- The IRS want to trace Monero transactions, which – unlike Bitcoin – are entirely private
- Cracking Monero could help the IRS trace those who have avoided paying tax, and assist in criminal investigations
Do you think you can crack Monero’s layers of privacy? The IRS would like to hear from you.
Monero (XMR) is a famously privacy-centric cryptocurrency, with features built into it from its inception that claim to make transactions untraceable and completely private, hiding the details of movements of digital cash from prying eyes. Completely private by default, Monero is a lot more private than many other cryptocurrencies such as Bitcoin.
And that, of course, has not only made it a popular digital currency for criminals operating on the darknet, it’s also made it a focus of interest for law enforcement agencies and tax-enforcement authorities such as the United States Internal Revenue Service (IRS).
Proof of that is demonstrated by a scheme called “Pilot IRS Cryptocurrency Tracing” that the agency is hoping to run, looking for ways to crack Monero’s privacy and make it easier for them to investigate transactions made through the cryptocurrency.
According to the IRS’s call for contractors they are looking to share a total of $625,000 to “one or more contractors” who assist them in their goal to break Monero, other anonymity-enhanced cryptocurrency, or Lightning or other Layer 2 off-chain cryptocurrency protocols.
The first part of the payment (a mere $500,000) will be paid if a successful proof-of-concept is delivered, demonstrating how Monero transactions can have their privacy stripped away from them.
An additional $125,000 will apparently be given to whoever the lucky person is after the technique has passed a full examination and has been successfully launched.
Some have reacted with bemusement to the IRS’s efforts to decloak Monero transactions.
The IRS admits its approach is unorthodox:
“For those who are familiar with traditional government procurements, Pilot IRS will appear substantively different from how the government normally buys technology. To be fair, it is… This type of approach is more often used in research and development environments, but there are existing regulations that allow federal agencies to buy commercial items in a manner similar with how the private sector would. Pilot IRS will aggressively pursue a streamlined and cost-effective approach to testing and deploying technology solutions that will have an immediate impact on the government’s mission.”
Clearly the IRS has recognised that privacy-focused cryptocurrencies like Monero present a real challenge to their work, and has put its money where its mouth is. But I wonder whether $625,000 is enough reward for what would be such a significant breakthrough.
If you’re interested in participating you should hurry, submissions to the IRS by 08:00 EDT on Wednesday September 16 2020, to be in with a chance to win the prize.
It is unclear to me whether – if you succeed in the task – the IRS will be prepared to pay you in cryptocurrency or not.