What is Mixing Coins (What is the Mixing Circle)

What is Mixing Coins? In cryptocurrency, we often categorize “mixing” as a term for a blend of digital assets. Mixing is an important feature of blockchain networks that enables traders to conduct value transfers faster and more efficiently.

When it comes to the anonymity of cryptocurrencies, Bitcoin and other cryptocurrencies are also considered as mixing tools. However, this statement is not accurate because many people believe that these cryptocurrencies are pseudonymous or associated with fraudulent activities, thus they do not usually belong to the same person.

To help explain the phenomenon of mixing coins (i.e., the occurrence of mixing due to certain reasons), this article will analyze two types of mixing methods and discuss how these two mixing techniques compare to existing mainstream cryptocurrencies.

1. Mixing Method

Mixing coins is achieved through the exchange of various forms of cryptographic tokens. For example, BTC is a specific token whose price is determined by a small portion of exchanges, while ETH is unaffected. Similarly, USDT is a different token whose market value comes from other tokens (such as XRP and BCH) in the same specific address.

2. What does the Bitcoin mining algorithm look like?

The primary design goal of Bitcoin is to ensure that each block contains enough rewards to support the participation of validators. If users do not receive any rewards, they cannot continue using the same amount of new tokens. However, when an entity loses the asset by mistakenly creating multiple new tokens, it can be determined what will happen to all these newly minted cryptocurrencies. (Note: On January 17th, the Bitcoin Core team released a discussion on the Bitcoin mining algorithm, including two concepts: mining algorithm and hash rate mechanism.)

3. What are the benefits of mixing protocols?

1. Decentralization: Due to the large and irreversible transaction volume on the Bitcoin network, people easily question this issue. Most investors do not even know if they own their private keys or passwords. However, over time, the situation has changed significantly, such as the DeFi protocols introduced by some well-known figures, including MakerDAO.

2. “Hiding illegal activities”: Nevertheless, many people claim to “hide illegal activities” and attempt to disguise their true identities in a meaningless way.

3. Are smart contracts secure?

Although there are currently many vulnerabilities, cryptographic funds can still be protected by zero-knowledge proofs (ZKP) technology. In comparison, code-based applications often have advantages over traditional financial systems.

4. Data leakage: Due to malicious software attacks, hackers may obtain a large amount of customer data. This is a serious technical threat.

5. Fabricated contracts/advertising scams: The losses caused by forged contracts and marketing plans can be substantial.

What is the Mixing Circle?

Editor’s Note: This article is from according to Odaily Planet Daily and is authorized to be reproduced.

On June 1, 2018, the cryptocurrency market experienced a day of sharp decline. The prices of Bitcoin and Ethereum fluctuated significantly, but investors still chose to wait for a pullback to buy Bitcoin at its peak. This means that people have started paying attention to the trading behavior in the field of digital assets and whether they are participating in it. At the same time, there is also a saying that this situation is not as “crazy” as some analysts have said, as cryptocurrencies like Bitcoin are undergoing a massive sell-off process (commonly referred to as a bubble), eventually leading to them being seen by others as the next stage of a Ponzi scheme, speculative tool, or even a gambling game—the Mixing Circle. What is the Mixing Circle? Simply put, mixing coins is a new pattern that disperses funds to different addresses through different methods. For example, the two common forms of mixing coins are fiat currency transfers and Bitcoin transfers. Generally, users exchange fiat currency for BTC or ETH and enter the exchange account. After purchasing Bitcoin or ETH with fiat currency, they store the money in a cold wallet for receiving Bitcoin and other cryptocurrencies. If users want to withdraw their Bitcoin from the exchange, they can save their private keys in their pockets. If you want to retain your public key for more than a year, you can directly send it to the designated user and then send it to their private wallet to complete the transaction. (Note: “Money laundering” refers to the influx of funds related to illegal cross-border remittances into virtual currency platforms.) How to avoid the Mixing Circle? Blockchain technology enables anyone to confirm and control ownership of personal identity information without the need for a third party. However, currently, most blockchain-based technologies cannot meet the daily payment needs and operational needs of ordinary people. To address this issue, many projects have adopted layered architectures to handle various business processes and applications in different scenarios, including blockchain developer service providers and smart contract auditing companies. These technologies are open source and tamper-proof, so there are certain risks, such as the possibility of phishing attacks in the event of security incidents. In addition, due to Bitcoin not possessing complete decentralization characteristics, it is vulnerable to hacker attacks, making it difficult for most users to achieve anonymity and security. However, according to data from CoinMarketCap, as of the end of August 2019, there were nearly 1 billion tokens worldwide in a non-circulating state, and this data for 2020 is close to the level at the beginning of December last year, which means that there were over 3 billion active tokens in just the first half of this year, with a total market value of around 2 billion US dollars during the same period, accounting for over 50% of the entire market. Additionally, in the past two years, there have been five Bitcoin-related events globally:1. The first event was the investigation of Bitfinex by the US law enforcement agencies, which claimed that $50 million worth of Bitcoin was lost between unknown wallets. Subsequently, Arthur Hayes, the founder of BitMEX, tweeted a reminder, stating, “This is a typical fraudulent activity.”2. The second event was the hacker attack on OKEx.