Bitcoin mixer (also called Bitcoin tumbler, Bitcoin mixing service, Bitcoin cleaner) is an anonymous service, that confuses the trails of Bitcoin transactions.
Most of the bitcoin tumblers use the following technology: the client's funds are divided into smaller parts. These parts are mixed at random with similar parts of other clients. As a result, the client receives absolutely new coins.
Types of tumblers
Centralized tumbling services
First generation tumblers refer to centralized mixing services. User can send his bitcoins on this service, pay small commission, and then receive the same sum of utterly different bitcoins. The quality of tumbling depends on total number of users and the amount of coins available for mixing. Therefore, most of such services did not become popular. That's why now this role is successfully performed by large bitcoin exchange platforms. Attention should be paid to how long the service stores previous operation logs, and whether the information is not transmitted to a third party. Otherwise, the anonymity could be compromised.
Peer-to-peer tumblers appeared in attempt to fix the disadvantages of centralized model of tumbling. These services act as a place of meeting for bitcoin users, instead of taking bitcoins for mixing. Users arrange mixing by themselves. This model solves the problem of stealing, as there is no middleman. Such protocols as Coin Join, SharedCoin and CoinSwap allow few bitcoin-users to gather in order to form one bitcoin exchange transaction in several steps. When it is completely formed, the exchange of bitcoins between the participants begins. Apart from mixing server, none of the participants can know the connection between the incoming and outgoing addresses of coins. This operation can be carried out several times with different recipients to complicate transaction analysis.