Picture this: It’s 2020, and two $625K bounties dangle on a string for any tech wizard capable of piercing through various privacy coins’ code, off-chain layer-2s, and side chains that obfuscate transactions.
Here’s the skinny on what went down straight from the horse’s mouth (aka Uncle Sam’s digital archives):
The Mission Brief: A Request for Information dropped in mid-2020 laid it all out. The IRS’s Cyber Crimes unit wants a tool to crack the code on privacy coins, layer-2 off-chain networks, and side-chains.
- Privacy Cryptocurrency Coins:Monero ($XMR), Zcash ($ZEC), Dash ($DASH), Grin ($GRIN), Komodo ($KMD), Verge ($XVG), and Horizon ($ZEN)
- Layer 2 Off-chain Protocol Networks: Lightning Network, Raiden Network ($RDN), and Celer Network ($CELR)
- Side-chains: Plasma and OmiseGo ($OMG)
The Challenge From The IRS:
- Make a tool(s) for investigators that would allow them to trace transaction inputs and outputs to a specific user and differentiate them from mixins/multisig actors for Monero and/or Lightning Layer 2 cryptocurrency transactions, all while minimizing the need for external vendors. Notice how Monero was signaled out? Ya, it’s public enemy #1.
- Provide investigators with the tech to predict statistical likelihoods of other transaction inputs, outputs, metadata, and public identifiers.
- Lastly, the IRS wants the source code for the technology, allowing them to develop, modify, and integrate it with their internal systems with minimal costs, licensing issues, or dependency on external vendors.
The Outcome: Chainalysis and Integra FEC snagged the contracts, embarking on a quest split into development and testing phases. While Chainalysis later flaunted its Lightning Network tool’s prowess, Integra FEC’s achievements with Monero remain unknown.
So, did they crack Monero’s code? The silence from both winners suggests otherwise. If Integra FEC or Chainanalysis had triumphed over Monero, we’d likely see victory laps in their blog posts. Instead, we’re left with a trail of breadcrumbs leading to… well, more questions than answers.
But why was Monero selected as public enemy numero uno? Because Monero is designed to be anonymous. Zcash, Dash, and other privacy coins can be anonymous, but they also allow for transactions to have public identifiers.