IRS offers $625,000 reward to anyone who can create tracing tool for Monero cryptocurrency or the Lightning Network

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The agency wants to catch criminals who rely on untraceable networks

If you could use a little extra cash, the Internal Revenue Service (IRS) is forking out a $625,000 bounty to anyone who can find a way to trace transactions on the privacy-focused cryptocurrency Monero or on the Lightning Network.

The IRS’ Criminal Investigation unit (IRS-CI) is on the prowl for “illicit actors” whose bread and butter is the use of privacy coins and networks that might be facilitating identify theft, narcotics trafficking, money laundering, terrorist financing, sex trafficking, and child prostitution. 

As an example, CoinTelegraph’s Joshua Mapperson notes that Monero is one of the virtual currencies preferred among criminal organizations over more traceable crypto assets like Bitcoin. Monero was also tied to the WannaCry Ransomware Attack that hit Boeing, FedEx, and others.

Lightning Labs, on the other hand, has developed a monitoring app called Lndmon that allows network payments to be routed through several sequential channels that essentially mask cyber currency transactions and are not publicly recorded on the blockchain. The IRS says the number of nodes on the Lightning Network has grown to nearly 10,000 since the initial release in March 2018, close to the number of full redistribution points or communication endpoints on the Bitcoin mainchain.

What the IRS is looking for

The short version of the IRS’ gamble is that it’s looking for someone -- or some ones -- to show them how to trace transactions to specific users and provide technology which allows its Special Agents to predict statistical likelihoods of transaction inputs, outputs, metadata, and public identifiers. 

A key factor for the agency is the ability to keep everything in-house as much as possible. To date, authorities have had to outsource their crypto forensics capabilities and employ the skills of private contractors.

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