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DO NOT use blockchain. Turn off JavaScript before doing this step if you are using Helix, Bitcoin Blender, or other mixers that function without it. If you are using Helix, save the URL it sends you to after you enter your address s. Make a backup of these, or your login details for the other mixers. Send the coins from wallet 2, over Tor, to the address generated for you by the mixer.
Never use any market that requires you to enable JS! You can use Blockchain. Once they have, restart Tor and then send the coins to your market address or their eventually destination! You should also create a wallet you control in between any coins you may ever withdrawal from a market and a mixer.
This is far more important than the reverse, in case the market takes a long time to put your deposit through which happens, trust me. Mixers only keep track of the addresses it generates for you for a set amount of time, usually between 6 and 24 hours. They purge records every X hours for privacy. Search this page for your address s from wallet 2. The only weakness remaining is the fact that the mixing company has records of your transactions, and although they all claim to delete them shortly after the transaction is complete, it is possible they could have a trail of where your coins went.
Fortunately networks like Tor, I2P, Bitmessage, and Freenet all already exist and could all be used for this. Freenet would result in rather slow transactions, however. However, gumming up "taint analysis" and reducing transaction sizes doesn't even require that the users be private from each other. So even without things like tor this would be no worse than regular transactions.
In the simplest possible implementation where users meet up on IRC over tor or the like, yes they do. The next simplest implementation is where the users send their input and output information to some meeting point server, and the server creates the transaction and asks people to sign it.
The server learns the mapping, but no one else does, and the server still can't steal the coins. Using chaum blind signatures: The users connect and provide inputs and change addresses and a cryptographically-blinded version of the address they want their private coins to go to; the server signs the tokens and returns them. The users anonymously reconnect, unblind their output addresses, and return them to the server. The server can see that all the outputs were signed by it and so all the outputs had to come from valid participants.
Later people reconnect and sign. The same privacy can be achieved in a decentralized manner where all users act as blind-signing servers. I don't know if there is, or ever would be, a reason to bother with a fully distributed version with full privacy, but it's certainly possible.
Yes, this can be DOS attacked in two different ways: However, if all the signatures don't come in within some time limit, or a conflicting transaction is created, you can simply leave the bad parties and try again. With an automated process any retries would be invisible to the user. So the only real risk is a persistent DOS attacker. In the non-decentralized or decentralized but non-private to participants case, gaining some immunity to DOS attackers is easy: They are then naturally rate-limited by their ability to create more confirmed Bitcoin transactions.
Gaining DOS immunity in a decentralized system is considerably harder, because it's hard to tell which user actually broke the rules. One solution is to have users perform their activity under a zero-knowledge proof system, so you could be confident which user is the cheater and then agree to ignore them. In all cases you could supplement anti-DOS mechanisms with proof of work, a fidelity bond, or other scarce resource usage.
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