500 unrelated accounts all deposit money into a single shared account. From that shared account, payments are made to 1,000 other accounts. None of the amounts match the original deposits, even when summed. Whose money is whose?

This is an oversimplification, but it should give you a rough idea of how difficult it is to trace Bitcoin.

Authorities might already know mixers service providers and a subpoena will give them all info they need. Not sure tho, I haven't used bitcoin but there always be weak link somewhere

How are you going to identify them? When they cash out, all their Bitcoin has already been laundered.

Granted, this is all theoretical. In practice, it’s not unusual for such people to make mistakes that reveal their identity; however, there’s nothing inherent to Bitcoin that ensures they can be de-anonymized.

Usually they attempt to go after hosting providers, but when the services are only accessible by Tor and they’re using bulletproof hosting—hosting providers who do their best to avoid law enforcement—that’s no easy feat. It’s not impossible, but it can be both a technical and diplomatic nightmare.

I would be very surprised if any mixer operators are located in places that care in the slightest about a US subpoena (russia, etc).

You clearly have no idea what you're talking about.

> This is an oversimplification, but it should give you a rough idea of how difficult it is to trace Bitcoin.

You'd be surprised. The feds have very advanced taint analysis if they have reason to go after you.

When you use a mixer, there’s a delay between when you put your money in and when it comes back out. The mixing service randomly splits up the transaction into batches and sends them out at different times. So even if you know that somebody sent to a mixer (perhaps as an investigator you could find out mixer addresses by sending lots of transactions to the mixer service yourself), you wouldn’t be able to associate those inputs with any particular output.

If the mixer has a lot of users, at best you could determine that the your target is among the entire set of people who used the mixer this hour/day. Although if the mixer was compromised, you’d have everything. That does seem like a substantial risk. It’s kind of like deciding to trust your vpn. You could mitigate that risk by using multiple mixers.

Wouldn't using multiple mixers increase the risk? You only need to be traced once.

I would not split your transaction between mixers, but instead mix your entire amount through one, then mix all of the outputs through others. Use multiple mixers in series, not in parallel. Compromising one mixer there would associate the inputs and outputs of that step but wouldn’t associate your initial input with your final output. You’d also want to conceal your ip at every step so you don’t get compromised that way either.

Would there not be a huge danger that a mixer operator, if they received $4m+ of BTC in one big transfer, could simply shut down immediately and pull what's known as an 'exit scam'? They would be in possession of the BTC and could themselves then launder it through other mixers.

Perhaps they might do this if the saw keeping the entire 4m as much more lucrative than many years of taking the percentage skimmed off the top from a number of smaller transactions, and just going into "retirement".

You’d only want to use a mixer where your transaction represents a small fraction of the total volume (otherwise it doesn’t provide much anonymity). An exit scam isn’t so appealing in that case. If a mixer charges a 1% fee, with an average delay of 1 hour, the ongoing fee earns more than a one-time exit scam of all transactions in flight after just four or five days. It takes time to establish a reputable mixer and scale up, so your wouldn’t ruin it just to get under a week of profit early. Maybe they’d choose to do the exit scam if a really anomalous huge sum showed up, which is so large they can’t mix it effectively anyway. I don’t know if $4M is a lot by those standards.

Maybe I'm woefully out of touch on the scale of the BTC flowing through mixers on a daily and weekly basis, but if they can earn more than 4M USD in a year by just skimming off the 1%, that's a lot of BTC moving...

In that case, you split your initial sum and run through multiple sequential series in parallel. You produce more crackable sequences, but you still need to crack an entire sequence to trace the owner.

>you could find out mixer addresses

Why would the mixer need to reuse addresses when you could create a brand new one each time.

Investigators could be sending many small transactions into the mixer all the time. Depending on the transaction volume and how the mixer works, they could identify most of the mixer’s transactions this way. This would allow them to show that somebody sent money to or received money from the mixer.

I think one of the ideas of mixers is to achieve such a large volume of transactions that dedicating man-hours and personnel resources to tracking down every transaction path becomes cost prohibitive on the part of a law enforcement organization.

The idea is that you can't track any of the transaction paths. There's nothing tying a specific input transaction to a specific output transaction, and great pains are taken to ensure there cannot be any publicly available link.

If you understand enough about Bitcoin to know how the immutable ledger works, your questions feel bad faith. One of the biggest “selling points” early on was obviously anonymity.