In brief
- The IRS is taking applications from participants who believe they can break Monero's privacy.
- It's paying out $625,000 in two phases to those who manage to do so.
- The IRS cited rising cybercrime usage of privacy coins as a motivation behind the proposal.
The US Internal Revenue Services (IRS) will pay out up to $625,000 for anyone who cracks the untraceable cryptocurrency Monero, and other privacy coins, according to an official proposal published last week.
“IRS-CI is seeking a solution with one or more contractors to provide innovative solutions for tracing and attribution of privacy coins, such as expert tools, data, source code, algorithms, and software development services,” said the proposal.
Privacy coins like Monero allow users to transfer their funds with strong privacy. They use various methods to do this, such as obfuscating the transaction amounts and the wallet addresses of the sender and receiver. This is unlike Bitcoin or Ethereum, where addresses can be traced back to known wallets and to crypto exchanges, and subsequently, one’s identity.
“Currently, there are limited investigative resources for tracing transactions involving privacy cryptocurrency coins such as Monero or other off-chain transactions that provide privacy to illicit actors,” the IRS added.
A bounty to crack Monero
Under the terms, private contractors and individuals are invited to submit a working prototype of how they intend to crack Monero.
These could range from a system that provides identifying information of a Monero wallet user, to the exact time, date, and amount for a specific transaction on the network, to even more sophisticated tools that can statistically predict when a certain address is likely to make a transaction.
The IRS is taking applications until September 16 for the proposal. Those who take the challenge will receive their bounty in two phases: First, an initial $500,000 payment for developing and proving a working concept of a privacy crack tool (due eight months after the proposal acceptance) and later, a $125,000 payment after a pilot test is completed and approved by the government.
Growing cybercrime is a factor
The agency noted rising criminal usage for privacy coins like Monero as one of its motivations behind the proposal, stating that privacy coins are becoming more popular and are being used more by illicit actors.
It explained, “In April 2020 a ransomware group called Sodinokibi that future ransoms payments will be in Monero (XMR) rather than Bitcoin (BTC) due to transaction privacy concerns.”
So far, firms like on-chain tracking solution Chainalysis have worked with the US government for unearthing criminal activity on popular crypto networks like Bitcoin. Just last month, the firm was heralded by the IRS to help take down three notorious terrorist organizations.
But even Chainalysis has had a difficult time figuring out the privacy mechanisms that make coins like Monero what they are. Blockchain analytics firm CipherTrace claims it has a solution but this has been disputed by members of the Monero community.
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