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In the near future, Monero and Zcash will find out if they will be able to resist the full pressure of the US government. The SBIR (Small Business Innovation Research) program of the Department of Homeland Security, which includes the office for the fight against mass destruction and the direction of science and technology. issued a pre-solicitation announcement regarding a concession to decrypt the privacy of Monero and Zcash. The final request should be published December 19, 2018. In fact, hackers in the United States and the rest of the world will present proposals on how they would undermine the anonymity of Monero and Zcash, and the best hacker will be paid a significant sum of money and data all the resources they need to make it happen.
Bitcoin is only considered pseudo-anonymous, since all Bitcoin addresses and transactions are available on any block explorer such as Blockchain.com. That said, Bitcoin can be almost completely anonymous if people use virtual private networks (VPN) or the TOR network, to mask their IP address and use a new Bitcoin address for each transaction. However, private coins such as Monero and Zcash have made anonymity a step further by integrating true anonymity directly into their code. This is important, since there are many forensic analysis companies that can trace Bitcoin activities and associate Bitcoin addresses with identities. The US government is spending tens of millions of dollars on the blockchain judicial police.
Monero (XMR) is the secret coin number 1 with a market capitalization of 917 million dollars, while Zcash (ZEC) it is the n. 2 to 393 million dollars at the time of writing of December 5, 2018. Monero uses ring signatures, ring confidential transactions and invisible addresses to obscure the origin, destination and amount of all transactions. Ring signatures combine transactions with a group of other transactions, making it exponentially more difficult to establish a link between each subsequent transaction. The confidential transaction mechanism of the ring hides the amount transferred and the invisible addresses prevent anyone except the sender and the recipient from discovering the destination address of a transaction.
Zcash uses zero-knowledge zk-SNARKs tests to verify transactions without revealing the sender, recipient or transferred amount. However, Zcash is designed to selectively disclose transaction data if the user chooses, via z addresses and t addresses. The Z-addresses are private and transactions between them appear on the blockchain, but all data in the transaction is encrypted. Transactions between t addresses have the same pseudo-anonymity of Bitcoin, without encryption of transaction data. Users can protect their ZEC by sending it from a t address to a z address, or by sending it from a z address to a t address. Zcash has just been added to Coinbase, because the transparency option makes it compliant with regulations.
Presumably, transactions on the Monero blockchain can not be linked to a real-world identity, at least at this point, but the US government is trying to change that reality. Likewise, transactions performed between z addresses on the Zcash blockchain can not be associated with an & # 39; identity, since all data is encrypted.
The goal of the US government is to "Design a product to support the implementation of blockchain-based forensic analysis, data analysis and information sharing" specifically for Monero and Zcash, but also for other cryptocurrencies. The government is obliged to track and understand the illegal cryptocurrency transactions and the technology developed through this grant will be adapted to be used by the forces of the order.
There are 3 stages that people who apply for this bag must meet. In phase 1 it is necessary to create or modify blockchain analysis software to allow forensic analysis of Monero and Zcash. In phase 2 a prototype must be demonstrated, and specific cases will be studied with and without external data, in order to verify that the newly developed forensic software works. In phase 3 the software will be adapted for use by the Department of Homeland Security, law enforcement agencies and private institutions such as banks.
Unfortunately, if this software is successfully developed and the privacy of Monero or Zcash ends up being compromised, it seems unlikely that the cryptographic space will be known, at least for a long period of time. The only proof of the existence of such software would become evident in court documents after the users of Monero and Zcash who engage in illegal activities begin to be arrested. That said, it would be shocking that this project works and the anonymity of Monero is effectively compromised, even if the best hackers in the world are those who develop this software for the government.
