Monero on the Horizon: On Bitcoin, Chainalysis, & Darknet Marketplace Activity
This week, blockchain analysis firm Chainalysis published its latest “Crypto Crime Report,” therein noting that bitcoin’s use in darknet marketplaces, or DNMs, grew in 2019 to well over half a billion dollars.
But there’s a catch. Chainalysis found that the amount of cryptocurrencies that flowed into DNMs last year accounted for less than 1 percent of all cryptoeconomy transaction activity in the same span.
That means that while bitcoin currently remains entrenched as the currency of choice on the darkweb, the vast majority of overall bitcoin activity appears to be non-illicit in nature — a dagger to detractors who say BTC is a bastion mainly for criminals.
But Bitcoin Isn’t Anonymous, Right?
Correct, at its base the Bitcoin network is only pseudonymous, meaning if a BTC address can be tied to an IP address or an exchange account, its user can be identified.
That’s obviously not a desirable outcome for people using darknet marketplaces to buy illegal things like stolen credit cards, yet BTC’s popularity has had staying power to date in all areas of the cryptoeconomy, DNMs being no exception here.
There are special privacy tools like mixers that can be used to obfuscate the source of bitcoin, but they’ve not yet been widely adopted by either clearweb or darkweb users. There are also ways to obtain bitcoin privately, but many DNM buyers eschew such steps — either because they’re novices or feel comfortable enough with Bitcoin’s pseudonymity combined with privacy tools like Tor.
Accordingly, many darknet users are leaving a digital trail in the Bitcoin blockchain that investigators like Chainalysis can use to help law enforcement officials make sense of specific activity. So this begs the question, why bitcoin?
DNM Stagnation
Created almost 10 years ago now, the Silk Road was the first darknet marketplace and became famous for embracing bitcoin payments. Yet not much has changed in the years since then.
“Current markets are all based on the same 2011 technology as Silk Road, and share the same weaknesses which LE can exploit,” one veteran DNM vendor who goes by the alias Vendor_BBMC recently noted on Reddit.
Indeed, these markets rise and fall on a constant basis, some ending in exit scams, some in police busts, and fewer yet in orderly shutdowns. But always another platform steps in to fill the void, and the newcomers are commonly modeled as near direct copies of predecessor sites.
So DNMs are created and shuttered, but not much has changed beyond that. The reliance on BTC in the darkweb ecosystem is one of these pillars that simply hasn’t changed since the start. But shifting tides in the space seem to have already begun.
Monero on the Mind
Most DNMs are, of course, BTC-centric when it comes to commerce.
Over the last two years, though, a new wave of smaller marketplaces have tried to set themselves apart from larger competitors in embracing support for the privacy coin Monero (XMR), through which payments can be made in anonymous fashion.
The extra emphasis on privacy is as much a marketing tactic for these sites as it is a security mechanism, because XMR support is enough to bring in new, more privacy-focused users.
Some smaller DNMs in the arena have even cropped up with XMR-only models. No major DNM has yet to follow the same style, though some have added XMR support alongside bitcoin to provide the option. In their aforementioned report, Chainalysis projected that the rise of more Monero-focused markets may indeed be near:
“Finally, we may see more darknet markets accept, or perhaps even mandate the usage of privacy coins like Monero. Monero uses an obfuscated public ledger to make it more difficult to see the senders, receivers, or amounts of cryptocurrency exchanged on transactions. As of now, Empire appears to be the only major darknet market accepting Monero, but that could change in 2020.”
The post Monero on the Horizon: On Bitcoin, Chainalysis, & Darknet Marketplace Activity appeared first on Blockonomi.
OhNoCryptocurrency via https://www.ohnocrypto.com/ @William M. Peaster, @Khareem Sudlow