Amid the furor of the August 1 Bitcoin Fork, another interesting thing happened. The individual(s) behind the WannaCry ransomware attack started to empty their bitcoin wallets. The $140,000 worth of bitcoin they originally collected gained about 20% more in value during the split, and it was around that time that the virtual money started to move.
The activity was detected by Keith Collins of Quartz, who used a bot to watch for movement in the accounts. The bot observed the initial withdrawal of $70,000, which was then followed by additional amounts from other bitcoin wallets until all the money was gone.
The withdrawals then passed through a bitcoin mixer – a service that offers to hide the tracks of illicit bitcoin transactions by blending the code of each with code from other legitimate ones. This is, in effect, digital money laundering.
The WannaCry ransomware event was small in terms of the monies received, especially when compared to the more sophisticated ransomware rings like Locky and Cerber, whose hauls have been in the millions of dollars.
But the activity puts greater focus on the concept of bitcoin mixing. Given the supposedly immutable nature of the Bitcoin protocol and the blockchain, thieves have had to go to great lengths to hide their tracks when working with stolen money.
There are many bitcoin mixing services available online, but until recently, as was stated at the Black Hat USA 2017 Security Conference, 95% of the mixing was being done by one exchange house: BTC-e. This is the same BTC-e whose kingpin, Alexander Vinnik, was arrested in Greece in late July. BTC-e is notorious for its activities as an exchange house. Mr. Vinnik’s arrest was made possible in part by experts at Google and Chainalysis, who established that it is still possible to track down Bitcoin transactions even after they have been scrambled. Their sleuthing led authorities to the front door of BTC-e.
Vinnik’s arrest is unlikely to make a dent in the money laundering business, even if BTC-e itself is shut down. Other organizations will quickly spring up in its place, run by the same people or by more agile competitors. Organized crime has never, and will never stop its efforts to find money, and the atmosphere of confusion and novelty that surrounds cryptocurrency daily, makes for a ripe environment.
But at least one major bitcoin mixing service, BitMixer, has closed its doors, after recognizing that Bitcoin cannot become anonymized. As Catalin Cimpanu reported at bleepingcomputer.com, “BitMixer was founded in 2011, and it shut down three days after US and European authorities had announced they infiltrated and shut down the Dark Web’s two largest illegal marketplaces — AlphaBay and Hansa. BitMixer’s owners stated, ‘Blockchain is a great open book. I believe that Bitcoin will have a great future without dark market transactions. You may use Dash or Zerocoin if you want to buy some weed. Not Bitcoin.’”
This is a major boost for the status of Bitcoin in its quest to become a legitimate currency. The fact that it cannot be anonymous as the bad guys would like allows for greater market confidence. It serves as a strong antidote against the fear generated by endless stories of hacks and thefts, and gives credence to the use of bitcoin wallets as a storage and transaction mechanism.
Bitcoin’s evolution, especially in recent weeks, has been put under the microscope. There are already billions of dollars at play. Some market analysts have dismissed cryptocurrencies as a Ponzi scheme, citing no intrinsic value to shore up the currency, but the fact is banks, governments and companies worldwide have already invested heavily in testing out Bitcoin and blockchain-based innovations.
The Fork was an evolutionary milestone, challenging the technology to prove itself as viable and economic, by resolving its current stumbling blocks, which have to do primarily with the speed and efficiency of approving and recording transactions. It will not be the last. Progress is built from friction, and the various factions behind the Bitcoin and Bitcoin Cash protocols, along with those at Ethereum, will rub themselves together until an ideal polished currency format evolves.
The lesson, for the time being at least, is that Bitcoin has survived another challenge to its status as the de facto king of virtual currency. Vigilance in protecting data from ransomware and in keeping bitcoin wallets secure against the bad guys remains the responsibility of the individual, but the money itself is proving its own ability to fight back.