The growing popularity of privacy-centered Wasabi and Samourai bitcoin wallets has made tracking crypto transactions on the darknet harder than before.
Europol is targeting privacy protocols in their recent crime threat assessment.
While crypto seems closer than ever to adoption, the darknet still looms as the black sheep of the crypto space. According to the European Union’s police agency Europol, research shows that privacy protocols remain a significant threat to EU security.
These wallets use CoinJoin technology to make their transactions anonymous. Specifically, Europol named CoinJoin as the largest threat among privacy technologies.
The police agency’s research indicated an increase in the popularity of CoinJoin and associated wallets. These technologies, Europol noted, have other features. Samourai, for example, offers a “remote wipe” using SMS commands while “under distress.” In other words, it’s easier for bad actors to erase their footsteps.
In addition to software wallets and technologies that cover up tracks, more criminals have (intelligently) adopted hardware wallets, which offer a higher degree of security. These wallets store keys and information on a physical device, and thus are difficult to track remotely over the internet.
Still, Europol noted, new technology has not erased transaction origins entirely. Origins and destinations are still traceable, often.
Importantly, however, criminals are learning more about these new technologies and adapting them to make the police’s work more difficult. Many have begun to integrate CoinJoin wallets into their payment systems.
In general, dark web criminals are getting more sophisticated. Some have begun using multi-sig wallets in their transactions and crypto transactions without the use of wallets.
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The document also named privacy coins Monero and Zcash and digital currency Dash as the most popular dark web currencies. Earlier this year, CipherTrace announced they had cracked Monero’s privacy features (though critics argue the security firm exaggerated their success).
Meanwhile, Litecoin’s Mimblewimble protocol went live on a testnet on Oct. 1, 2020. Mimblewimble technology promises to allow Litecoin transactions without revealing transaction data.
Interestingly, while several countries scramble to launch Central Bank Digital Currencies using blockchain technology, they also seek to regulate and control transactions beyond their grasp. This balancing act is likely to be pertinent for years to come.