Forget bitcoin. There’s a new digital currency that is surging as online drug dealers begin adopting it to conduct business with more anonymity.
The two-year-old currency monero has more than quadrupled this month after gaining support from prominent websites that anonymously peddle drugs.
It spiked to as much as US$10 on Sunday after AlphaBay, one of the most popular sites for buying drugs such as liquid LSD and hybrid cannabis, said last week it will begin accepting the currency on 1 September.
The total value of all monero in circulation pushed past $100m on Monday, up from about $25m at the end of last month, according to coincap.io.
“Following demand from the community, and considering the security features of monero, we decided to add it to our marketplace,” AlphaBay announced on Reddit last week. “We expect this to cause a spike in the price, so if you are an investor, now is the time to purchase monero.”
Bitcoin, the most popular digital currency in the world with a total value of $9,1bn, also allows users to move funds discreetly and uses a network of miners to verify the authenticity of each trade.
But its privacy has come under threat as governments and private investigators increase their ability to track transactions across the bitcoin network and trace funds to bank accounts ultimately used to convert digital assets to and from traditional currencies like US dollars.
Monero similarly uses a network of miners to verify its trades, but mixes multiple transactions together to make it harder to trace the genesis of the funds. It also adopts “dual-key stealth” addresses, which make it difficult for third parties to pinpoint who received the funds.
“For any two outputs, from the same or different transactions, you cannot prove they were sent to the same person,” Riccardo Spagni, a lead developer of monero, wrote by e-mail. Jumbling trades together makes it “impossible to tell which transaction, of a set of transactions, a particular input comes from. It appears to come from all of them.”
The features have earned praise from influential players in the community, including millionaire angel investor Roger Ver, known as “Bitcoin Jesus” for his evangelical support of the currency during its early years. Ver said his investment in monero is “substantial” and his biggest in any virtual currency since bitcoin.
“Monero at a protocol level is very, very private and has that big advantage over bitcoin,” Ver said in a phone interview. “You have to be really, really careful how you use bitcoin in order to use it privately.”
Ver also said a big reason behind his investment is the recent in-fighting among the bitcoin community about increasing the capacity of its network. “Bitcoin hasn’t been allowed to scale, but monero still has a lot of room before it starts bumping into any sort of scaling issues,” he said.
To be sure, even after its impressive recent streak, Monero is still a tiny segment of the digital currency market and is ranked number 5 in terms of overall market value, far behind bitcoin and ethereum. It is also not clear how anonymous monero actually is and whether its code has been subject to extensive review.
Still, its adoption by so-called “dark net” sites is helping it achieve a level of attention that propelled bitcoin to the global consciousness in 2011, after sites like Silk Road began using it to facilitate trades in psychedelic mushrooms and child pornography. That initial burst of attention eventually drew other legal businesses to its ecosystem. — (c) 2016 Bloomberg LP