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“Exclusive mining” – a new way of money laundering through the MTC
CONTENT

  • Exclusive mining can be used to launder money

  • Darknet participants use miners’ services

  • Vampire mining siphons liquidity from successful protocols

International consortium of news organizations developing transparency standards.

Researchers from the Blockchain Research Lab have identified a new way to launder money using cryptocurrency, which is called “exclusive mining”.

Miners become accomplices in crime

The “exclusive mining” scheme was described several years ago, but has not been popular until now. However, the rapid development of mining pools and retail mining is helping to popularize this criminal area..

As Dr. Elias Strehle from the Blockchain Research Laboratory and Lennar Ante from the University of Hamburg explain in their article, scammers can place transactions through private channels and ask the miner or mining pool to confirm the transfer and receive a reward in return. Thus, the transaction remains unaccounted for by many analytical systems, as it looks like a reward from mining cryptocurrency..

“Someone places a transaction through a private channel and gives one miner or mining pool the exclusive right to confirm that transaction and earn cryptocurrency as a reward. They are added to the blockchain just like regular transactions, ”the article says..

This technology, as mentioned in the document, can be used to “disguise transfers for transaction costs for tax evasion or money laundering.” How this works in practice, the researchers also explain in their article.

“Imagine that you are a drug lord on the darknet and you need to launder your millions of bitcoins. You send some bitcoins to an exclusive miner that you control and force that miner to charge an absurdly high transaction fee. The exclusive miner then withdraws the bitcoins they received as a reward for processing this expensive transaction to a cryptocurrency exchange and exchanges them for fiat currency. It looks legitimate as it is the income generated from mining bitcoins. Then the exclusive miner gives the fiat currency to the mafia boss, ”the authors of the study describe the scheme..

The researchers themselves argue that it is very difficult to detect cases of “exclusive mining”, and it is even more difficult to prove criminal intent, because the mining of cryptocurrencies is not prosecuted today.

                                                      Scheme of the organization of “exclusive mining”

Vampire miners suck liquidity from other projects

Another popular direction in the cryptoindustry, which is now actively replicated in the decentralized finance market, is called “vampire mining”. The bottom line is that the new DeFi Decentralized Finance (DeFi) is financial services built on blockchain technology that offer users access to open, efficient and … More projects sucking liquidity from more lucrative protocols and transferring it to themselves. BeInCrypto reported cases of “vampire mining” on the example of the SushiSwap and Uniswap project.

The creators of SushiSwap claim to have broken the system. They distribute SUSHI tokens to users, which will allow them to receive a percentage of the protocol fees, regardless of whether they are currently providing liquidity or not. During the first two weeks, for each block, a tenfold reward is paid, or 1000 SUSHI tokens, while the SUSHI / ETH pool receives an additional coefficient equal to two.

Despite this scheme for obtaining liquidity, the SushiSwap protocol did not survive the market pressure, and SUSHI tokens fell in price by more than 50%. The largest cryptocurrency exchange Binance defended the unsuccessful project, which justified itself for listing the scandalous coin.

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