The Justice Department announced a coordinated international takedown of ChipMixer, a custodial cryptocurrency “mixing” service.
Custodial mixing services provide improved on chain privacy to users but come with massive trust tradeoffs. You trust the service with both custody of your bitcoin and that they are not tracking transactions.
Custodial mixers are distinctly different than coinjoin tools. With a custodial mixer you are sending someone your bitcoin and they send you someone else’s bitcoin. With coinjoin tools you are doing a collaborative bitcoin send transaction, without giving up custody, to break the probability analysis used when tracking bitcoin on chain.
The operation involved U.S. federal law enforcement’s court-authorized seizure of two domains that directed users to the ChipMixer service and one Github account, as well as the German Federal Criminal Police’s (the Bundeskriminalamt) seizure of four ChipMixer back-end servers with 7 TB of data and more than $46 million in bitcoin (about 1909.4 BTC in 55 transactions). The investigation was also supported by Belgium, Poland and Switzerland.