Bitcoin’s privacy is presently getting weaken as law enforcers adopt software tools to monitor people using bitcoin. This is making bitcoin’s earliest and most avid fans – criminals – drop bitcoin for other virtual currencies.
Monero, a privacy coins designed to avoid tracking, have been climbing faster over the past two months as law enforcers develop software that can monitor people using bitcoin.
Europol, the EU’s law-enforcement agency, raised alarms about 3 months ago, stating in a report that “other cryptocurrencies such as monero, ethereum and Zcash are gaining popularity within the digital underground.” Online criminals, who use ransomware to lock victims’ computers until they fork over a payment, have begun demanding virtual currencies such as monero, ethereum and Zcash instead. According to security company Wordfence, hackers attacked about 190,000 WordPress sites within an hour to get them to produce Monero last December.
In a phone interview with Matt Suiche, the founder of Dubai-based security firm Comae Technologies, Matt stated “Monero is now one of the favorites, if not the favorite,” for ransomware attacks.
Criminals are embracing Monero because bitcoin’s underlying technology can work against them. The digital ledger, blockchain, can meticulously records which addresses send and receive transactions, including the exact time and amount, providing a great data to use as evidence. It can match an address to a crime and then watch the bitcoin universe carefully, and you can see the funds disappear and reappear in other locations.
Monero, which started in 2014, acts very differently. It encrypts the receiver’s address on its blockchain and creates fake addresses to conceal the real sender. It also conceals the amount of the transaction.
Monero is one of many privacy-focused coins that offers different security features. Its main competitor, Zcash can offer even better privacy protection. Rather than creating fake addresses to hide senders, Zcash encrypts their true address. This makes it impossible to identify senders by looking for correlations in addresses used in multiple transactions to pinpoint the real one — a weakness of Monero.
Though researchers from Princeton University have recently developed a tool that helps them to analyze Zcash transactions at least to some extent, however, they have not been able to crack Monero. More so, Zcash high-security features can’t be used on disposable burner phones, a favorite of criminals that are eager to stay anonymous.
Monero developers say they simply created the coin to protects privacy. Most people use it legitimately — they just don’t want others to know whether they’re buying a coffee or a car, Riccardo Spagni, core developer at monero, said in a phone interview.
“As a community, we certainly don’t advocate for monero’s use by criminals,” Spagni said. “At the same time if you have a decentralized currency, it’s not like you can prevent someone from using it. I imagine that monero provides massive advantages for criminals over bitcoin, so they would use monero.”
Yet criminals are probably only a fraction of monero’s users, according to Lucas Nuzzi, a senior analyst at Digital Asset Research, which provides research to institutional investors.
“As with any disruptive technology, many of the initial use cases revolve around illicit activities,” he wrote in an email. But as everyday people grow concerned about privacy and surveillance, “there is utility in these currencies that go beyond just a means of exchange for illicit goods.”
This weakness in policy may lead to a drift from bitcoin to other virtual currencies leading to a fall in investment in bitcoin.