CipherTrace has just announced its second patent on the development of a technology that allows it to track transactions in Monero, the privacy cryptocurrency that is causing the most controversy in the digital world.
Since the arrival of the cryptocurrencies, , and its popularization in society as a means of payment and exchange of value, privacy in transactions became one of the most widely debated topics by government authorities, who consider that pseudo-anonymous and anonymous transactions of cryptocurrencies allow criminals to carry out illegal activities with a greater level of audacity, without fear of being discovered.
This perception of cryptocurrencies, about their willingness to facilitate illicit activities, increased with the arrival of privacy cryptocurrencies, such as Monero (XMR). For this reason, one of the companies focused on tracking private transactions, and especially those made with this cryptocurrency, is ciphertra by. The renowned intelligence firm in blockchain has been designing and developing, since the beginning of last year, a tracking tool specifically designed to monitor transactions made with Monero, and has just announced its second patent.
In her release Recently published, CipherTrace informs the community and its clients about the advances of its technology designed to track transactions in this cryptocurrency, which of all those on the market is the one that offers the greatest privacy and anonymity to its users. According to the firm, its tracking tool will allow authorities to explore transactions made with Monero, breaking the high level of privacy offered by this popular cryptocurrency.
It may interest you: CipherTrace develops tools with the ability to track Monero transactions
The end of privacy in Monero?
The second patent filed by CipherTrace for Monero transaction tracking, called “Probabilistic techniques and methods for tracking Monero”, continues its first patent, called “Systems and methods for investigating Monero”, which support the technology that the company is developing to allow agencies such as the United States Department of Homeland Security (DHS) y Internal Revenue Service (IRS) can track financial transactions made with this cryptocurrency, in order to support their investigations into cases of financial crimes and other illicit activities carried out by these departments.
The company is strongly challenging the security of this cryptocurrency, and its community, which claims that transactions with Monero are untraceable, thanks to its design and its privacy algorithm known as TriptychThe community that supports and defends the development of Monero claims that Triptych is designed to guarantee and protect the privacy of users' transactions against the tracking tools developed by CipherTrace, although the company claims that it can trace them.
CipherTrace claims it can now explore transaction flows within the Monero blockchain, although it was designed to prevent third parties from revealing users’ spending patterns.
CipherTrace Tool Basics
According to its recent statement, the CipherTrace tracking system has Sophisticated forensic tools capable of exploring Monero transaction flows, to assist authorities in the development of their financial investigations. The company is also developing original tracking methodologies, which are based on Advanced Bayesian simulation and inference techniques, which allows us to infer the probability that a hypothesis may be true.
Through these statistical and probabilistic methods, CipherTrace seeks to qualify transactions and group potential owners, reducing the number of decoys implanted by ring signatures (Ring Signature) that Monero uses to hide the trail of transactions and the addresses involved.
CipherTrace also claims to be developing the ability to track stolen or illicit Monero coins, and to be gaining intelligence by actively participating in the Monero network to also visualize transactions that rely on third-party nodes. However, it appears that to date, the features and potential of CipherTrace's tracking tools have not been tested in real-world cases.
Monero's privacy promise
On the other hand, Monero developers and their community claim that their privacy algorithm prevents transactions from being traced by exponentially increasing the number of decoys that obfuscate the true origin and destination of the transactions carried out.
But that's not all. As CipherTrace and government agencies' surveillance techniques and methodologies evolve, Monero's developers aren't stopping, saying they're perfecting their obfuscation techniques to prevent CipherTrace's surveillance tools from having any chance of success. In late September, Monero published a article about their Triptych algorithm, explaining how it can ensure a higher level of privacy in Monero transactions by more effectively hiding the sender, recipient, and amount in a transaction, without affecting network speed.
Current state of privacy cryptocurrencies
According to the company, the intention is to detect those cryptocurrencies involved in illicit activities, as Monero is becoming the second preferred cryptocurrency for malicious actors to carry out illegal acts on the darknet. CipherTrace claims that 45% of dark markets on the darknet are using Monero after Bitcoin, despite the fact that BTC is not a privacy cryptocurrency and its transactions are auditable and completely transparent on its blockchain.
To date, the South Korean regulator has opted to ban the use of privacy cryptocurrencies, applying stricter regulations for cryptocurrency users and service providers, in order to comply with its existing regulations. For its part, the Federal Financial Surveillance Service of Russia also announced their intentions, like CipherTrace, to develop a surveillance tool to track transactions with Monero and other common and privacy cryptocurrencies.
As mentioned at the beginning, this whole scenario around Monero and other cryptocurrencies is developing due to the current inability of governments to control the flow of money that moves through these types of transactions.
Need for KYC and AML compliance
Thus, due to the need to control transactions and enforce regulations within the crypto space, CipherTrace seeks to provide government agencies, and even financial service providers with cryptocurrencies, with the ability to identify cryptocurrencies of illicit origin, appropriately valuing transactions on the network to enforce applicable regulations on the matter.
“The goal of CipherTrace is to enable the detection of criminal users, thereby increasing the security and sustainability of privacy coins like Monero in the future. In their current form, Monero’s privacy capabilities make it difficult for many virtual asset service providers to assume its risk.”
The company assured that Monero's current way of operating represents a great risk for the exchanges and cryptocurrency exchanges, which, due to the inability to know the owner or recipient of the funds, cannot comply with KYC and AML requirements; so they often prefer to remove this cryptocurrency from their lists, in order to comply with the current regulations of the jurisdiction or jurisdictions from which they provide services. Some of the exchanges that removed Monero, in addition to other privacy cryptocurrencies such as dash (DASH) y Zcash (ZEC), are OKEx, Upbit and most recently ShapeShift.
Continue reading: Battle between CipherTrace and Monero: Triptych protects users against tracking tools
