ChipMixer for Transaction Anonymity — But I Received Coins from the Binance Hack!! by Cobo Vault

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We all know that bitcoin is not exactly anonymous. While bitcoin addresses are not tied to real-world identities; with a bit of effort, they can be. It is possible to connect multiple nodes within the blockchain and discover the source of a specific transaction. It’s also possible to figure out who’s using cryptocurrency, and for what reasons, by carefully analyzing the blockchain, and through the Know Your Customer (KYC) or Anti-Money Laundering (AML) regulations.
In our previous article on the Dusting Attack, we explored the method employed by hackers, law enforcement services, etc., to uncover the identity behind a specific transaction.
Following the article, we got a lot of questions around cryptocurrency security, and the use of ChipMixer, a popular bitcoin mixer or tumbler, to ensure transaction anonymity.
We did some digging and here’s what we found.
Most bitcoin mixers and tumblers combine your bitcoins with other users’ bitcoins and the mixer’s own reserves. They then send the equivalent of your original deposit in someone else’s bitcoins to the address that you specify.
ChipMixer, however, uses a different approach. Instead of combining your bitcoins with those of other users, they use a chip-based system for increased privacy. When users deposit bitcoin to the address given by ChipMixer, they receive its equivalent in chips, along with the private key to spend them at any time they want to.

Each chip has a predetermined value backed by bitcoin addresses that have already been set up and prefunded by ChipMixer. There are chips worth 0.001 BTC, 0.002 BTC, 0.004 BTC, etc., that go up to 4.096 BTC. For example, if you deposited 0.1 BTC, you would probably receive three chips worth 0.064, 0.032, and 0.004 BTC.
Since those chips have already been prefunded before your deposit, there is no direct link between them and your deposit on the blockchain. You can then split, merge, bet, donate or withdraw your chips. If you’d like to delve a bit deeper into how this works, here’s an article that will help, or you could also check out the FAQ section of their website.
But do you know where the funding for the chips come from? What is the source of those coins?
The funding comes from previous deposits, and they could be coins that have a bad history — coins that were hacked, stolen, involved in shady deals, etc. And while, ChipMixer’s innovation is about changing ownership of coins via private keys, it does not include taking tainted coins and washing them “clean.” The transaction history of those coins is still somewhere there on the blockchain — difficult to trace maybe, but not impossible.
For all you know you could be depositing clean coins (maybe you use ChipMixer for added security and anonymity in your transactions), and receiving tainted coins in the address you specify. You could get a coin that is valid at the time you receive it, but a few weeks or months later a hacker’s address is traced, and your coin becomes tainted.
And there lies the problem.
But ChipMixer has a solution for that — when you receive the private keys from them, you also get a signed receipt which says “Chips for those addresses were withdrawn from ChipMixer”. Is that adequate assurance?
In fiat terms, it dates back to a 17th century court case that concludes — If you receive a note that was involved in a theft, 10 transactions ago, and the police investigate the theft, they have no right to remove the ten dollar note from your pocket. It’s not your fault that it was involved in a previous crime.
Ditto for cryptocurrency — if you happen to own a tainted coin through no fault of yours, how can you be blamed for it?
But that’s a risk you should take into account. Considering that close to 4836 BTC of the 7074 BTC stolen from Binance earlier this year were laundered using ChipMixer, you can be sure that at least some of the output you receive will contain these stolen coins. And at some point in the future, Binance might uncover this and ban you from trading those coins on the exchange — that’s definitely a possibility.
That brings us to one important question — do you want to risk it?
It’s true that while a significant portion of the mixed bitcoin is used by individuals mostly concerned with anonymity and protecting their funds from hackers, mixing is still an option for criminals to get away with their ill-gotten funds. It shouldn’t come as a surprise if coins from other hacks and scams have also been sent to mixers to enable money laundering. To add to this, the general mindset is that only those individuals involved in shady deals use such services.
The cryptocurrency industry has been plagued with controversy, hacks and scams, but it’s also continuing to grow and evolve. Regulations are being put in place, and there may come a time in the future when 10% of hundreds of millions’ worth of mixed bitcoin might be considered unsuitable for trading, or might be traded for much lower than its worth. What if something like that happens to you?
If, on the other hand, you don’t want others to know where you spend your coins or how much you own….
If you don’t want to connect one particular transaction to your previous record….
Using ChipMixer is definitely a choice that’s open to you, but are willing to consider it in spite of the risks involved? Or is there something else that you can do?
We’d like to hear your thoughts on this. Do reach out to us on Twitter, Facebook, or Telegram! https://t.me/CoboVault