Chainalysis: Most Mixed Bitcoin Not Used for Illicit Purposes
In a recent webinar titled “Cryptocurrency Typologies: What You Should Know About Who’s Who on the Blockchains,” the blockchain analytics firm suggested that users of mixing services mostly leverage the option for privacy reasons. Many darknet users, in contrast, send their coins directly from exchanges.
That said, while they come from a small minority of all users of mixing services, a large fraction of stolen coins do end up being mixed.
“A lot of people are using mixers just for personal privacy,” explained Hannah Curtis, senior product manager of data at Chainalysis, during the webinar. “But we do know that a lot of illicit funds do end up at mixers.”
The Chainalysis webinar presented a broad overview of
blockchain use cases, which included blockchain analysis of mixers and darknet markets, but also mining pools, ICOs, hosted wallets, ransomware and more. One of the perhaps more surprising conclusions is that Bitcoin mixers — both centralized and “decentralized” versions — appear to be used much more often for privacy purposes than for illicit activity.
Specifically, Chainalysis believes that 8.1 percent of all mixed coins were stolen, while only 2.7 percent of coins had been used on darknet markets. As such, less than one in every 11 coins sent to mixers could be identified as having been used for illicit purposes. Additionally, 1.9 percent of mixed coins came from gambling or betting sites, which could be illegal depending on the jurisdiction of the users and the sites.
In contrast, almost half of all mixed coins were sent from exchanges. This includes 40 percent from traditional exchanges and 7.7 percent from peer-to-peer exchanges. Over a quarter of mixed coins came from other mixers.
It is worth noting, however, that while the 8.1 percent of stolen coins represents a minority of all mixed coins, it does represent a large fraction of all stolen coins. That is to say, most stolen coins are mixed.
While Chainalysis did not go into detail, it appears that centralized mixers receive a bigger share of coins used in illicit activity than “decentralized” mixers. For example, Bestmixer, a centralized mixer that was shut down by law enforcement earlier in 2019, did receive a lot of coins for which the origin of destination could be identified as illicit. The service mixed over 27,000 coins.
Chainalysis noted that “decentralized” mixers like Wasabi Wallet have seen exponential growth this year. Where the wallet mixed around $10 million worth of bitcoin in the first months of 2019, this had grown to about $90 million in August 2019. In total, Wasabi Wallet mixed $250 million worth of bitcoin in 2019, according to Chainalysis. (It should be noted that Chainalysis categorized Wasabi Wallet as “decentralized” because users run the wallet software locally, and possibly because users mix coins directly with each other. Wasabi Wallet’s mixing infrastructure is, in actuality, centralized, though trustless.)