Monero, and other private coins, drive the new cyber currency arms race.
Reality, they say, is stranger than fiction. But the lines between the two are quickly blurring. With 58 different gender identities and professors at Cornell asking if the term black hole is racist, one regularly finds themselves asking, how much more insane can reality get?
Oh, plenty more.
Last week, two brothers in South Africa disappeared with almost $3.6 billion in bitcoin. The duo, who operated Africrypt, one of the most influential cryptocurrency exchanges in Africa, are nowhere to be found. Thats a lot of money. According to Fortune, its by far the largest cryptocurrency loss in history. However, its important to note that this will only go down as the biggest loss in history if the money isnt recovered. Bitcoin, as I have explained before, is highly traceable. Although the brothers are nowhere to be found at present, they will be located, and the bitcoins may very well be recovered.
How do we stop criminals from absconding with the GDP of Aruba? Its simple: just ban bitcoin. This, however, will do little to deter criminals. Why? Because theres a new cryptocurrency in town. If bitcoin is problematic, this new coin is downright dangerous.
Show Me the Monero In a recent interview with FT, Bryce Webster-Jacobsen, a cyber- security expert, spoke of a worrying trend. Ransomware groups, he warns, are specifically shifting to monero, And why wouldnt they? Monero, which literally means coin in Esperanto, is a private digital currency. When the makers of the coin chose to make it private, they didnt hold back. Cyber criminals, according to Webster- Jacobsen, have recognized the ability for mistakes to be made using bitcoin that allow blockchain transactions to reveal their identity. With monero, their identities are fully concealed and geographical locations obscured.
Although the private coin is generating a lot of discussion now, it has been around for years. In 2013, someone going by the name of Nicolas van Saberhagen published the CryptoNote white paper. The pseudonymous author (probably authors) outlined the myriad issues associated with the first ever cryptocurrency:
Unfortunately, Bitcoin does not satisfy the untraceability requirement. Since all the transactions that take place between the networks participants are public, any transaction can be unambiguously traced to a unique origin and final recipient. Even if two participants exchange funds in an indirect way, a properly engineered path-finding method will reveal the origin and final recipient.
Not long after the paper was published, developers began working on monero. Although the coins value pales in comparison to bitcoin, its easier to mine. Furthermore, and rather crucially for the criminally inclined, anonymity is guaranteed. In 2018, Newsweek ran a piece documenting the ways in which far-right groups were turning to monero as a source of funding. After the crowdfunding platform Patreon banned Christopher Cantwell, also known as the Crying Nazi, the convicted felon turned to monero. Cantwell, were told, viewed it as an alternative way for his white supremacist fan base to give him handouts. Unsurprisingly, in the three years since the Newsweek piece, moneros popularity with extremist groups has grown considerably.
In the aforementioned FT article, another expert, Justin Ehrenhofer, talks about the future of ransomware attacks, and the ways in which they will be inextricably linked with monero. Today, according to the cryptocurrency compliance manager, 10 to 20 percent of ransoms are paid in monero; by the end of the year, that figure will be closer to 50 percent. It may very well be closer to 100 percent 18 months from now.
Interest in privacy coins is growing. Bitcoin and ethereum have the largest community of crypto-developers. The third largest? Monero. Monero was also recently ranked 26th by market cap among cryptocurrencies, meaning its no small sideshow. In this cyber arms race between law enforcement agencies and criminals, privacy coins like monero powered by anonymous blockchain transactions are giving bad actors more power. With stealth addresses, monero allows users to create a one-time address for each transaction carried out. With more than 76 privacy coins in operation, banning monero will do very little to deter criminals. Cryptocurrencies, for all their strengths and benefits, have created a never-ending game of Whac-A-Mole, with hapless regulators and law enforcement agents swinging mallets like crazed lunatics.
What, If Anything, Can be Done? Of course, regulators in the U.S. could opt to prohibit cryptocurrency exchange platforms from recognizing monero. But, one wonders, how will this deter a group like DarkSide, the Russian ransomware group responsible for the Colonial Pipeline attack? It wont.
Regulators could also choose to punish any American company that agrees to pay ransom fees in monero. Again, though, this does little to address the problem. Punishing victims of attacks seems, at best, unwise.
Solutions must be found. Last year, the country witnessed a 300 percent increase in cybercriminal activity. Things are only getting worse. Every 60 seconds, five ransomware attacks occur. As these types of attacks continue to increase in frequency, and moneros popularity continues to grow, a vaccine, for lack of a better word, must be developed.
According to reporters at Cointelegraph, a vaccine may already exist, and its ready to be rolled out. CipherTrace, a blockchain analytics firm, claims to have a developed a tool that can trace monero transactions. Although the tools capabilities have yet to be fully tested, the Department of Homeland Security intends to use CipherTrace in an effort to track illegal transactions back to their original sources.
The FBI, as you may recall, recently reclaimed $2.3 million in bitcoin from hackers. Monero, though, is a different beast, and the FBI knows this. In fact, federal authorities have been worried about monero for years; however, they have appeared powerless to stop its rise. Will CipherTrace be a game changer? Perhaps. But even if it is, in this never ending game of Whac-A-Mole, and with more than 10,000 cryptocurrencies in existence, criminals will always find a way to get paid. With monero, they can disappear into the ether. How do you handcuff a ghost?
John Mac Ghlionn is a researcher and essayist. His work has been published by the likes of bitcoin magazine, New York Post, South China Morning Post, and the Sydney Morning Herald.