Bitcoin Users Exposed
At this point, if you live on the planet earth, you have most certainly heard of Bitcoin. From the overnight millionaires, to the huge daily price fluctuations to the controversies surrounding security, energy consumption and influence on the merchant landscape, Bitcoin has been the pioneer.
Bitcoin’s astronomical climb in value has shined a spotlight on the entire cryptocurrency market. Bitcoin has brought cryptocurrency to the forefront and, as with all disruptive technology, has begun to experience growing pains.
As we start the New Year, Bitcoin has seen intense scrutiny as international markets move to impose increased regulation. Law enforcement agencies are quickly coming up to speed and are beginning to use advanced technologies to better understand and track Bitcoin.
The anonymous luster that was once shining on Bitcoin is starting to fade.
This is why. After many years of supporting nefarious activity, criminals and those that operate on the Dark Web, are abandoning Bitcoin to go with something a little more under the radar and more specialized to their privacy needs. Bitcoin, along with others, have been dubbed “privacy coins” and are designed to avoid tracking and thus have enjoyed a steady climb to close out 2017.
Enter Monero. Starting in 2014, Monero is different in that it masks critical information pertaining to the individual user involved in the transaction. Monero encrypts the recipient’s address on its blockchain and generates fake addresses to obscure the real sender. As if that was not enough, monero also obscures the amount of the transaction.
Monero has seen a rise to stardom in recent months, fueled primarily by the increase in usage by those that operate in the Dark Web. Monero is one of many privacy-focused coins, like Zcash and Ethereum, each offering different security features. Zcash, for example, encrypts the users true address. That makes it impossible to identify senders by looking for correlations in addresses used in multiple transactions to pinpoint the real one.
What is the draw? Privacy coins provide the anonymity that is lacking with Bitcoin. As law enforcement becomes more sophisticated and the market experiences greater regulation, the users of Bitcoin are realizing that their identity and transaction are tracked with greater efficiency than ever before. This exposure is from Bitcoin’s reliance on the underlying technology, Blockchain. Blockchain acts as digital ledger meticulously recording which addresses send and receive transactions, including the exact time and amount. Because of this, blockchain matches an address to a crime and law enforcement has a virtual breadcrumb trail that tracks funds as they disappear and reappear in other locations.
It is my contention that this rise in usage in these emerging cryptocurrencies (such as Monero is concurrent with law enforcements adoption of software tools to help monitor and track people using Bitcoin. Analytic firms such as Chainanalysis have improved their ability to identify digital caches linked to crime or money laundering, alerting exchanges and preventing conversion into traditional cash.
Regardless of the cryptocurrency that is used there will be fraud. For fraud follows money. Bitcoin has raised the awareness of cryptocurrency and in doing so has raised the valuation of many of the emerging coin vendors and fraudsters are going to choose the currency that allows them to remain in the shadows and continue their illegal activities.
When everything is said and done, I am not sure where cryptocurrency will end up, however I think it is safe to say that some will rise and others will fall. Bitcoin has been the preferred method of currency for a long time, however as spotlight comes down it is beginning to show some cracks. For those that are trafficking in illegal activity, Bitcoin could very well be pulling you into the spotlight.