Stories

For cryptocurrency, online criminals prefer availability to anonymity

Cryptocurrencies
Photo: Chesnot / Getty Images

New research from Recorded Future finds that online criminals who offer an alternative payment method to bitcoin prefer the more available cryptocurrency Litecoin to the harder-to-trace currency Monero.

Why it matters: Bitcoin won’t be around forever, at least for use as a method of criminal payment. Due to design flaws limiting the scalability of bitcoin, converting fiat currency to bitcoin can be slow and costly compared to other coins. And, though the currency is harder to trace than cash, transactions between anonymized sources can still be traced by law enforcement, leading to some security issues. Litecoin is a currency better equipped to address the first problem, while Monero is a currency better equipped to address the second.

The researchers expected Monero to do better: Buyers of drugs, stolen credit cards and the like tend to prefer how much harder the currency’s design makes it to trace transactions back to buyers and sellers. But Monero has one flaw that sellers can’t abide by — it’s very difficult to store offline.

Cold storage is the difference: Bitcoin ATMs can convert bitcoin stored on USB drives into actual currency. They can’t do the same for Monero. Since online exchanges and storage systems have often been hacked, criminals — and security-minded bitcoin enthusiasts — prefer to store their currencies offline, what cryptocurrency users refer to as cold storage. Litecoin closer resembles bitcoin in the convenience of cold storage.

The methodology: There are hundreds of different cryptocurrencies and thousands of different criminal vendors. Recorded Future essentially went door to door to check who took which coins. Monero, what may be the gold standard of hard-to-trace transactions, came in fifth. While Litecoin was accepted in 30% of markets, Monero was only accepted in 6%, ranking it behind Dash (20%), the Bitcoin spinoff Bitcoin Cash (13%) and Etherium (9%).