Most recently, the IRS caused a stir in the crypto community when it awarded a crypto asset award aimed at anonymizing Monero (XMR), giving $ 625,000 to anyone who could track an alleged traceable asset. Since the crypto and blockchain industry values anonymity and privacy, questions arise about the outcome of this effort, not to mention its credibility.
“In today’s cryptographic phase, it’s almost impossible to crack the Monero protocol with the necessary security,” Paul Kuskovsky, CEO of Coinfirm, a blockchain analytics firm, told Cointelegraph. “However, this does not mean that tracking Monero assets is impossible to be effective,” he said, explaining:
Some initiatives may be useful to the authorities in the investigation of cryptocurrency crimes, for example: managing their large network of Monero nodes and analyzing data captured by disabling incompatible service providers participating in Monero and using spyware and wallets – the latter. Especially useful in surveys. ”
Monero is one of the most popular anonymity-focused assets in the crypto industry. Cryptocurrencies such as Bitcoin (BTC) publish all transactions in a shared ledger that is visible to everyone on the Internet. While BTC transaction addresses remain borrowed, many tools and efforts can sometimes link transactions and addresses to personal data. Since its inception in 2014, Monero has had the ability to hide transaction values and sender addresses. The real estate blockchain also hides transactions and their amounts from outsiders.
The company declares XMR tracking features.
Blockchain analyst company CipherTrace stepped in on August 31 to promote the alleged XMR tracking technology, which is said to be the first of its kind. “We recently added Monero tracking features to our investigation suite,” CipherTrace CEO Dave Jevans told CipherTrace in a follow-up chat, adding:
“Our tools do not disclose the identities of users who send or receive Monero transactions. Law enforcement agencies need to find this information from map data from addresses, wallets, payment IDs, etc. ”
The tax authorities are involved in
However, the pressure to decrypt XMR encryption became more interesting on September 11, when the US IRS announced that it was looking for someone who could break Monero’s transaction hole technology, giving $ 625,000 in rewards. information. In an industry that values privacy, it is in some ways to help a government agency in such matters oppose space.
“The IRS provides these funds for research and development, which is not controversial or surprising, as many media outlets do,” Jevans said, adding that the board targets a number of organizations in this work, with only $ 1 million in funding. for the effort. … Thus, the IRS announced $ 500,000 in advance, and another $ 125,000 was paid eight months later. Jevans declined to comment on whether CipherTrace plans to partner with the IRS.
Kuskovsky described the IRS bonus as predictable given the timing of the award, which was announced about five days after CipherTrace announced the XMR tracker. However, Kuskovsky did not name CipherTrace, only quoting the company, citing the timing of the events, and the company’s probable approach, which he described as: “Completely useless for investigation due to the authorities’ inability to show clear evidence. There is something in cryptography or not, it is unlikely. ”
On September 30, the IRS unveiled two Monero Hacking Champions. Surprisingly, CipherTrace was not one of the two, although the race to crack cryptographic privacy also suggested that the government wanted to break the privacy of second-tier blockchain solutions such as the Bitcoin Lightning Network. Chainalysis and Integra FEC were the winners, beating 22 other competitors.
Doubts about Monero tracking efforts
CipherTrace claims to have the power of Monero tracking, and the IRS seems to have seen something promising from Chainalysis and Integra FEC, but the effectiveness and depth of this tracking is still debated. A spokesman for the Monero Outreach told the Cointelegraph: “I strongly suspect any allegations that companies may track Monero transactions.” As an independent working group, Monero Outreach informs the public about privacy-focused assets.
The spokesman explained that “although it would be possible to find out information about users from metadata in the network layer, which is not hidden by Tor or a similar network level for privacy, it is possible that they will not be able to track wallets or amounts for any transaction.