Mixing Services

A mixing service (sometimes known as a tumbler) is a service that obscures the audit trail back to a cryptoasset’s original source. This is usually achieved by breaking the link between the fund’s input address and output address, thereby allowing an identifiable or “tainted” asset to become anonymous and untainted.

This in turn enables assets passing through the mixer to regain (or retain) their fungibility, which is crucial characteristic of sound money. If the fungibility of an asset class is not safe- guarded, it cannot serve as a reliable and stable store of value, and therefore cannot be re- garded as a hard currency.

For background, United Protocol introduced the notion of providing privacy using mixing methods in. A survey of techniques used by mixing services is provided in.

Loopix is a recently proposed mixing-based anonymity system.It uses a mixing tech- nique that is based on the independent delaying of messages, which makes the timings of packets unlinkable. Moreover, Loopix introduces a number of types of decoy traffic to thwart de-anonymization attacks.

The two main factors that affect the level of privacy offered by mixing services are:

• the size of the anonymity set,

• the volume of transactions in the anonymous pool prior to withdrawal, often proxied by time in the pool.

The larger these two parameters are, the harder it is for a third-party observers to track the flow of the anonymized cryptoassets, and conversely, the higher the level of plausible denia- bility a user can claim about their transaction activities.

Layer 2 solutions provide privacy by mixing transactions off-chain before committing on chain, through the use of e.g. ZK-Rollups. Besides processing users’ balances privately, this often allows many transactions to be bundled together off-chain which are periodically synchro-nized onto the blockchain in a highly compressed form. This approach increases transaction throughput and provides savings in transaction fees such as gas costs when operating on top of Ethereum, although it is likely to result in increased transaction latency.A survey of Layer 2 privacy enhancing solutions is provided in.