The use of cryptocurrency mixers reached a record high in 2022, according to a report by Chainalysis. And there’s a shift in the majority addresses sending their funds there. Zoom in on this little-known sector of the ecosystem, and the entities that are using it.
The use of cryptocurrency mixers on the rise in 2022
Chainalysis’ report is unsurprisingly very pro-regulation, with the company otherwise attempting to “unmix” transactions through its services. But it gives a good overview of the evolution of cryptocurrency mixers, and their actual uses.
As a reminder, blenders (or “tumblers”) are platforms for anonymizing transactions in Bitcoin (BTC) or other cryptocurrencies. They get their name from the original process of mixing coins with each other.
Mixers are of course useful for people who want to discreetly move funds in cryptocurrencies, but as Chainalysis points out, they are not always funds from criminal acts. The platforms can indeed be used by people living in totalitarian countries or those who have not authorized cryptocurrencies. The desire to leave no trace can also be seen as an end in itself, especially for users close to the initial ideals of cypherpunks.
With this background in mind, we can still point out that 10% of the funds sent to mixers come from illicit sources. Less than 1% comes from high-risk exchange platforms, betting platforms, peer-to-peer exchanges, DeFi and centralized exchange platforms. Note, however, that Chainalysis does not report the remaining share, which is probably not analyzable.
Volumes also up
The value received by mixers had peaked in early 2022, before plunging following the fall in cryptocurrency prices. On April 19, the average amount of funds sent to mixers reached an all-time high of $51.8 million.
If we look at the origin of the funds received, we can see that the usages have changed in recent years. Since 2021, decentralized finance (DeFi) is now an important channel, and there is also a breakthrough of centralized exchange platforms.
There is also a breakthrough of illicit addresses, with funds doubling since last year according to Chainalysis:
“Illicit addresses account for 23% of funds sent to mixers in 2022, up from 12% last year.”
Which criminals are using cryptocurrency mixers?
The report also looks at the types of criminal activity that led to these transactions. In recent years, the majority of the volume has come from sanctioned platforms, such as darknet marketplaces like Hydra Market. The second largest sector in terms of volume is represented by stolen funds.
Other interesting data: in the “entities subject to sanctions” category, large criminal groups account for a very large share of the volume for 2022, which is less heterogeneous than one might think. For example, Hydra Marketplace accounts for over 50% of the funds from sanctioned entities sent to mixers in 2022. The North Korean group Lazarus, very often associated with large-scale hacks, accounts for 30%. Also noteworthy is the 18% from Blender.io, which is itself a blender associated with Lazarus.
Chainalysis also notes a breakthrough of North Korean entities. This is not really a surprise: we have been seeing this country’s use of cryptocurrencies for years, including attacks targeting centralized exchange platforms.
The place of blenders in the ecosystem
Having the means to preserve one’s privacy is globally a given, especially in the cryptocurrency industry, which was built with this ideal in mind. So mixers have their role to play, and that’s even if they’re used by criminals. This data also reminds us of something that is worth repeating: the majority of cryptocurrencies are not really anonymous, and it will be necessary to go through side services in order to leave no trace.
It’s also worth pointing out that criminal activity now only accounts for 0.15% of cryptocurrency transactions. A figure that should be kept in mind when regulators and analysts point out the alleged danger of the sector.