Meet Monero, the favorite privacy coin for alt-rights and criminals.

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Remember that Florida teenager who managed to simultaneously hack Kim Kardashian, Elon Musk, Uber and Barack Obama’s Twitter accounts during a Bitcoin scam attempt in 2020? Law enforcement officers analyzed the blockchain ledger of “anonymized” Bitcoin transactions and were able to locate the hacker, who ended up behind bars.

For most people, it may seem impossible to track transactions through Bitcoin, but it really isn’t. The FBI’s recovery of Bitcoins paid in the Colonial Pipeline ransomware attack demonstrates that Bitcoin is not as nowhere to be found as one might think. So users, especially criminals and members of far-right fringe groups, hoping to avoid the regulatory eye have turned to a new kind of cryptocurrency: privacy coins.

To understand their growing popularity, it’s important to point out how privacy coins work differently from other types of cryptocurrency like Bitcoin. Bitcoin uses a public ledger system which means transfers are publicly visible, especially if the sending or receiving crypto wallet is sending funds to an exchange site that requires a “Know Your Customer” verification. The purpose of the KYC, which is used across the financial industry, is to verify the identity of a client in order to prevent illegal activities such as money laundering or terrorist activity financing. Major crypto exchanges like Coinbase use KYC verification to comply with anti-money laundering regulations, and Coinbase’s Bitcoin address information was a tool used by authorities to track down the perpetrators of the Twitter hack.

Privacy coins, the largest of which is called Monero, bypass identification and verification, focusing on improving anonymity and payment security. Monero, established through a spin-off of the cryptocurrency Bytecoin in 2014, both obscures the digital addresses of people involved in a given payment and hides the value of each crypto transaction. Thus, it becomes much more difficult to identify the users.

Monero achieves this through two key methods. First, it uses “stealth addresses”. Basically, although every Monero wallet has a public view and a public send key, these wallet addresses are not used to send transactions themselves. Instead, with every transaction, the general ledger records a unique stealth address generated using these public display and send keys. With these single-use addresses, only the sender and recipient know who owns the sending wallet. Second, Monero and most other privacy coins rely on another strategy known as ring signing. It is essentially a mixture of transactions; instead of a single account sending a transaction, a “ring” of users signs the transaction and “sends” it alongside the actual originator of the payment. Thus, it becomes extremely difficult to identify who is the real sender even if you have been able to identify the owner of the stealth single-use addresses.

This level of anonymity has made Monero the coin of choice for ransomware groups, like the Russian hacking group Revil, which was linked to the JBS meatpacker hack this summer. Jonathan and Diane Toebbe, the American couple who allegedly tried to sell nuclear secrets to foreign countries, asked undercover agents to pay them in Monero, fearing that Bitcoin was traceable.

White supremacists in the United States were also the first to adopt the currency. Take the example of Robert Warren Ray, aka Azzmador. A neo-Nazi from east Texas, Ray was a key writer and podcast host for the Daily Stormer hate site. As part of his work there, Ray was a central figure in organizing the “Unite the Right” rally in Charlottesville in 2017, which proved fatal when a right-wing extremist marched into a crowd of counterparts. -demonstrators. As he fled an arrest warrant for contempt of court in the fall of 2020, Ray turned to web-based fundraising methods to avoid sounding law enforcement alarm bells. Megan Squire, a computer science professor at Elon University, said she knew of at least two Monero addresses Ray was using when I interviewed her in late July. However, given the anonymity of the Monero ledger, it is still quite difficult to track Ray’s actions and transactions on the platform, especially because each transaction sent to the platform is split into multiple anonymized transfers. of different values.

And Ray is not alone. One of his fellow alternative right activists, Christopher Cantwell, promoted the play to raise funds ahead of the Unite the Right rally. He had previously pleaded guilty to assaulting the Charlottesville rally and is one of the persons named in the civil lawsuit regarding the Charlottesville rally currently taking place in court. The Daily Stormer has also started calling on its readers to support the publication through Monero transfers, not Bitcoin. Thomas Sewell, an Australian neo-Nazi, raised funds in Monero for his legal defense against assault charges. The racist and homophobic French website (owned by American extremist David Johnson Jr.) Democratie Participative – offensive enough to be banned by French courts in 2018 – exclusively accepts Monero. The site informs its readers that it is “against Jewish lies,” then asks its readers to donate using cryptocurrency in support. As Frontline and the Associated Press have reported, so do the Nordic Resistance Movement, the Proud Boys chapters, and more.

But it’s not just the groups themselves who are embracing the privacy pieces.

Privacy coins also allow non-activists to hide their financial support for white and far-right nationalist causes. Michael Hayden, senior investigative reporter at the Southern Poverty Law Center, explains that Monero allows supporters of Ray or other neo-Nazis to transfer “money to them without ever having to put their name on it. gave”. Hayden also notes that he could provide bad faith actors from other countries like Russia with an anonymous method to funnel money to right-wing extremists. Put simply, Hayden thinks that “this total hiding of money for any business can really only benefit criminals” because it “is of no use to anything else.”

In particular, Monero is not a good investment. As Hayden said, “Monero is not a good currency to own. It is extraordinarily volatile. Monero’s value has ranged from a low of $ 109 to a high of $ 517.62 per coin over the past year, and it can experience significant value changes over the course of a few hours. Of course, all cryptos are relatively volatile, but over the past 80 days Monero has experienced much higher price volatility than more common coins like Bitcoin. Just days after peaking in value in May, the coin collapsed by hundreds of dollars. But even if you get past that, Hayden notes that the currency is hard to come by, as the exchanges that sell it are often niche and shady – you don’t just find Monero on Coinbase or most of the other major cryptocurrency exchanges.

So, its real appeal is for those who want to keep their transactions secret. Government organizations have certainly struggled to manage the privacy room. For example, in September 2020, the IRS offered up to $ 625,000 to anyone who could crack Monero and track payments on the service. There is reason to believe that technologists will be able to better track payments in the future; Squire explained that “new technology is coming out that… promises to try to solve this problem. But of course, they’re going to be very expensive and only available from law enforcement. For example, blockchain analytics company CipherTrace released a Monero tracking tool developed with funding from the Department of Homeland Security, which costs $ 16,000 per user to access. Additionally, many researchers have claimed that the tool does not actually work.

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Unfortunately, the task of tracing will be made more difficult by the recent announcement of atomic exchanges between Monero and Bitcoin that allow crypto holders to exchange the two coins without the need for a third-party exchange service, thus eliminating the need for a third-party exchange service. one of the easiest entry points to identify. Monero operations. Vile cryptominers also continued to go to great lengths to mine it. In early September, that work included exploiting a vulnerability in Atlassian Confluence, a web-based enterprise collaborative workspace service, to run Monero mining operations on Atlassian servers.

Meanwhile, Monero isn’t the only privacy coin that is quickly establishing itself. Dero has grown wildly over the past year. The Verge Coin, unrelated to the tech news site, has been an anonymous payment form accepted on Pornhub since 2018. And yes, you can say there are legal and moral reasons for using a privacy coin. But these coins run into the same problem as encryption and other technologies for protecting privacy – they cannot allow dissidents, activists, and people from marginalized communities to stay safe without also harboring criminals and purveyors. of hate. And it is these criminals and hate purveyors who seem to embrace this particular play the most.

Future Tense is a partnership between Slate, New America, and Arizona State University that examines emerging technologies, public policy, and society.

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