Criminal Underworld Is Dropping Bitcoin for Another Currency
Bitcoin is losing its luster with some of its earliest and most avid fans, criminals, giving rise to a new breed of virtual currency, according to Bloomberg.
Privacy coins such as monero, designed to avoid tracking, have climbed faster over the past two months as law enforcers adopt software tools to monitor people using bitcoin. A slew of analytic firms such as Chainalysis are getting better at flagging digital hoards linked to crime or money laundering, alerting exchanges and preventing conversion into traditional cash.
The European Union’s law-enforcement agency, Europol, raised alarms three months ago, writing in a report that “other cryptocurrencies such as monero, ethereum and Zcash are gaining popularity within the digital underground.” Online extortionists, who use ransomware to lock victims’ computers until they fork over a payment, have begun demanding those currencies instead.
Monero quadrupled in value to $349 in the final two months of 2017, according to coinmarketcap.com, placing it among a number of upstart coins that that rose faster than bitcoin, the world’s most valuable digital currency. Bitcoin roughly doubled in the same period, data compiled by Bloomberg show.
In monero’s case, criminals are snapping it up because bitcoin’s underlying technology can work against them. The digital ledger meticulously records which addresses send and receive transactions, including the exact time and amount, great data to use as evidence. 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 is one of many privacy-focused coins, each offering different security features. Its main competitor Zcash, which isn’t known to have a significant criminal following, can offer even better privacy protection. Instead of creating fake addresses to hide senders, it encrypts their true address. That makes it impossible to identify senders by looking for correlations in addresses used in multiple transactions to pinpoint the real one, a vulnerability for monero.
Still, Princeton University researchers recently developed a tool that helps them analyze Zcash transactions at least to some extent, but they haven’t been able to crack monero. And Zcash high-security features can’t be used on disposable burner phones, a favorite of criminals eager to stay anonymous.