Chainalysis indicated that they know the exact location the missing Mt. Gox funds, emphasizing the need for both greater privacy and greater transparency in the blockchain world.
During a hearing on June 8th for the Subcommittee on Terrorism and Illicit Finance of the US House of Representatives, blockchain analysis firm Chainalysis revealed that they know without a doubt the destination of the missing funds from the now-defunct Mt. Gox exchange. Chainalysis has a partnership with US law enforcement and was the official investigator in the Mt. Gox bankruptcy case.
Mt. Gox was the world’s largest Bitcoin exchange during the currency’s infancy and rise to fame. It famously became insolvent in 2014 because of the loss of 650,000 Bitcoin, which mysteriously went missing, precipitating a market crash and one of the more prominent “Bitcoin is dead” moments from the press in recent years.
Discovery highlights that Bitcoin isn’t fully private
While the discovery of missing funds from one of the biggest disasters of the cryptocurrency world is a welcome event, it also reinforces that Bitcoin isn’t private. While addresses and transactions are pseudonymous and not necessarily tied to any real-world identity, and while a few tricks can be done to make tracing transfers more difficult, everything is transparent on the blockchain. The right tools can make analysis possible, and this will likely become easier as time goes on.
The traceability of Bitcoin transactions gave way to several other approaches to blockchain transactions that serve to obfuscate their origins and destinations. Several top coins, including Dash, Monero, and Zcash, emphasize features to make transactions anonymous, protecting the privacy of its users. While untraceable digital money initially invokes stereotypes of darknet markets and illicit purchases, there remain many legitimate reasons to protect one’s privacy, from protecting one’s balance from the eyes of potential thieves or kidnappers to keeping to-be-announced business transactions etc. from becoming prematurely public. Legitimate use cases such as these also make the case for optional privacy features to complement full transparency.
Accountability becoming a must in the cryptocurrency world
While the Mt. Gox situation emphasizes the need for greater privacy with cryptocurrency transactions, it also highlights the need for the opposite: accountability. Digital currency is still very much in a “wild west” phase, and accounting standards have needed establishment in the new digital age. Some blockchain analysis firms, such as Node40, assist in this task, allowing individuals and businesses to account for all their funds, as well as calculate the value of their digital assets at every juncture of their history, for tax and other accounting purposes.
Finally, the open nature of the blockchain world underscores the need for accountability measures for projects which may not have a traditional, old-world legal framework. In the case of Dash’s masternode system, contractors who gain a net 10% “yes” votes from the network are awarded their proposed budget allotment, with no additional follow-up on the protocol level. To support this system, several accountability features have cropped up, including Dash Budget Watch, a system that helps escrow funds pending milestones to ensure budget proposals are fully completed, and of course Dash Force News’s very own Joe Moraca‘s proposal research and updates.