What is Fungibility?
We are all aware that money is fungible. This means that one unit of the fiat is equivalent to one unit of another. For example, if you borrowed $1 from me and later returned another $1, I wouldn’t be concerned that it wasn’t exactly the dollar bill that I gave you that you returned. Obviously, you must have spent it by passing it over to someone else. This is what is meant by the fungibility of money or the fact that it is fungible.
However, we are aware that there have been issues with cryptocurrencies such as Bitcoin in terms of fungibility. This is why the issue of tainted bitcoin has become a recurring problem in the coin market. For instance, what happens if a cryptocurrency development team flags hacked coins as seen with the Coincheck hack of NEM tokens? The result is that it negated the fungibility of the token.
Even as the debate has been going on, many believe that the fungibility as a feature of money must be applied to cryptocurrencies such as Bitcoin. This is the way to protect everyone holding it. There has never been a time a central issuing authority such as a central bank declared their fiat illegal because it was used for illegal activities. This also should be applied to cryptocurrencies.
How To Overcome Fungibility Challenge
Bitcoin mixers have become popular in recent times due to its ability to make the cryptocurrency fungible. This is accomplished by obfuscating its origin and giving the holder of the coin a completely ‘new’ cryptocurrency that cannot be traced back to the owner even with blockchain analysis.
As we are aware, blockchain analysis companies are working very hard at tracking the movement of digital currencies in the quest to minify the seeming anonymity of the users. This would effectively make the users of the coins lose their privacy. In an age in which people’s privacies have been routinely compromised, it has become necessary to do more to preserve the privacy of users of cryptocurrencies.
Data is big business, personal data especially. That is why giant corporations such as Google and Facebook are billion dollar businesses. People and businesses would pay a lot to get access to data of millions of individuals because such sensitive information could be used profitably to the detriment of the individuals. This is why Bitcoin mixers also called blenders or tumblers have been used by holders of the cryptocurrency to protect their privacy.
How Bitcoin Tumblers Work
Tumblers have come a long way and the best are those that completely mask the identity of the user by dissociating the input wallet from the receiving wallet. This is accomplished by creating a time lag from the time the coins were sent and the time fresh coins are received by the customers.
Bitcoin blenders use a unique algorithm to shake off scrutiny on the blockchain. This means that blockchain analysts trying to spy on your transactions and possibly know your identity would be lost if you always use a good blender such as kutbit.com. You have to understand that blenders are not in the same class, so you should always use a good one whenever you’re making transactions on the network.
Essentially, a good tumbler must have high liquidity to enable it send ‘fresh coins’ to the client. These coins that have no previous link to their wallet would ensure that their anonymity is guaranteed. This is even more important because there are strategies used by blockchain analysts to identify every transaction originating or terminating at a wallet.