Monero: For Black Markets Where Bitcoin Isn’t Anonymous Enough …
On the so-called “dark web” black markets exist outside the purview of the law. These online marketplaces have relied on digital currencies to avoid detection and allow for the monetary exchange for illicit goods and services. Most commonly, Bitcoin has been used for transaction purposes, but there is increasing concern that Bitcoin’s protocol is not wholly anonymous. Notably, Silk Road, the largest such black market at the time, was brought down by the FBI, purportedly by following the Bitcoin transactions of its founder. According to a recent report by Wired, a new digital currency has begun to stand out for black market purposes, known as Monero. (See also: EY Auctioning Last of Seized Bitcoin from Silk Road)
Monero, which is esperanto for ‘coin’ was the best performing cryptocurrency of 2016 in terms of price, rising more than 27-fold, this according to Wired. One Monero currently trades for around $12. One reason for its sudden rise is its increasing use in black markets online. (For more, see: Is Bitcoin Legal in the United States?)
In the Wired article, they cite the fact that all Monero transactions are completely anonymous and untraceable. This achieved via a number of mechanisms that address vulnerabilities in Bitcoin’s protocol. For example, wallet balances are obscured in Monero using so-called “stealth addresses.” It has a feature known as “ring signatures” which essentially mixes up the transactions of many users at once automatically to make a forensic analysis of money flows impossible. It also hides the amount of each transaction from view. Wired concludes, “all of that makes Monero a significant upgrade for a cryptocurrency user’s financial privacy.” People transacting in Monero can then change it back to either Bitcoin or to dollars (or other currency) via a number of online cryptocurrency exchanges.
Of course, having complete anonymity and opacity is valued by black market denizens, but is frowned upon by regulators and law enforcement. If the only perceived usage of something like Monero is for illegal or questionable activity, then its widespread use may be dampered. Indeed, Bitcoin used to be used primarily for black markets and gambling, but has since evolved in to a much more general use currency with very little illegal activity going through its network.
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