The US Internal Revenue Service (IRS) offers to pay $625,000 dollars to any contractor who can successfully crack and invade the untraceable Lightning Network or Monero Transactions according to an official proposal released last week. Inside the detailed proposal is the deadline of submission to Sept. 16 with an outline of a two-phase approach.
$500,000 will be awarded on phase one with no more than eight months. On this first phase, the contractor must demonstrate and present a well-founded track result for Lightning Network or Monero. It includes sending and accepting Identification address.
The remaining $125,000 will be awarded on the second phase with 120 days of development. Within these days, the contractor will continue to improve the performance of the system and provide additional functionality and features.
The contractor must comply to open standards of interoperability and demonstrate their solution works in active transactions in 2020, in order to be chosen.
The main goal of this project is to improve investigative resources for tracing transactions involving cryptocurrency coins and to prevent rising criminal usage for privacy coins like Monero.
Growing Use of Privacy Solutions Threatens Fed Power
IRS also mentioned that Monero use is growing. The agency noted that in April 2020, due to privacy concerns with its former payment method, BTC, Ransomware as a Service group Sodinokibi began to request future payments be made using the anonymity-focused XMR currency.
Privacy coins like Monero permit customers to switch their funds with strong privacy. They use diverse techniques to do this, which include hiding the transaction quantities and the pockets addresses of the sender and receiver. Bitcoin and Ethereum addresses may be traced to wallets and crypto exchanges.
IRS also highlighted the increasing use of Lightning Network. The second-layer Bitcoin scaling solution not only allows for micro-transactions but also hides the sender and receiver of transactions by only recording the opening and closing of a channel on the Bitcoin blockchain.
Blockchain forensics have come a long way in recent years because of high demand of privacy coins among criminal syndicates. In recent years, Chainalysis has assisted law enforcement by tracking cryptocurrrency transaction that was used for child abuse, money laundering and terrorist financing.
Of the other firms who are helping to enforce law is CipherTrace, which appears to stand in good stead to deliver on the recent IRS Request for Proposals. CipherTrace announced their new tool that can trace Monero used for underground transactions. Although its functionalities are not yet finalized, it will be used by U.S. Department of Homeland Security. In addition, CipherTrace Chief financial Analyst, John Jeffries said that this tool will also trace stolen Monero used for illegal transactions back to its original source, such as ransomware cases.
Following in June 2020, Chainalysis also announced Dash and Zcash as additional privacy coins and as a compliance toolset but has not yet included Monero tracking services.