Europol Threat Analysis: Privacy Wallets and the Dark-Net

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The last 2 years have been marked with volatile dark-web and cryptocurrency activity. In mid 2020 the situation changed dramatically. Vendors and buyers seemed to rush to adapt to the current economy due to the ongoing pandemic. Nonetheless, as the dark-net storm ended, the crime did not. Criminals continue to look for ways to circumvent law enforcement and stay under the radar.

Cryptocurrency Mixing

The latest technique governments employ to track dark-net transactions includes blockchain analysis. This makes it very difficult for criminals to exchange their cryptocurrency as they can be tracked at the final point of exchange. Criminals have a handful of tricks that they can employee to try and evade government intervention. One such technique is called Bitcoin Mixing. This complicates the tracking process but does not make the coins untraceable.

Bitcoin mixing is not a very complex process. This process works by mixing cryptocurrency with other crypto of the same monetary value. It also involves the shuffling of coins around different addresses. By doing this the original identity can be obscured. This does not guarantee safety as law enforcement can tell when coins have been mixed.

The Rise of Coin Mixing

In the last few years, the popularity of bitcoin mixing has skyrocketed. Blockchain analysis firm Bitfury's crypto published a report in May of 2020. The paper was focused on the rise of bitcoin mixers and their use on the dark-net.

The research made a lot of interesting discoveries. The research mentions the amount of Bitcoins transferred from the dark-net to mixing services. That number went up by 20% in the first quarter of 2020. This figure sharply contrasted with the share of bitcoins sent the previous year.

Europol, the European law enforcement agency also published a report on the situation. The papers published seem to support the findings of the above research. Europol also made a link between two bitcoin wallet services. Wasabi and Samourai were found to have too many cases of crypto transactions being mixed.

Coin Mixing and Enhanced Anonymity

The paper published by Europol provides a lot of details on cryptocurrencies and the dark-net ecosystem. The paper titles Internet Organized Crime Threat Assessment was published on the 5th of October.

To highlight, the law enforcement agency reported the threat posed by Wasabi and Samourai. The two platforms are considered to be privacy enhancing avenues by many. Unfortunately, as a result of this, the criminal segment decided to join in. Most of the currency now being mixed on the two platforms is dark web related.

There are many examples of known criminals using such platforms to launder money. One popular example involves the recent Twitter attacks. The perpetrators that hacked into twitters back end and tweeted from many accounts. In the end, the threat actors managed to scam hundreds of people and tried to escape with all the cryptocurrency. It is said that these criminals used Wasabi to hide their tracks.

The report published by Europol also revealed some important details. It mentions the increased difficulty that such services pose to tracking dark-net transactions. Bitcoin mixing was classified as a threat along-side criminal dark-web activity.

The Europol research mentions that Samourai and Wasabi Bitcoin wallets boast advanced features. A decentralized mixing capability with Tor integration is one of them. The report also mentions a notable Samourai feature. An SMS command that can remotely wipe everything in a cyber emergency.

The two decentralized wallets have not been designed to fully disguise the origin of the coins. aAhough harder, links between the origin and the destination can still be made. The wallets are meant to consolidate transaction anonymity. It achieves such anonymity by making it harder for third parties to trace the exchange of the coins.

Researches have noticed the increased adoption of privacy-enhancing wallets for the above reason. All types of criminals, including dark-net markets themselves are switching to such wallets. Researchers also noted the increased adoption of hardware wallets. That is a physical device that is designed to store the seeds and private keys of a wallet. Such a wallet is almost impenetrable.

Conclusion

Dark Web related cyber-crime has skyrocketed in recent times. Criminals keep adapting to new tactics used by the government to track users. All this cyber-crime is partially enabled by cryptocurrency. As the government develops ways to track cryptocurrency, criminals are seeking new ways to stay under the radar. These new, privacy based wallets are the finest example of criminals adapting to change.

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