Mixed Signals: Analyzing Ground-Truth Data on the Users and Economics of a Bitcoin Mixing Service

Bitcoin mixing is a commodity, mostly offered in the underground economy, selling anonymity in the bitcoin ecosystem. Its popularity is rather remarkable, as transactions initiated by its users run through wallets of a centralized service where personal identifiable information is collected in the mixing process, without any prior knowledge of data retention policies. This leaves us to wonder if users resort to strategies to mitigate these risks—like the usage of IP proxy services—or test the service with smaller transactions to identify scam services at low' costs.

In this paper, we explore unique ground-truth data capturing 15,574 mixing transactions, initiated by 8,838 users, totaling US $45M worth of bitcoins mixed through BestMixer between July 2018 and June 2019. We find that user adoption of risk mitigation strategies is limited, while transaction volumes users entrust BestMixer are high and usage is frequent and recurrent—with 23% of users returning. Our analysis shows that only 61% of all transactions used some form of IP address obfuscation—i.e., VPN or VPS usage. We discuss possible explanations for these findings, including how information asymmetries and the role of mixers in the process of cashing-out criminal proceeds might force users to accept the risks associated with bitcoin mixing. Furthermore, we address the implications of our findings for the broader cryptocurrency security ecosystem.