On September 1, 2023, hackers made off with 2,675.73 monero (XMR), worth over $3 million at the time, from the Monero CCS donation wallet in nine separate transactions. Now, blockchain analysis firm Moonstone Research has traced forward through three of those transactions in a postmortem released this week.
Monero Privacy Challenged in Monero CCS Wallet Trace
Just 65 days ago, a monero (XMR) wallet earmarked for compensating contributors suffered from a hack. In a puzzling twist of events, the Monero team still grapples with the mysterious origins of this breach. A comprehensive investigation revealed that only two individuals held knowledge of the CCS wallet seed.
The wallet had also been operational since April 2020, functioning without issues until September 1, when an attacker executed a sequence of nine transactions, ultimately draining the entire balance of the CCS wallet. The enduring mystery revolves around how the assailant successfully accomplished this audacious feat.
The Moonstone Research postmortem details how the firm identified one of the hacker’s transactions that contained outputs from all nine of the initial withdrawals from the CCS wallet. While XMR transactions are designed to be private, this transaction’s rings contained one matching output from each of the nine hack transactions. Moonstone believes this indicates the transaction almost certainly belonged to the hacker, merging funds.
Analyzing this first transaction then allowed Moonstone to trace two more transactions likely made by the hacker sending funds to an exchange, service, or counterparty. However, the firm was unable to account for all the XMR withdrawn, indicating some funds have not yet been traced. The postmortem speculates the transactions were made using the mobile wallet Monerujo and its anonymizing “PocketChange” feature based on the abnormal number of outputs.
“Monero tracing is not deterministic in the same way that Bitcoin and Ethereum tracing often is. Monero transactions purposefully impose complexity to their transaction graphs, leading to false positives and ambiguity,” the report states. Still, blockchain analysis can uncover leads when combined with other evidence using heuristics.
Privacy Expert: ‘This Is Not a Scenario That Applies to Almost Anyone Using Monero’
Moonstone’s investigation demonstrates, under certain circumstances, XMR transactions can sometimes be partially traced despite their privacy features. But the report also shows there are still limitations to analyzing Monero’s complex blockchain. This development has piqued the interest of the crypto community, sparking discussions across various social media platforms. “Wow… not as private as everyone thinks,” one person remarked.
“I’m impressed but also concerned by how Monero transactions can be traced,” another person said on the social media platform X.
This is not the first time a blockchain analysis company has disclosed its capabilities to track XMR transactions. In 2020, Ciphertrace, a blockchain surveillance firm, claimed to have developed the “world’s first” Monero tracing tools designed for law enforcement purposes.
However, skepticism persists in the crypto community regarding the extent of these capabilities. At that time, information security engineer and XMR advocate Seth Simmons, among others, raised doubts about the accuracy of Ciphertrace’s claims and emphasized the need for corroborating evidence.
Simmons shared his perspective about Moonstone’s study as well and stressed that the specific tracing scenario doesn’t apply to the typical Monero user. He insists XMR remains inherently private and resistant to most tracking attempts. He explained that the ability to trace resulted from unusual circumstances: private keys were shared with a chain surveillance company.
Simmons further said that an atypical onchain footprint was created due to a Monerujo feature, and significant off-chain metadata was voluntarily provided. Seth suggests that future Monero improvements will make such tracing nearly impossible, emphasizing the need to avoid sharing private keys, sweeping entire wallet balances unnecessarily, and to minimize off-chain metadata exposure.
“Ring signatures’ only major weakness is against targeted tracing with known (or ‘poisoned’) inputs, which is this exact scenario,” Simmons wrote.
What do you think about Moonstone’s study and the skeptism surrounding monero tracking attempts? Share your thoughts and opinions about this subject in the comments section below.