Privacy focused cryptocurrencies have been growing in popularity for a while now. Monero is the most popular privacy focused cryptocurrency. This cryptocurrency stands out from all the other privacy-based cryptocurrencies. All transactions carried out on the Monero network remain anonymous and untraceable.
Adoption by Criminals
After its launch in 2014 monero quickly grew in popularity. Not only it became the number 1 privacy based currency, but it also grew and became a big part of the crypto space. Despite all of this positive growth, monero has one big downside. Its anonymity enables criminal activity to take place under the law enforcement radar. Criminals are adopting monero quicker than ever before. Statistics found that monero is currently the 2nd most popular cryptocurrency among criminals. With the current trajectory, monero is going to become the most used cryptocurrency by criminals in less than a year.
The Race to Track Monero
With its rapidly increasing influence on crime, monero got on the governments scope relatively quick. The need for the government to track monero was becoming increasingly obvious. In early 2019, a large cryptocurrency analysis firm made a surprising announcement. Cipher-Trace revealed its plans to develop a tool that will combat moneros privacy features. Development on the tool started shortly.
According to Cipher Trace this project was being worked on for many reasons. Mainly, the company saw the need for the government to track monero transactions. Cipher trace intimated that over 45% of dark-net markets now support monero transactions. Cipher trace also mentioned how such a tool could be used by exchanges. It was mentioned how many exchanges don't accept the cryptocurrency due to its anonymous nature. Many exchanges would accept it if they knew the origin of the currency.
Working Tool Tracking Monero
In August of 2020 the first batch of tools was delivered to the U.S. government. It was reported that the tool could successfully track transactions on the network. The tool could track transactions simply by visualizing monero transaction flows. Cipher Trace CEO Dave Jensen made some comments on the tool. According to him, the tool enables users to search, explore and visualize transactions. He mentioned the ability to use decoy elimination in order to narrow down the identities of monero users. The U.S. Department of Homeland Security also participated in the development process of the tool.
Doubt Within the Community
Most of the monero community is in doubt about the tracking capabilities of the too developed by cipher trace. Many went as far as to call it a hoax. Monero researchers say that cipher trace has simply not provided enough information on the techniques employed to uncover the privacy of the coin. Many came to the conclusion that cipher trace simply did not develop a tool good enough to ensure the users identity to the same extent as the bitcoin blockchain. Some claim that users that keep their data separate from their wallet can remain secure. There are no clear answers to this for now.
Initially cryptocurrencies have been popularized by their anonymous and secure nature. This was not true for long as government agencies quickly developed ways to track coins such as bitcoin. For this reason privacy coins like monero have been invented. This fueled criminal activity and gave the government the need to seek methods to track the technology. Even if cipher trace developed such a tool is is not guaranteed to uncover privacy to the same extent as bitcoin.