The purpose and dangers of Crypto Privacy Tools

The purpose and dangers of Crypto Privacy Tools

cryptodistics to improve the privacy of transactions are still used for illegal activities, but the use of so -called mixers for shameful purposes is becoming increasingly risky.

A cryptocurrency service is used to transmit crypto-assets privately between wallets by mixing funds in a pool of assets that belong to many participants.

The hacker, who exploited the Ronin network last month for around $ 625 million, recently transferred thousands of Ether to Tornado Cash, a data protection tool for Ethereum. More than 165,000 ETH remain In the wallet of the attacker .

tornado cash, a decentralized protocol for private transactions on Ethereum, interrupts the on-chain connection between the source and destination address, according to his website. The protocol uses an intelligent contract that accepts ETH deposits that can be withdrawn from a different address. The longer the funds remain in the pool before they are withdrawn, the better the protection of privacy.

"While Tornado Cash can be used for illegal activities such as money laundering or tax fraud, many believe that it is a crucial instrument to safeguard financial anonymity," Travis Hoyt, Chief Technology Officer from NETSPI, told Blockworks.

"Due to the nature of blender like Tornado Cash, the transactions are disguising, consumers who do not fully understand the Crypto safety infrastructure can be susceptible to risks such as accidental money laundering."

Funders also confiscated federal lawyers in Florida Krypto worth around $ 34 million and German authorities confiscated Bitcoin worth around $ 25 million. The alleged criminals used mixed services in both cases to disguise transactions.

The covering of money sources by mixers is an increasingly risky option for bad actors, especially if you try to move the large amounts that are necessary to avoid sanctions, to wash stolen funds or to pay the proceeds from a Darknet marketplace, says Gurvais Grigg, the global public of Chainalysi's Chief Technology Officer.

"Mixer require the participation of many users who enter the comparable amounts of cryptocurrency in order to achieve the desired veil, and the liquidity often cannot support this," he said.

Mrranka Pattnaik, co -founder and CEO of Merkle Science, agreed that mixers, tumblers or data protection coins do not have enough liquidity so that individuals can move hundreds of millions of dollars in an incomprehensible way. He found that cash is still the preferred means of payment for intelligent criminals.

A Chainalysis report published in February showed that illegal crypto transactions reached an all-time high of $ 14 billion in the past year, but the proportion of criminal activities in the transaction volume of cryptocurrencies was never lower.

Grigg noted that the recently published demolition skills of Chainalysis could further deter mixed use for illegal purposes. Forbes Secret forensic tool ”, which was able to demonstrate transactions that were connected to the 2016 DAO-Hack, and to pursue their edition on four stock exchanges.

A man from Florida allegedly used an online alias and made more than 100,000 sales of illegal articles and chopped online account information-such as for HBO, Netflix and Uber-made on several Dark-Web marketplaces Explanation .

he used "Tumbler"-mixed services that bundle several cryptocurrency transactions-and illegal Dark-Web money transfer services to wash a cryptocurrency for another.

The Tumbler distributes the cryptocurrency to a certain cryptocurrency letter pocket at accidental times and in random steps to disguise the original source of money, officials said. Law enforcement officers confiscated various cryptocurrency wallets that were associated with the illegal behavior on the Dark Web.

The confiscation took place a day before the German authorities unveiled on Tuesday that the Federal Criminal Police Office (BKA) and its central office to combat the internet crime (cit) server from Hydra Market, the world's largest Darknet marketplace, had dropped. The authorities confiscated Bitcoin worth around $ 25 million after an examination that started in August.

The Russian-speaking Darknet platform, which focuses on the trade in illegal narcotics, has been accessible via the Tor network since at least 2015. Around 17 million customers and 19,000 seller accounts were registered on the marketplace.

According to estimates by ZIT and BKA, Hydra Market's sales were at least 1.2 billion euros in 2020. The "Bitcoin Bank Mixer", a service provided by the platform to cover up digital transactions, make crypto investigation extremely difficult for law enforcement authorities, said officials.

In another case, by crypto.com Stole money In January, reports were reported via tornado cash On -chain-data discovered at that time by the blockchain-security and data analysis company Peckshield.

Roman Semenov, co-founder of Tornado Cash Coindesk This month the service was designed as "unstoppable", with it determined that the team has little control of what its users do with the protocol. This means that not updated software as soon as it is provided on an unchangeable blockchain like Ethereum, it works as long as Ethereum - and with it the Internet. The popular uniswap of the decentralized exchange is another such example.

A Tornado Cash spokesman did not answer a request for comment.

The ethos behind mixers is to accommodate more financial freedom and privacy and otherwise give public transaction books that are anonymity -like anonymity by deliberately difficult to regulate transactions, said Hoyt. This technology can be used legally or illegally; The only way to completely avoid risks is not to get involved at all.

"While there is an abundance of general resources to crypto, the industry has to give priority over the inherent security risks and the best possible reduction in these risks," said Hoyt. "Apart from the fact that consumers actively choose not to use a mixer, this is the best way to ensure that ethical crypto retailers remain protected."

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The contribution The Purpose and Perils of Crypto Privacy Tools is not a financial advice.