Europol has issued an alarm saying that "other crypto-coins such as monero, ethereum and Zcash are gaining popularity in the digital underworld"
Bitcoin is losing its sparkle with some of its oldest and most avid fans - the criminals - giving rise to a new generation of virtual currencies.
Privacy coins such as monero, designed to prevent crawling, rose faster in the past two months, as authorities have been adopting software tools to monitor bitcoin users. Many analysis companies, such as Chainalysis, are gaining more experience to identify the accumulation of digital fortunes related to crime or money laundering, warning the stock markets and preventing conversion to traditional money.
Europol, the European Union's police agency, sounded an alarm three months ago when it wrote in a report that "other crypto-coins such as monero, ethereum and Zcash are gaining popularity in the digital underworld." Online blackmailers, who use ransomware to block victims' computers until they receive a payment, began demanding those coins. On December 18, hackers attacked up to 190,000 WordPress sites per hour to get them to produce monero, according to security company Wordfence.
In attacks with ransomware, monero is currently "a favorite, perhaps the favorite," Matt Suiche, founder of Comae Technologies, a Dubai-based security company, said in a telephone interview.
Technique
In the case of monero, criminals are buying a lot because the underlying bitcoin technology can hurt them. This technology, called blockchain, is a digital ledger that meticulously records the addresses that send and receive transactions, including the precise timing and amount - excellent data to use as evidence. By linking an address to a crime and analyzing the bitcoin universe with care, you can see the backgrounds disappearing and reappearing elsewhere.
The monero, created in 2014, is very different. It encodes the recipient's address in your blockchain and generates fake addresses to hide the real sender. It also hides the amount of the transaction.
The techniques are so powerful that software that identifies coins suspected to have been obtained from criminal activities now marks as high-risk pretty much anything converted to or from the monero, according to Pawel Kuskowski, CEO of Coinfirm, which helps scholarships and other companies to avoid dirty money. In comparison, this happens with only about 10 percent of bitcoin, he said.
The monero is one of many coins focused on privacy, each offering different security features. Its main competitor, Zcash - which is not known to have significant criminal follow-up - may offer even better privacy protection. Instead of creating fake addresses to hide senders, the currency encrypts the true address. This makes it impossible to identify senders by looking for correlations in addresses used in multiple transactions to identify the actual address - a monomer vulnerability.
However, criminals are likely to be only a fraction of the users of the monero, according to Lucas Nuzzi, senior analyst at Digital Asset Research, which provides research for institutional investors.
"As with all revolutionary technology, many of the early uses revolve around illicit activities," he wrote via e-mail. But as ordinary people become concerned about privacy and vigilance, "these coins are useful and are no longer just a means of exchanging illicit goods."