Crypto and PrivacyA problem we all share

2014

Why is privacy important in digital currencies?

What services and alternative coins exist that introduce privacy?

What can you do armed with this knowledge?

Why it matters Obtaining Privacy Takeaways

Digital Currency Entrepreneurship & Startups

What you will learn in 20 minutes

Privacy Matters

Why

1

2

4

Political or religious causes you support

Are you a good target to scam?

Who you or your family does business with

Stolen coins you unintentionally own could become disabled

Digital Currency Entrepreneurship & Startups

“I have nothing to hide“

3

Digital Currency Entrepreneurship & Startups

1. You list a laptop on Craigslist

2. A Bitcoin thief buys it from you

3. You are now marked as a thief

Trackable money is not good

Slippery Slope

THE BLOCKCHAIN IS PERMANENT

Every sale

Anything you buy from anybody

Every donation

Any cause you supported, ever

Every loan

Any friend you helped out, ever

Digital Currency Entrepreneurship & Startups

Your identity can leak

Exchanges Public QRC Recipients

Obtaining Privacy

Solutions

Digital Currency Entrepreneurship & Startups

Forwards coins through dummy accounts1 Requires high trust in

operators to not steal2 A dying trend3

Tumblers Poor Man’s Privacy

Can be applied to any crytpo-currency

NOT JUST BITCOIN

Achieves complete anonymity for all transactions (sender, amount, and receiver)

ANONYMOUS

Sits on top of the “base” coin as a second coin

PIGGYBACKS

Concerns that the cryptographic proofs it uses could be cracked later

TOO NEW

Digital Currency Entrepreneurship & Startups

CONCEPT: Zerocoin (zerocash)

http://zerocoin.org/

Digital Currency Entrepreneurship & Startups

Groups transactions together into multi-output transactions

1 Reduces fees since transactions are merged2

Operators need to be trusted to not keep logs or expose data

3

CONCEPT: Coinjoin

Are the inputs of Transaction 2 owned by the same person?

https://bitcointalk.org/index.php?topic=279249.0

As a service As a Coin

Dark Wallet and SharedCoin both implement hosted

solutions for “mixing” Bitcoin

transactions

Darkcoin ($30M market cap;180s

block target). Uses random master

nodes to obscure transactions.

Digital Currency Entrepreneurship & Startups

Coinjoin in the wild

https://darkwallet.is/https://sharedcoin.com/

http://darkcoin.io

Coinjoin Sudoku can analyze transactions and remove the anonymity !(www.coinjoinsudoku.com)

BUT…

It’s flawed

Digital Currency Entrepreneurship & Startups

Payments are sent to a one-time address1

The funds are split into pieces before being spent again

2No central nodes; no need for other concurrent transactions

3

CONCEPT: Cryptonote

https://cryptonote.org/

Digital Currency Entrepreneurship & Startups

• Monero • $5.7M market cap, 60s

block target

• not a fork of Bitcoin;

• Receiver can de-cloak sender with key.

• Bytecoin • $5.8M market cap, 120s

block target

• Original code source for

Cryptonote in the wild

REVAMPED

http://monero.cc/

https://bytecoin.org/

Digital Currency Entrepreneurship & Startups

Honorable Mentions

• (incomplete) Cloakcoin ($3.0M market cap) - nodes act as tumblers; 60s block time; not coinjoin; *POS = lower fees; http://www.cloakcoin.com/

• XCurrency ($4.8M market cap) - Custom method. Integrates Tor to mask sender IP. Splits transaction across network. Uses nodes (like DRK) to process; all wallets are nodes; small trns size means less risk.; *POS = lower fees; http://www.xc-official.com/

• Vericoin ($5.3M market cap) - Via service Verisend; *POS = lower fees; http://www.vericoin.info/

• More: https://bitcointalk.org/index.php?topic=568166.0;all

Takeaways

Privacy

- Privacy is an obstacle to serious adoption

- Services and coins: Tumblers, Coinjoin, Cryptonote, etc.

- Beware of identity leaks - Oldest privacy coins are less than 4-months old; many problems unsolved

Why it matters Obtaining Privacy Takeaways

Digital Currency Entrepreneurship & Startups

What we learned

Thanks, Lab Zero (our host)

Michi Kono

Visit our host at http://labzero.com

Visit the Meetup page at http://meetup.com/digital-currency/

Contact the author at michi.kono@coinposit.com