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DEA Agent: Privacy Coins Lack Liquidity and There Are “Ways of Tracking Them”

According to an agent for the US Drug Enforcement Agency (DEA), Bitcoin is used more than its more private competitors due to its higher liquidity.

Speaking on the shift in the most common purpose of cryptocurrency transactions, DEA special agent Lilita Infante said that cryptocurrency has shifted from primarily used for illicit means to a majority speculative purpose. Additionally, according to Infante, the vast majority of illicit transactions are still done in Bitcoin, rather than coins such as Monero and Zcash with enhanced privacy features. This is reportedly because of significantly lower liquidity for these coins.

Current 24-hour trading volume for Bitcoin is $5.26 billion, significantly higher than the current highest volume coin with enhanced privacy features, Dash, which currently holds about a $181 million 24-hour trading volume. Zcash, meanwhile, ranks at $116 million in the last 24 hours, while Monero‘s volume comes in significantly lower at $32 million. Of all these coins, top brokerage service Coinbase only supports Bitcoin at present, while other popular brokerage service Uphold supports Bitcoin and Dash.

Privacy in cryptocurrency is locked in a constant technological arms race

The struggle between technologies seeking to improve user privacy, and those seeking ways of cracking that privacy, remains constant and ever-evolving. For example, research into Monero found that transactions prior to 2017 were easily linkable to past transactions, a vulnerability that was largely fixed with the introduction of RingCT. Further, a chain split from MoneroV and additional forks caused a new privacy threat to users attempting to claim coins on the new chains, as well as for the ecosystem at large. Dash’s PrivateSend was found to have a theoretical edge case exploit against large transactions being moved to an empty addressed, mixed, and sent out in the same unit, which can be mitigated through best practices.

Notably, all privacy coins face a similar issue, in that it is currently impossible to preserve near-perfect privacy on anything other than full-node, full-blockchain wallets. In order for a light client to communicate with a full node, certain data must be visible to that node, and therefore not completely private. This means that most wallets, including mobile, web, hardware, and most desktop, have to trust their privacy to the full node used by the wallet provider, potentially creating a honeypot situation where most private transactions are funneled through a few entities which can then be compromised, therefore compromising the privacy of most users. A temporary workaround for this is to run a full node at home and point a mobile wallet (when possible) to that node, therefore trusting your own node and in practice offering a bootstrapped trustless privacy setup.

Dash continues to improve its privacy functions, market penetration

One of the first major cryptocurrencies offering advanced privacy, Dash has a series of improvements to PrivateSend. The recent 12.3 update overhauled the network, including optimizations to mixing speed, and a fix to a potential privacy vulnerability discovered through Dash’s bug bounty program. Additionally, MyDashWallet provides an easy though trusted PrivateSend option on mobile and web environments, and is currently working on a iOS and Android apps, as well as the option for a user to select their own node, providing a workaround to a trustless setup. Finally, Dash’s next scheduled update, 12.4, will include a major overhaul of the network, including deterministic masternode lists, which enable light clients including mobile devices to use PrivateSend without trusting a full node. This may make Dash the first cryptocurrency with completely trustless enhanced privacy features on mobile devices.

Finally, dash has reached new all-time highs in both masternode counts and merchant counts. According to the most recent figures from DiscoverDash, 2,163 merchants at present accept Dash around the world, 865 of them located in Venezuela alone, a country which has experienced a sharp surge in Dash adoption. This growth of Dash’s ecosystem will vastly improve its liquidity over less-used competitors.


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