is one way to bring a heated topic into the room. With firms like Chainalysis scoring huge funding from some of the tech world’s largest venture capital firms, it is no wonder that many are concerned about the move blockchain is making toward control, surveillance, and regulation.
What’s more, with some firms scoring record funding, the race for more firms to come into the picture is well and truly on. Since Chainalysis’s early success, several other prominent startups have landed on the scene, including Parsiq and others.
These blockchain analysis groups like to refer to themselves as blockchain intelligence and risk monitoring platforms. That sounds nice and helpful, sure, but intelligence and risk monitoring for who exactly? The answer is: the highest bidder.
If you have the money and clout to secure a contract with one of these firms, then you can use their firepower in the direction you want or need. While it is unlikely that cyber-criminals will employ blockchain analysis firms, it is certainly likely that playmakers like Binance will.
Why should you care? Because blockchain analysis easily gets to the bottom of who owns what where blockchains are concerned. If you think that just because your bitcoin wealth is hidden behind a public and private key combination, then think again.
With every blockchain transaction you’ve ever done, you’ve created a breadcrumb trail leading straight back to your identity. Sometimes that identity is your physical one, other times, it is your IP address or exchange wallet.
Regardless of which identifier it is, the point is that blockchain analysis almost always gets its man.
Out run blockchain analysis with a bitcoin tumbler
The only way to get out from under blockchain analysis’ oversized magnifying glass is by using a bitcoin tumbler. Tumblers are remarkably simple tools for breaking the link between your identifying transaction history and a new wallet you create for yourself to keep your wealth in.
Basically, all it takes to use a tumbler is sending some BTC to a trusted service like Tumbler.io, then waiting for a few confirmations for the blender to send protected BTC to your new wallet.
You specify the wallet address at the start of the order, and Tumbler.io also gives you a unique one-time-use deposit address for security reasons. Everything happens in a matter of minutes, and after the process is finished, your new wallet contains BTC that can’t be traced back to you in any way.
Blockchain privacy matters
Some blockchain users out there wonder why they should use a bitcoin mixer if they haven’t done anything wrong. That’s a fair question, but the answer is clear – even if you haven’t done anything wrong, someone in your transaction history might have.
Going a step further, it is possible that someone you have sent BTC to will use that BTC in an illicit manner later, too, meaning if someone investigates that particular user, the trail can easily lead back to your wallet.
The simplicity of tracing bitcoin on the public blockchain makes it simple for blockchain analysis to implicate innocent users like yourself in potentially illicit blockchain activities. Additionally, if governments decide to implement tax regulations affecting your back history, then your transaction details, which are self-evident, will provide ample evidence for them to tax you as they see fit.
This is where blockchain privacy really matters. You simply can not afford to gamble with your bitcoin wealth.
How does tumbling work?
A bitcoin tumbler is an elegant and simple tool.
The way it works, in a nutshell, is by taking your possibly traced BTC, and giving you a mixture of BTC belonging to others. This bitcoin is kept in a reserve pool and has an accountable history, meaning it has been blended and no longer contains an easily isolated transaction path.
In this way, you can rest assured that the BTC you receive from a trusted bitcoin mixer like Tumbler.io is secure. Additionally, you’ll receive a unique code that you can input upon subsequent mixes. The purpose of this code is to ensure that you never receive a single trace of your old BTC back.
Mixing is the only way to completely protect your new wallet from the transaction history associated with the old one. If you think there is another way to do this, then you are mistaken – but it is better to be mistaken and realize it than to be mistaken without knowing it at all.
Once your bitcoin has been properly mixed, you can send it to other wallets without worrying about the implications. However, if you receive BTC from a source other than a blender or one of your anonymized wallets, then you will have to repeat the process again.
Staying a step ahead of blockchain analysis is simple if you stay aware.
Disclaimer: This article is not intended to provide financial advice or promote the use of Bitcoin and other cryptocurrencies. Its main purpose is to inform, explain, and educate. Readers must make their own decisions regarding the use of such services.