In this article we explain why you should be using Monero for any darknet market purchase, how it works compared to Bitcoin and most other cryptocurrencies and mention a couple other privacy coins occasionally supported by darknet markets.
Launched in April 2014, Monero (XMR) is the most popular privacy coin used on the dark web, by far. It has gone through numerous upgrades over the years to become the largest coin focused on providing cash-like fungibility. The first major darknet market to accept Monero as a deposit option was AlphaBay, which introduced the coin to its marketplace in August 2016. Others have increasingly adopted it over the years to the point where it is now considered a standard option among English language darknet markets. Some markets now are even Monero-only.
While its privacy-enhancing features make it a superior option over Bitcoin (BTC) for darknet market purchases, Monero still lags behind Bitcoin in terms of frequency of use in markets. This is due to a few reasons:
- Bitcoin is easier to get ahold of and can be purchased from literally any cryptocurrency exchange,
- It has a bigger market cap and more trading volume, which means its price doesn’t fluctuate as wildly as Monero, and
- It is considered easier to use than Monero, but this is mainly because new users haven’t acquainted themselves to how it works, even though it is actually quite simple to use in 2023.
Even though Bitcoin may still be more popular and convenient, the opaqueness of Monero’s transactions and blockchain render it a much more suitable cryptocurrency for darknet market transactions, hands down. Even if you don’t use darknet markets but just value your financial privacy and OpSec, you’ll want to familiarize yourself with how it works as it is truly better than Bitcoin in this regard.
We hope that by explaining the basics of the underlying tech through which it functions, some of the mystery shrouding Monero can be lessened.
What’s Wrong With Using Bitcoin?
Bitcoin continues to dominate the cryptocurrency landscape in terms of market cap while also receiving the most attention from developers. From a privacy standpoint, however, it is severely lacking in functionality. This is because the core essence of how the Bitcoin blockchain functions leaves it highly traceable and thus susceptible to forensic analysis.
Unlike Monero, all Bitcoin transactions are public, meaning anyone can look at the blockchain to see which addresses are sending coins to which recipients, as well as the amounts of coins being sent. It is quite often easy to tie a Bitcoin user’s transaction history to their identity if they had ever used an exchange for which they provided their personal information for KYC purposes, or simply if they had ever made it publicly known that an address belonged to them.
This means that, with the right information, anybody can follow one’s Bitcoin spending habits, figuring out who they sent coins to, in what amounts, and how often. There are a couple of ways to create some privacy among Bitcoin transactions, and these include making use of “coinjoin” transactions or mixing services, although neither method is guaranteed to provide absolute anonymity as a result.
For example, one could easily undo the anonymity created by a mixing session by sending mixed coins to a previously-used address that had already been associated with their spending habits. In addition, blockchain forensics companies like Chainalysis have already nearly perfected the art of deanonymizing Bitcoin mixers. As they are partnered with the US government, they are sometimes called into court to testify and explain blockchain linkages on a scientific level, all of which are mathematically provable thanks to the open ledger system employed by the Bitcoin blockchain.
How Does Monero Work?
Monero achieves its supreme level of privacy through its incorporation of three unique features that only it contains:
- Ring Signatures: conceals the true sender of a transaction.
- Ring CT (Confidential Transactions): hides the amount of XMR being sent in a transaction.
- Stealth Addresses: a hidden address where XMR is actually received, derived from the public address.
Through the combination of these features, every part of a Monero transaction is hidden on the blockchain — from sender, to amount, to receiver. What is displayed on the blockchain instead is transaction data that can only be deciphered by parties possessing the private keys of addresses related to each transaction.
Ring Signatures
Ring Signatures are used to obscure the true identity of the sender in a transaction by creating a group of potential signers, of which the true signer is a member, but it is unknown which member is the actual signer. It accomplishes this through combining the sender’s public key with public keys pulled at random from the blockchain which then act as “decoys.” Since unspent and spent outputs appear the same on the Monero blockchain, each public key has the same plausible deniability of being used to sign the send transaction. The maximum number of signatures in a ring is currently 16.
Ring CT
Ring CT is an evolution of Monero’s original Ring Signatures technology and was introduced in early 2017. With Ring CT, the amount of Monero being transacted is hidden from public view by using a cryptographic method known as a “range proof.” A range proof is a mathematical proof that the amount being transacted is within a certain range without revealing the exact amount. This means that only the sender and receiver of the transaction can see the actual amount being transferred. Ring CT also improves transaction privacy by allowing multiple inputs and outputs to be combined into a single transaction, obscuring the exact source and destination of funds.
Stealth Addresses
Stealth Addresses allow users to receive transactions without publicly revealing their actual receiving address. When a user creates a transaction with Monero, a unique one-time stealth address is generated for the recipient, rather than using the recipient’s actual public address. The stealth address is derived from the recipient’s public address and a random number generated for each transaction. To spend funds, the recipient derives the address’ private key using a piece of information known as a “shared secret,” generated during the transaction process, allowing them to recover the random number used to create the stealth address.
How Does Monero Generate New Coins?
Like any proof-of-work cryptocurrency (such as Bitcoin, Litecoin, Dogecoin, and previously Ethereum), Monero relies on miners to dedicate computational resources to add new blocks to its blockchain, thus processing new transactions and securing the network. The process of mining is driven by hash power usually provided by a CPU, but a GPU can also be used (although with less efficiency).
Unlike Bitcoin, which uses the SHA256 proof-of-work algorithm that is dominated by highly expensive ASIC hardware, Monero uses the RandomX algorithm which serves to make mining fairer between CPU and GPU miners. Also unlike Bitcoin, Monero has a fixed miner reward of 0.6 XMR + transaction fees per block, forever. Known as a “tail emission,” this fixed reward assures that miners will never be solely reliant on transaction fees for income, as opposed to Bitcoin’s halving schedule in which the reward is cut in half approximately every four years.
What Are the Drawbacks of Using Monero?
Despite its clear advantages over Bitcoin in terms of transaction confidentiality, Monero does have some drawbacks. In the beginning of this article, we mentioned that Monero is not widely traded on many exchanges and does not have the same liquidity as Bitcoin, which means its price is more volatile than BTC. It also means it is less accessible. Some other disadvantages include:
- By default, Monero transactions are not spendable until 10 confirmations have passed, which is usually around 20 minutes.
- Monero transactions to and from major cryptocurrency exchanges may be more heavily scrutinized than other cryptocurrency transactions.
- Some countries, such as Japan, South Korea and Australia, have banned local exchanges from listing Monero, and Dubai has banned its use altogether. Chances for regulatory measures to take place in the EU remain high.
- While wallet clients like Feather and Cake are relatively user friendly compared to previous Monero wallets, they are still a bit cumbersome and require synching with the blockchain.
- It is not as well accepted among e-commerce platforms as other major cryptocurrencies.
What Darknet Markets Accept Monero?
Just about every major English-language darknet market supports Monero as a deposit option, including (but not limited to) Abacus, Archetyp, ASAP, BlackMarket, Bohemia, Cypher, Incognito, Kerberos, Kingdom Market, Royal Market, and Tor2Door.
What Are the Other Privacy Coins Accepted by Darknet Markets?
There are a few other cryptocurrencies which have privacy-enhancing features, although they are not necessarily as technically sound as those provided by Monero and not nearly as often supported. They include Litecoin (LTC), Zcash (ZEC), Dash (DASH), Decred (DCR), and Verge (XVG) (note that only LTC and ZEC are currently supported by any active darknet market). These coins achieve differing levels of privacy through their own unique means.
Litecoin
One of the oldest cryptocurrencies still in operation, Litecoin is the 12th largest coin by market cap and has close to 20x the trading volume of Monero. It is therefore much easier to find and purchase. It is also less volatile in terms of price. Litecoin was not regarded as a “privacy coin” until May 2022, when the MWEB (MimbleWimble Extension Blocks) upgrade was activated. MWEB is an “opt-in” feature that Litecoin users can utilize to add privacy to their transactions.
The MimbleWimble protocol, first introduced in Grin and Beam, works by combining multiple transactions into a single “block,” which is then verified using a process called “cut-through.” Cut-through removes any unnecessary data from the blockchain, such as input and output addresses, transaction amounts, and transaction fees, while still preserving the integrity of the transaction. By removing this data, MimbleWimble makes it much harder for anyone to trace a transaction back to its original sender or receiver.
Markets of note that currently support Litecoin include Kingdom Market and BlackMarket. The vendor shop HeinekenExpress also features LTC as a payment option. Archetyp used to support LTC but seems to have disabled it in the last few months. Tor Market, another market that supported LTC, is currently on hiatus. It would not be surprising if more markets decide to implement Litecoin as a deposit or payment option in the near future.
Zcash
Zcash (ZEC) was launched in October 2016 and is based on the Bitcoin protocol. One of the key features of Zcash that renders it different from Bitcoin is its use of zero-knowledge proofs. These are a type of cryptographic protocol that allow a party to prove the validity of a statement without revealing any information beyond the validity of the statement itself. In Zcash, zero-knowledge proofs are used to hide the details of transactions, such as the sender and receiver addresses and the transaction amount.
Zcash allows users to choose between two different types of addresses: transparent addresses, which function similarly to Bitcoin addresses and are visible on the public blockchain, and shielded addresses, which use zero-knowledge proofs to keep the transaction details private. Zcash uses a proof-of-work consensus algorithm similar to Bitcoin, to verify transactions and add new blocks to the blockchain. However, the Zcash team has implemented a feature known as “dual-key stealth addressing,” which makes it more difficult for transactions to be traced back to their origin.
As of now, there are no major darknet markets that still accept ZEC. Although they once offered it as a deposit option, both Archetyp and Kingdom Market seem to have disabled support for the coin, perhaps due to it being unpopular among customers. Tor Market, which is currently on hiatus, did support ZEC, but it is unknown when/if the market will return. There is a chance other major markets may add ZEC in the future, but this is unlikely.
Conclusion
The first half of 2023 saw the addition of a few more entries to the ever-growing list of reasons why any darknet market user should be using Monero (or another privacy coin when available) over Bitcoin. These reasons include enhanced forensic analysis abilities by blockchain analysts like Chainalysis, the government takedown of ChipMixer and its seizure of 7 TB of transaction data, and skyrocketing fees that have plagued the Bitcoin network in recent months.
While good enough for most users historically speaking, Bitcoin mixers should no longer be thought of as safe to use. The reliance on a transparent blockchain and a third party to hold customer coins simply poses more risk than should now be deemed acceptable. Seeing as how most darknet markets and vendors accept XMR as a payment option these days, there’s really no reason why anyone should continue using BTC. Even if a buyer cannot get XMR from a local exchange, there are plenty of no-KYC exchangers ready to convert their other coins to it.
Monero has advanced quite a long way during its nine-year history. As it has grown and become more sophisticated, so have the user interfaces, infrastructure and services built around it. In many ways, Monero is the peer-to-peer, fungible electronic cash that Bitcoin set out to be in 2009. As it is now a permanent fixture of the dark web, its demand will likely increase well into the foreseeable future, eventually replacing BTC as the #1 coin used on darknet markets.