Ultimate glossary of crypto currency terms, acronyms and abbreviations
Edit: Currently writing a new version of this, dont know when it will be done. Edit: Since first post I have updated a few sections with additional information. I recommend reading it all even if it is very long, I might have placed some relevant info in different sections while thinking about what else needed to be added, plenty of steps remains mostly the same except when I comment directly on it. It is not necessary to do 100% security all the time, unless you absolutely need it, combining some high and some lower security ideas for a balance of security and convenience is useful. I will base this mostly on Windows, Linux users probably know this, and I have no idea how apple machines work (tho many things in here are still relevant for other operating systems, as they are just general tips) Disclaimer: There are certainly other steps that can make you more anonymous or safer, however I think for most people this will surfice. Any software I recommend should be independently verified for security, and examples of software are not to be taken as endorsements. I simply use examples and give recommendations when I believe it necessary, or helpful. I will not really differentiate between anonymity and security, they are often the same thing. As such the word security can mean either more anonymous, less vulnerable, or both. -------- Everyday Simple Info Sec:
Password for the device is an obvious one (8+ characters minimum, best if over +12), if there is sensitive information on any of the drives, either encrypt the entire drive or just the sensitive files, and make encrypted backups on a different memory storage device (There many programs to encrypt files and drives I'm sure a search will figure it out)
-There could be a hidden administrator user on your PC, make sure to change its password
Always use the device on a non admin account
a VPN that doesn't log (use with kill switch on, should be enough for everyday stuff, more safe stuff in the high security section) (VPNs that claim they don't log sometimes do, it's bad, but I would like to point out that not using a VPN will always expose your traffic to your ISP and also remove additional encryption. Even if the VPN tracks, there is no downside because your ISP would track anyways, and VPNs can be more anonymous, and also add extra encryption)
disable location tracking (preferably make all your privacy setting to release minimal info, get rid or cortana, change privacy settings in all of your accounts as well, there's no reason why you should allow Facebook to give you target ads. Use the setting they give you.
TOR, Firefox or similar browser, stay the fuck away from Google Chrome.
your preferred search engine should be duckduckgo (other privacy focused search engines exist as well)
use an adblocker that also prevents the adding of tacking cookies
Use pgp with all your friends or messaging services that implemented end to end encryption (Implemented services can still be bypassed, but are way more convenient so for everyday use they should suffice, some examples should be Telegraph, Signal, WhatsApp etc) (more info on pgp in high security section)
(Snapchat msgs, reddit dms, discord msgs, are just a few examples of msgs that are never encrypted) -Any info even send in encrypted msgs (and obviously non encrypted) should still be kept with possible deniability, don't say "I'm gonna do MDMA", say "I'm going out with molly."
use software (like ccleaner) that purges cookies and other data after every use, before shutting down your device
use a virus scanner daily (I like spy bot Search and destroy, many other options also exist)
never use the same password/passphrase twice (I will address what passphrase are below) (Better yet use randomized passwords that are stored in a master key chain, make them as long as possible (tho it is okay to go with the minimum of 12 never go below 7, I recommend 15+ depending on how often you have to manually enter the password instead of copying/pasting it) Don't generate too long keys for things you need to access regularly without copy/paste, except your master key ring)
its ideal to never use the same email or username as well, especially username, email is obviously tricky and also very annoying, but it would be best to always change the email.
-DO NOT STORE ANY PASSWORDS ON GOOGLE, IF GOOGLE LOGIN IS AUTHENTICATED IT WILL AUTFILL ALL PASSWORDS IT HAS SAVED (same with other similar services) (This means if you are logged in to chrome and someone has access to your machine, they can auto fill passwords without entering a single password) -use a rememberable passphrase, especially for your master key ring aka password manager A long sentence that is memorable makes an okay password (decent example,: "I met my wife at Little Ceasers for the first time on 07/09/20" better even if it's just something you know, if its impersonal, and if you can add special characters or numbers that you won't forget) (A better example for a passphrase is: "There is 0nly 0ne letter that d0esn’t appear in any U.S. state nameQ")
for your main password manager(key ring), I highly recommend Keepass 2, make backups of the file save to separate devices and drives (Flash drives, phone, PC, laptop, etc, if you loose that file, you lose all of your passwords) (Other good password managers exist as well, I don't recommend online password managers as you lose the control over passwords)
-Purge your internet activity frequently, there's a reason why I only have one post, and a few comments appearing in my account, but thousands of kama. Exposing information needlessly is not good. -Never post private information publicly, and if you do, do it vaguely as possible. (Example: Not "I'm 15", say "I'm a teenager") Do not post any vital information ever, no birthdays, mother's maiden name, age, or anything you have ever seen in a security question. Never post your current activities while they are ongoing. You going on a vacation? Don't announce it to the world, taking picture there? Post them when you are home.
Any account that is supposed to remain anonymous and as secure as possible should only be used on secured devices. A unsecured device can link you to the account.
always shutdown your machine when leaving it (To prevent access, and to prevent a possible attack vector)
2 factor factor authentication is not great anymore. Unless you can do it over a anonymous source. A cell phone is usually directly connected to you, so it is not a anonymous device. There might still be secure/anonymous 2 factor authentication methods that won't expose you, for example over a secure email. (If there is 2FA that doesn't need a device that removes anonymity and is secure, use it.) (Please don't misunderstand, 2FA is great, however it can remove the anonymity that you worked hard to establish)
-Rethink how you do security questions. Many answers to security questions can be found in your internet history. One could use the first word of the security question as an answer, or a different sceme that will mean you always remember it. (Security question need to go, the amount of personal info an average person puts on the internet makes it easy to attack anything using security question) -------_ High level crimimal information security: The motto here is, "All the Security, All the Time" As one fuck up can end with you leaving a lick of traceability, and you could be fucked. Pre Note: All of your software should always be up to date. Also even perfect info sec does not guarantee you are completely safe, a new zero day (exploit) can still fuck you, but good info security makes you significantly safer, by eliminating as many attacks as possible. -Get a new device (or make a already owned device seem like you never owned it, do this only if you know how to, there's a lot of stuff that goes into that, like changing your mac adress etc) buy with cash, and your face covered, preferably far away from where you live. (Do I need to specify to not bring your phone or anything else that tracks your location to anywhere you want to go anonymously?) (Be aware that even hardware can have vulnerabilities, many cpus have known vulnerabilities, I can't list them all, do some research before buying)
Do not EVER use a high security device at any lower level of security. There are unique identifiers to your device, exposing them once can expose you for everything you do.
-If you know how to use Tails (A linux distro designed for Info sec) use that, preferably on a USB. (Or learn how to use tails, its better, but complicated) Otherwise a clean copy of windows (make sure its not in any way associated with you) can do the job too, tho not as well. (Using a VM might give extra security, since VMs usually erase all data and RAM they were using on shutdown) -Get a non tracking VPN, Enable the kill switch (a setting that disables all traffic that doesn't go through the VPN) (change your firewall settings to only allow the traffic from the VPN, windows guide (Change settings so only traffic from the tor application is send) Edit: (Due to complaints: do not use vpn over tor, use tor over vpn. tor over vpn has no notable downside, if the VPN logs it makes no difference, your ISP will always log anyways, and vpns remove other attack vectors and also provide backup security should tor fail. Again even if the VPN tracks you only change the people doing the tracking, but now you are further removed making it more anonymous and also with less vulnerabilities) -rember privacy settings, cookie cleaner, and antivirus, password (There could be a hidden administrator user on your PC, make sure to change its password) -Always use the device on a non admin account
-Ideally use this device only on networks that are not connected with you. Such as public networks (try to never use the same public networks twice, move around) (a home network should be fine now, as it should never be exposed, but more security is always better) (Its just a conveniences vs security trade) -Never use accounts that have been exposed to lower security on higher security machines -your browser is now TOR (or your preferred security focused browser, if you dont plan on using onion ) Make sure you get the standalone version of tor not the addon build (the standalone is safer, because there are less settings and options to tweak) -Change your tor settings, to safest mode, enable a bridge (to my knowledge there's no difference in security between the build in bridges in tor), enable automatic updates, set duckduckgo onion as your primary browser. Set dark.fail onion page as your home page. (Or your preferred privacy search engine and onion directory)
set up a new pgp (can't use the same one you use for regular use, again less safer accounts are never used on safer devices) Cleopatra is my choice, its simple to use. Make sure you back up the private key multiple times, on safe devices. (Dont let the private key fall into anyone's hands) Give it a generic name like "HighSecurityPGP" do not give the pgp key pair a name that could identify you. (No initials etc) (Some pgp key pair programs want an associated email for a key pair, you can create a safe email, or which I recoend you can use a different program (like Cleopatra) (Feds & LEOs are known to copy private keys if they have your machine, so you will need to set up a new key pair if they ever take a device with a private key copy)
a high security machine that facilitates criminal activity can not use many programs. Many programs collect your devices mac adress, which is a unique identifier, amongst other things. It's should be used only for the activity you want to do.
-------_ How to use dark net markets (DNMs) If you finished your High Security setup, we can dive right in. Otherwise go do that. This is where all that is essential. Quick info on Tor, and onion sites. There is no search engine. It's all based of directories and addresses you are given by others. Tor will likely not be very quick, it has to pass through multiple networks to get to the destination. DNMs sometimes exit scam, an exit scam is when a market shuts down completely and takes all the money, this is a risk when using DNMs, it's not too common but happens maybe 0-4 times a year. The admins of thoese servers need to get out at some point, before they get jailed, so they exit the game, and scam everyone out of their money. -A very useful onion directory is dark.fail it has a lot of links, for all kinds of stuff. News, email, DNMs, Psychonautwiki (harm reduction website), forums etc. (Other directories also exist) -Pick a market, preferably one that handles secure connection server side instead of requiring you to establish the secure connection. Then create an account. Your account once created should include an entry box in your profile for a pgp key, post your PUBLIC key in there. (Verify the link is not a scam, most markets should provide a pgp signature) -Next is currency setup. All major cryptocurrency exchangers can be used, I can recommend coin base but there could be better ones out there. Unless you find a small non U.S., exchange, they will always ask for your identity. So unless you can find a trustworthy exchange that doesn't ID, you will need to give it to them. (Side note, all major crypto exchangers report to the IRS, if the IRS asks you if you bought cryptocurrency and you bought while having IDed yourself SAY YES, DO NOT COMMIT TAX FRAUD WHEN THEY KNOW YOU DID)
I recommend using Monero, it's hard to track, so it makes your job a lot easier. (If you use bitcoin you should run it through a scrambler, because BTC is tracable to anyone who knows what they are doing)
-Transfer (monero you can send directly, btc you should scramble) to your wallet. There are two options a cold wallet (physical) or a software wallet. Software wallets usually dont cost anything so I recommend them, even if often less safe. Electrum is easy to use, and pretty safe. You can also do your own research and find a wallet that fits your needs.
decide where you want to ship it. You can send to your home, to a PO box, to a PO box that you opened with a fake ID (I don't recommend), an abandoned house, general mail (sending to a post office instead of a street adress) pickup up with fake ID, use a remailing service. These are some options, sending it to your own home, isn't ideal, but its pretty much the only easy way.
-now you are ready to buy, only buy using escrow (it means the money is held by the market as a middle man until the product is delivered, they will also handle any issues like wrong quantity, cuts, etc), judge the reviews for a product, and if available look at the history of the vendor, until you find a product from a vendor you trust. (I recommend to buy within your country as much as possible, so it doesn't go through customs, it's very rare that something is found, but it can happen) -now you get to buy, depending on market, you either have cryptocurrency stored in their wallets (not recommend, you will lose it in an exit scam) or you can send it every order. When you send your delivery adress (or the one you want it to go to) encrypt the adress using the sellers public key. Make sure the adress is correct. -wait for the product, make sure to extend the escrow until the product arrives, if you can't extend it anymore dispute the order, and a moderator will step in -test the product, use it, and leave a review. PLEASE LEAVE A REVIEW, DNMs only work because of reviews. Edit: Didn't imagine I would write over 15000 words. Oh well, it was fun. Hope it helps, if you have any questions feel free to ask. No idea how long this will stay up, I might purge it in 7 days, or never.
Hi Monero community! Two months ago I posted a CCS for continuing my research on Monero Atomic Swaps. That research is now complete and I'm happy to present my results. This post will be a summary of my research, but you can also find the whitepaper that describes the full protocol and all the details here.
Shiny BTC/XMR Atomic Swap Protocol!
We found it! With the help of the MRL, my colleagues, and the community, we created the first (to our knowledge) protocol to atomically swap bitcoin and monero. And this resulting protocol is implementable today - no more obscure crypto!
Why now? What changed?
When I started studying Monero for a Bitcoin/Monero atomic swap three and a half years ago, most of the swap protocols where based on 'Hash Time Locked Contract' (HTLC), something that we all know as non-existent on Monero. So the goal at the beginning of the project was to create an atomic swap where all the logic (timeouts, possible sequences of operation, secret disclosures, etc) is managed on the other chain: the Bitcoin chain. The second difficulty with Monero and Bitcoin is their respective underlying cryptographic parameters: they don't share the same elliptic curve, they don't share the same signing algorithm; they have nothing in common! This makes the pair a bad candidate for other types of atomic swap that don't (solely) rely on HTLC. In November 2018 we came up with a draft protocol that respects the above constraints. Thus, the protocol requires a specific type of zero-knowledge proof to be trustless: a hash pre-image zero-knowledge proof. This type of zkp is not wildly used in practice, if at all. Thus the protocol works in theory, but with some obscure crypto, making the protocol a bad candidate for an implementation. In early 2020, after presenting the draft protocol at 36C3 in December 2019, I discovered, by reference from Sarang Noether (MRL), Andrew Poelstra's idea of doing a discrete logarithm equality across group zero-knowledge proof of knowledge (MRL-0010), meaning that we can prove some relations between elements in two different groups (two curves to simplify) and the paper by LLoyd Fournier on One-Time Verifiably Encrypted Signatures allowing secret disclosure with ECDSA. With these two new (to me) cryptographic primitives, we were able to replace the previous zero-knowledge proof with a combination of the latter, making the protocol complete and practically feasible.
How it works
As a broad overview (and simplified) the protocol work as follow:
The monero are locked in an address generated by both participants
At the beginning, neither of the participants have the full control over the address; they both have half of the private key only
With the cross group discrete logarithm equality zkp, both participants prove to each other that the address on the Bitcoin chain is related to the address on the Monero chain
By means of Bitcoin scripts and ECDSA one-time verifiably encrypted signatures, one participant reveals to the other her partial private key by taking the bitcoin, allowing the other to take control over the monero
If the swap succeeds, A reveals to B, and if the swap is cancelled, B reveals to A. (We have a third scenario explained in the paper to force reaction and avoid deadlock.)
The obvious next step would be to have a working implementation on mainnet, but a ready-to-use implementation that is also robust and safe-to-use requires a lot of engineering work. Furthermore, even though the cryptography is not too obscure, most of it still also lacks an implementation. I'll post soon, if the community wants it, a CCS proposal to get my team and I to work on implementing this protocol, step by step, with the end goal of creating a working client/daemon for swapping Bitcoin and Monero. It would be very exciting to build that!
Thanks to the MRL and its researchers for their help, the CCS team, and the community for its support! I hope I fulfilled the community's expectations for my my first CCS - all feedback is appreciated.
Summary: Everyone knows that when you give your assets to someone else, they always keep them safe. If this is true for individuals, it is certainly true for businesses. Custodians always tell the truth and manage funds properly. They won't have any interest in taking the assets as an exchange operator would. Auditors tell the truth and can't be misled. That's because organizations that are regulated are incapable of lying and don't make mistakes. First, some background. Here is a summary of how custodians make us more secure: Previously, we might give Alice our crypto assets to hold. There were risks:
Alice might take the assets and disappear.
Alice might spend the assets and pretend that she still has them (fractional model).
Alice might store the assets insecurely and they'll get stolen.
Alice might give the assets to someone else by mistake or by force.
Alice might lose access to the assets.
But "no worries", Alice has a custodian named Bob. Bob is dressed in a nice suit. He knows some politicians. And he drives a Porsche. "So you have nothing to worry about!". And look at all the benefits we get:
Alice can't take the assets and disappear (unless she asks Bob or never gives them to Bob).
Alice can't spend the assets and pretend that she still has them. (Unless she didn't give them to Bob or asks him for them.)
Alice can't store the assets insecurely so they get stolen. (After all - she doesn't have any control over the withdrawal process from any of Bob's systems, right?)
Alice can't give the assets to someone else by mistake or by force. (Bob will stop her, right Bob?)
Alice can't lose access to the funds. (She'll always be present, sane, and remember all secrets, right?)
See - all problems are solved! All we have to worry about now is:
Bob might take the assets and disappear.
Bob might spend the assets and pretend that he still has them (fractional model).
Bob might store the assets insecurely and they'll get stolen.
Bob might give the assets to someone else by mistake or by force.
Bob might lose access to the assets.
It's pretty simple. Before we had to trust Alice. Now we only have to trust Alice, Bob, and all the ways in which they communicate. Just think of how much more secure we are! "On top of that", Bob assures us, "we're using a special wallet structure". Bob shows Alice a diagram. "We've broken the balance up and store it in lots of smaller wallets. That way", he assures her, "a thief can't take it all at once". And he points to a historic case where a large sum was taken "because it was stored in a single wallet... how stupid". "Very early on, we used to have all the crypto in one wallet", he said, "and then one Christmas a hacker came and took it all. We call him the Grinch. Now we individually wrap each crypto and stick it under a binary search tree. The Grinch has never been back since." "As well", Bob continues, "even if someone were to get in, we've got insurance. It covers all thefts and even coercion, collusion, and misplaced keys - only subject to the policy terms and conditions." And with that, he pulls out a phone-book sized contract and slams it on the desk with a thud. "Yep", he continues, "we're paying top dollar for one of the best policies in the country!" "Can I read it?' Alice asks. "Sure," Bob says, "just as soon as our legal team is done with it. They're almost through the first chapter." He pauses, then continues. "And can you believe that sales guy Mike? He has the same year Porsche as me. I mean, what are the odds?" "Do you use multi-sig?", Alice asks. "Absolutely!" Bob replies. "All our engineers are fully trained in multi-sig. Whenever we want to set up a new wallet, we generate 2 separate keys in an air-gapped process and store them in this proprietary system here. Look, it even requires the biometric signature from one of our team members to initiate any withdrawal." He demonstrates by pressing his thumb into the display. "We use a third-party cloud validation API to match the thumbprint and authorize each withdrawal. The keys are also backed up daily to an off-site third-party." "Wow that's really impressive," Alice says, "but what if we need access for a withdrawal outside of office hours?" "Well that's no issue", Bob says, "just send us an email, call, or text message and we always have someone on staff to help out. Just another part of our strong commitment to all our customers!" "What about Proof of Reserve?", Alice asks. "Of course", Bob replies, "though rather than publish any blockchain addresses or signed transaction, for privacy we just do a SHA256 refactoring of the inverse hash modulus for each UTXO nonce and combine the smart contract coefficient consensus in our hyperledger lightning node. But it's really simple to use." He pushes a button and a large green checkmark appears on a screen. "See - the algorithm ran through and reserves are proven." "Wow", Alice says, "you really know your stuff! And that is easy to use! What about fiat balances?" "Yeah, we have an auditor too", Bob replies, "Been using him for a long time so we have quite a strong relationship going! We have special books we give him every year and he's very efficient! Checks the fiat, crypto, and everything all at once!" "We used to have a nice offline multi-sig setup we've been using without issue for the past 5 years, but I think we'll move all our funds over to your facility," Alice says. "Awesome", Bob replies, "Thanks so much! This is perfect timing too - my Porsche got a dent on it this morning. We have the paperwork right over here." "Great!", Alice replies. And with that, Alice gets out her pen and Bob gets the contract. "Don't worry", he says, "you can take your crypto-assets back anytime you like - just subject to our cancellation policy. Our annual management fees are also super low and we don't adjust them often". How many holes have to exist for your funds to get stolen? Just one. Why are we taking a powerful offline multi-sig setup, widely used globally in hundreds of different/lacking regulatory environments with 0 breaches to date, and circumventing it by a demonstrably weak third party layer? And paying a great expense to do so? If you go through the list of breaches in the past 2 years to highly credible organizations, you go through the list of major corporate frauds (only the ones we know about), you go through the list of all the times platforms have lost funds, you go through the list of times and ways that people have lost their crypto from identity theft, hot wallet exploits, extortion, etc... and then you go through this custodian with a fine-tooth comb and truly believe they have value to add far beyond what you could, sticking your funds in a wallet (or set of wallets) they control exclusively is the absolute worst possible way to take advantage of that security. The best way to add security for crypto-assets is to make a stronger multi-sig. With one custodian, what you are doing is giving them your cryptocurrency and hoping they're honest, competent, and flawlessly secure. It's no different than storing it on a really secure exchange. Maybe the insurance will cover you. Didn't work for Bitpay in 2015. Didn't work for Yapizon in 2017. Insurance has never paid a claim in the entire history of cryptocurrency. But maybe you'll get lucky. Maybe your exact scenario will buck the trend and be what they're willing to cover. After the large deductible and hopefully without a long and expensive court battle. And you want to advertise this increase in risk, the lapse of judgement, an accident waiting to happen, as though it's some kind of benefit to customers ("Free institutional-grade storage for your digital assets.")? And then some people are writing to the OSC that custodians should be mandatory for all funds on every exchange platform? That this somehow will make Canadians as a whole more secure or better protected compared with standard air-gapped multi-sig? On what planet? Most of the problems in Canada stemmed from one thing - a lack of transparency. If Canadians had known what a joke Quadriga was - it wouldn't have grown to lose $400m from hard-working Canadians from coast to coast to coast. And Gerald Cotten would be in jail, not wherever he is now (at best, rotting peacefully). EZ-BTC and mister Dave Smilie would have been a tiny little scam to his friends, not a multi-million dollar fraud. Einstein would have got their act together or been shut down BEFORE losing millions and millions more in people's funds generously donated to criminals. MapleChange wouldn't have even been a thing. And maybe we'd know a little more about CoinTradeNewNote - like how much was lost in there. Almost all of the major losses with cryptocurrency exchanges involve deception with unbacked funds. So it's great to see transparency reports from BitBuy and ShakePay where someone independently verified the backing. The only thing we don't have is:
ANY CERTAINTY BALANCES WEREN'T EXCLUDED. Quadriga's largest account was $70m. 80% of funds are in 20% of accounts (Pareto principle). All it takes is excluding a few really large accounts - and nobody's the wiser. A fractional platform can easily pass any audit this way.
ANY VISIBILITY WHATSOEVER INTO THE CUSTODIANS. BitBuy put out their report before moving all the funds to their custodian and ShakePay apparently can't even tell us who the custodian is. That's pretty important considering that basically all of the funds are now stored there.
ANY IDEA ABOUT THE OTHER EXCHANGES. In order for this to be effective, it has to be the norm. It needs to be "unusual" not to know. If obscurity is the norm, then it's super easy for people like Gerald Cotten and Dave Smilie to blend right in.
It's not complicated to validate cryptocurrency assets. They need to exist, they need to be spendable, and they need to cover the total balances. There are plenty of credible people and firms across the country that have the capacity to reasonably perform this validation. Having more frequent checks by different, independent, parties who publish transparent reports is far more valuable than an annual check by a single "more credible/official" party who does the exact same basic checks and may or may not publish anything. Here's an example set of requirements that could be mandated:
First report within 1 month of launching, another within 3 months, and further reports at minimum every 6 months thereafter.
No auditor can be repeated within a 12 month period.
All reports must be public, identifying the auditor and the full methodology used.
All auditors must be independent of the firm being audited with no conflict of interest.
Reports must include the percentage of each asset backed, and how it's backed.
The auditor publishes a hash list, which lists a hash of each customer's information and balances that were included. Hash is one-way encryption so privacy is fully preserved. Every customer can use this to have 100% confidence they were included.
If we want more extensive requirements on audits, these should scale upward based on the total assets at risk on the platform, and whether the platform has loaned their assets out.
There are ways to structure audits such that neither crypto assets nor customer information are ever put at risk, and both can still be properly validated and publicly verifiable. There are also ways to structure audits such that they are completely reasonable for small platforms and don't inhibit innovation in any way. By making the process as reasonable as possible, we can completely eliminate any reason/excuse that an honest platform would have for not being audited. That is arguable far more important than any incremental improvement we might get from mandating "the best of the best" accountants. Right now we have nothing mandated and tons of Canadians using offshore exchanges with no oversight whatsoever. Transparency does not prove crypto assets are safe. CoinTradeNewNote, Flexcoin ($600k), and Canadian Bitcoins ($100k) are examples where crypto-assets were breached from platforms in Canada. All of them were online wallets and used no multi-sig as far as any records show. This is consistent with what we see globally - air-gapped multi-sig wallets have an impeccable record, while other schemes tend to suffer breach after breach. We don't actually know how much CoinTrader lost because there was no visibility. Rather than publishing details of what happened, the co-founder of CoinTrader silently moved on to found another platform - the "most trusted way to buy and sell crypto" - a site that has no information whatsoever (that I could find) on the storage practices and a FAQ advising that “[t]rading cryptocurrency is completely safe” and that having your own wallet is “entirely up to you! You can certainly keep cryptocurrency, or fiat, or both, on the app.” Doesn't sound like much was learned here, which is really sad to see. It's not that complicated or unreasonable to set up a proper hardware wallet. Multi-sig can be learned in a single course. Something the equivalent complexity of a driver's license test could prevent all the cold storage exploits we've seen to date - even globally. Platform operators have a key advantage in detecting and preventing fraud - they know their customers far better than any custodian ever would. The best job that custodians can do is to find high integrity individuals and train them to form even better wallet signatories. Rather than mandating that all platforms expose themselves to arbitrary third party risks, regulations should center around ensuring that all signatories are background-checked, properly trained, and using proper procedures. We also need to make sure that signatories are empowered with rights and responsibilities to reject and report fraud. They need to know that they can safely challenge and delay a transaction - even if it turns out they made a mistake. We need to have an environment where mistakes are brought to the surface and dealt with. Not one where firms and people feel the need to hide what happened. In addition to a knowledge-based test, an auditor can privately interview each signatory to make sure they're not in coercive situations, and we should make sure they can freely and anonymously report any issues without threat of retaliation. A proper multi-sig has each signature held by a separate person and is governed by policies and mutual decisions instead of a hierarchy. It includes at least one redundant signature. For best results, 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7. History has demonstrated over and over again the risk of hot wallets even to highly credible organizations. Nonetheless, many platforms have hot wallets for convenience. While such losses are generally compensated by platforms without issue (for example Poloniex, Bitstamp, Bitfinex, Gatecoin, Coincheck, Bithumb, Zaif, CoinBene, Binance, Bitrue, Bitpoint, Upbit, VinDAX, and now KuCoin), the public tends to focus more on cases that didn't end well. Regardless of what systems are employed, there is always some level of risk. For that reason, most members of the public would prefer to see third party insurance. Rather than trying to convince third party profit-seekers to provide comprehensive insurance and then relying on an expensive and slow legal system to enforce against whatever legal loopholes they manage to find each and every time something goes wrong, insurance could be run through multiple exchange operators and regulators, with the shared interest of having a reputable industry, keeping costs down, and taking care of Canadians. For example, a 4 of 7 multi-sig insurance fund held between 5 independent exchange operators and 2 regulatory bodies. All Canadian exchanges could pay premiums at a set rate based on their needed coverage, with a higher price paid for hot wallet coverage (anything not an air-gapped multi-sig cold wallet). Such a model would be much cheaper to manage, offer better coverage, and be much more reliable to payout when needed. The kind of coverage you could have under this model is unheard of. You could even create something like the CDIC to protect Canadians who get their trading accounts hacked if they can sufficiently prove the loss is legitimate. In cases of fraud, gross negligence, or insolvency, the fund can be used to pay affected users directly (utilizing the last transparent balance report in the worst case), something which private insurance would never touch. While it's recommended to have official policies for coverage, a model where members vote would fully cover edge cases. (Could be similar to the Supreme Court where justices vote based on case law.) Such a model could fully protect all Canadians across all platforms. You can have a fiat coverage governed by legal agreements, and crypto-asset coverage governed by both multi-sig and legal agreements. It could be practical, affordable, and inclusive. Now, we are at a crossroads. We can happily give up our freedom, our innovation, and our money. We can pay hefty expenses to auditors, lawyers, and regulators year after year (and make no mistake - this cost will grow to many millions or even billions as the industry grows - and it will be borne by all Canadians on every platform because platforms are not going to eat up these costs at a loss). We can make it nearly impossible for any new platform to enter the marketplace, forcing Canadians to use the same stagnant platforms year after year. We can centralize and consolidate the entire industry into 2 or 3 big players and have everyone else fail (possibly to heavy losses of users of those platforms). And when a flawed security model doesn't work and gets breached, we can make it even more complicated with even more people in suits making big money doing the job that blockchain was supposed to do in the first place. We can build a system which is so intertwined and dependent on big government, traditional finance, and central bankers that it's future depends entirely on that of the fiat system, of fractional banking, and of government bail-outs. If we choose this path, as history has shown us over and over again, we can not go back, save for revolution. Our children and grandchildren will still be paying the consequences of what we decided today. Or, we can find solutions that work. We can maintain an open and innovative environment while making the adjustments we need to make to fully protect Canadian investors and cryptocurrency users, giving easy and affordable access to cryptocurrency for all Canadians on the platform of their choice, and creating an environment in which entrepreneurs and problem solvers can bring those solutions forward easily. None of the above precludes innovation in any way, or adds any unreasonable cost - and these three policies would demonstrably eliminate or resolve all 109 historic cases as studied here - that's every single case researched so far going back to 2011. It includes every loss that was studied so far not just in Canada but globally as well. Unfortunately, finding answers is the least challenging part. Far more challenging is to get platform operators and regulators to agree on anything. My last post got no response whatsoever, and while the OSC has told me they're happy for industry feedback, I believe my opinion alone is fairly meaningless. This takes the whole community working together to solve. So please let me know your thoughts. Please take the time to upvote and share this with people. Please - let's get this solved and not leave it up to other people to do. Facts/background/sources (skip if you like):
The inspiration for the paragraph about splitting wallets was an actual quote from a Canadian company providing custodial services in response to the OSC consultation paper: "We believe that it will be in the in best interests of investors to prohibit pooled crypto assets or ‘floats’. Most Platforms pool assets, citing reasons of practicality and expense. The recent hack of the world’s largest Platform – Binance – demonstrates the vulnerability of participants’ assets when such concessions are made. In this instance, the Platform’s entire hot wallet of Bitcoins, worth over $40 million, was stolen, facilitated in part by the pooling of client crypto assets." "the maintenance of participants (and Platform) crypto assets across multiple wallets distributes the related risk and responsibility of security - reducing the amount of insurance coverage required and making insurance coverage more readily obtainable". For the record, their reply also said nothing whatsoever about multi-sig or offline storage.
In addition to the fact that the $40m hack represented only one "hot wallet" of Binance, and they actually had the vast majority of assets in other wallets (including mostly cold wallets), multiple real cases have clearly demonstrated that risk is still present with multiple wallets. Bitfinex, VinDAX, Bithumb, Altsbit, BitPoint, Cryptopia, and just recently KuCoin all had multiple wallets breached all at the same time, and may represent a significantly larger impact on customers than the Binance breach which was fully covered by Binance. To represent that simply having multiple separate wallets under the same security scheme is a comprehensive way to reduce risk is just not true.
Private insurance has historically never covered a single loss in the cryptocurrency space (at least, not one that I was able to find), and there are notable cases where massive losses were not covered by insurance. Bitpay in 2015 and Yapizon in 2017 both had insurance policies that didn't pay out during the breach, even after a lengthly court process. The same insurance that ShakePay is presently using (and announced to much fanfare) was describe by their CEO himself as covering “physical theft of the media where the private keys are held,” which is something that has never historically happened. As was said with regard to the same policy in 2018 - “I don’t find it surprising that Lloyd’s is in this space,” said Johnson, adding that to his mind the challenge for everybody is figuring out how to structure these policies so that they are actually protective. “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.”
The most profitable policy for a private insurance company is one with the most expensive premiums that they never have to pay a claim on. They have no inherent incentive to take care of people who lost funds. It's "cheaper" to take the reputational hit and fight the claim in court. The more money at stake, the more the insurance provider is incentivized to avoid payout. They're not going to insure the assets unless they have reasonable certainty to make a profit by doing so, and they're not going to pay out a massive sum unless it's legally forced. Private insurance is always structured to be maximally profitable to the insurance provider.
The circumvention of multi-sig was a key factor in the massive Bitfinex hack of over $60m of bitcoin, which today still sits being slowly used and is worth over $3b. While Bitfinex used a qualified custodian Bitgo, which was and still is active and one of the industry leaders of custodians, and they set up 2 of 3 multi-sig wallets, the entire system was routed through Bitfinex, such that Bitfinex customers could initiate the withdrawals in a "hot" fashion. This feature was also a hit with the hacker. The multi-sig was fully circumvented.
Bitpay in 2015 was another example of a breach that stole 5,000 bitcoins. This happened not through the exploit of any system in Bitpay, but because the CEO of a company they worked with got their computer hacked and the hackers were able to request multiple bitcoin purchases, which Bitpay honoured because they came from the customer's computer legitimately. Impersonation is a very common tactic used by fraudsters, and methods get more extreme all the time.
A notable case in Canada was the Canadian Bitcoins exploit. Funds were stored on a server in a Rogers Data Center, and the attendee was successfully convinced to reboot the server "in safe mode" with a simple phone call, thus bypassing the extensive security and enabling the theft.
The very nature of custodians circumvents multi-sig. This is because custodians are not just having to secure the assets against some sort of physical breach but against any form of social engineering, modification of orders, fraudulent withdrawal attempts, etc... If the security practices of signatories in a multi-sig arrangement are such that the breach risk of one signatory is 1 in 100, the requirement of 3 independent signatures makes the risk of theft 1 in 1,000,000. Since hackers tend to exploit the weakest link, a comparable custodian has to make the entry and exit points of their platform 10,000 times more secure than one of those signatories to provide equivalent protection. And if the signatories beef up their security by only 10x, the risk is now 1 in 1,000,000,000. The custodian has to be 1,000,000 times more secure. The larger and more complex a system is, the more potential vulnerabilities exist in it, and the fewer people can understand how the system works when performing upgrades. Even if a system is completely secure today, one has to also consider how that system might evolve over time or work with different members.
By contrast, offline multi-signature solutions have an extremely solid record, and in the entire history of cryptocurrency exchange incidents which I've studied (listed here), there has only been one incident (796 exchange in 2015) involving an offline multi-signature wallet. It happened because the customer's bitcoin address was modified by hackers, and the amount that was stolen ($230k) was immediately covered by the exchange operators. Basically, the platform operators were tricked into sending a legitimate withdrawal request to the wrong address because hackers exploited their platform to change that address. Such an issue would not be prevented in any way by the use of a custodian, as that custodian has no oversight whatsoever to the exchange platform. It's practical for all exchange operators to test large withdrawal transactions as a general policy, regardless of what model is used, and general best practice is to diagnose and fix such an exploit as soon as it occurs.
False promises on the backing of funds played a huge role in the downfall of Quadriga, and it's been exposed over and over again (MyCoin, PlusToken, Bitsane, Bitmarket, EZBTC, IDAX). Even today, customers have extremely limited certainty on whether their funds in exchanges are actually being backed or how they're being backed. While this issue is not unique to cryptocurrency exchanges, the complexity of the technology and the lack of any regulation or standards makes problems more widespread, and there is no "central bank" to come to the rescue as in the 2008 financial crisis or during the great depression when "9,000 banks failed".
In addition to fraudulent operations, the industry is full of cases where operators have suffered breaches and not reported them. Most recently, Einstein was the largest case in Canada, where ongoing breaches and fraud were perpetrated against the platform for multiple years and nobody found out until the platform collapsed completely. While fraud and breaches suck to deal with, they suck even more when not dealt with. Lack of visibility played a role in the largest downfalls of Mt. Gox, Cryptsy, and Bitgrail. In some cases, platforms are alleged to have suffered a hack and keep operating without admitting it at all, such as CoinBene.
It surprises some to learn that a cryptographic solution has already existed since 2013, and gained widespread support in 2014 after Mt. Gox. Proof of Reserves is a full cryptographic proof that allows any customer using an exchange to have complete certainty that their crypto-assets are fully backed by the platform in real-time. This is accomplished by proving that assets exist on the blockchain, are spendable, and fully cover customer deposits. It does not prove safety of assets or backing of fiat assets.
If we didn't care about privacy at all, a platform could publish their wallet addresses, sign a partial transaction, and put the full list of customer information and balances out publicly. Customers can each check that they are on the list, that the balances are accurate, that the total adds up, and that it's backed and spendable on the blockchain. Platforms who exclude any customer take a risk because that customer can easily check and see they were excluded. So together with all customers checking, this forms a full proof of backing of all crypto assets.
However, obviously customers care about their private information being published. Therefore, a hash of the information can be provided instead. Hash is one-way encryption. The hash allows the customer to validate inclusion (by hashing their own known information), while anyone looking at the list of hashes cannot determine the private information of any other user. All other parts of the scheme remain fully intact. A model like this is in use on the exchange CoinFloor in the UK.
A Merkle tree can provide even greater privacy. Instead of a list of balances, the balances are arranged into a binary tree. A customer starts from their node, and works their way to the top of the tree. For example, they know they have 5 BTC, they plus 1 other customer hold 7 BTC, they plus 2-3 other customers hold 17 BTC, etc... until they reach the root where all the BTC are represented. Thus, there is no way to find the balances of other individual customers aside from one unidentified customer in this case.
Proposals such as this had the backing of leaders in the community including Nic Carter, Greg Maxwell, and Zak Wilcox. Substantial and significant effort started back in 2013, with massive popularity in 2014. But what became of that effort? Very little. Exchange operators continue to refuse to give visibility. Despite the fact this information can often be obtained through trivial blockchain analysis, no Canadian platform has ever provided any wallet addresses publicly. As described by the CEO of Newton "For us to implement some kind of realtime Proof of Reserves solution, which I'm not opposed to, it would have to ... Preserve our users' privacy, as well as our own. Some kind of zero-knowledge proof". Kraken describes here in more detail why they haven't implemented such a scheme. According to professor Eli Ben-Sasson, when he spoke with exchanges, none were interested in implementing Proof of Reserves.
And yet, Kraken's places their reasoning on a page called "Proof of Reserves". More recently, both BitBuy and ShakePay have released reports titled "Proof of Reserves and Security Audit". Both reports contain disclaimers against being audits. Both reports trust the customer list provided by the platform, leaving the open possibility that multiple large accounts could have been excluded from the process. Proof of Reserves is a blockchain validation where customers see the wallets on the blockchain. The report from Kraken is 5 years old, but they leave it described as though it was just done a few weeks ago. And look at what they expect customers to do for validation. When firms represent something being "Proof of Reserve" when it's not, this is like a farmer growing fruit with pesticides and selling it in a farmers market as organic produce - except that these are people's hard-earned life savings at risk here. Platforms are misrepresenting the level of visibility in place and deceiving the public by their misuse of this term. They haven't proven anything.
Fraud isn't a problem that is unique to cryptocurrency. Fraud happens all the time. Enron, WorldCom, Nortel, Bear Stearns, Wells Fargo, Moser Baer, Wirecard, Bre-X, and Nicola are just some of the cases where frauds became large enough to become a big deal (and there are so many countless others). These all happened on 100% reversible assets despite regulations being in place. In many of these cases, the problems happened due to the over-complexity of the financial instruments. For example, Enron had "complex financial statements [which] were confusing to shareholders and analysts", creating "off-balance-sheet vehicles, complex financing structures, and deals so bewildering that few people could understand them". In cryptocurrency, we are often combining complex financial products with complex technologies and verification processes. We are naïve if we think problems like this won't happen. It is awkward and uncomfortable for many people to admit that they don't know how something works. If we want "money of the people" to work, the solutions have to be simple enough that "the people" can understand them, not so confusing that financial professionals and technology experts struggle to use or understand them.
For those who question the extent to which an organization can fool their way into a security consultancy role, HB Gary should be a great example to look at. Prior to trying to out anonymous, HB Gary was being actively hired by multiple US government agencies and others in the private sector (with glowing testimonials). The published articles and hosted professional security conferences. One should also look at this list of data breaches from the past 2 years. Many of them are large corporations, government entities, and technology companies. These are the ones we know about. Undoubtedly, there are many more that we do not know about. If HB Gary hadn't been "outted" by anonymous, would we have known they were insecure? If the same breach had happened outside of the public spotlight, would it even have been reported? Or would HB Gary have just deleted the Twitter posts, brought their site back up, done a couple patches, and kept on operating as though nothing had happened?
In the case of Quadriga, the facts are clear. Despite past experience with platforms such as MapleChange in Canada and others around the world, no guidance or even the most basic of a framework was put in place by regulators. By not clarifying any sort of legal framework, regulators enabled a situation where a platform could be run by former criminal Mike Dhanini/Omar Patryn, and where funds could be held fully unchecked by one person. At the same time, the lack of regulation deterred legitimate entities from running competing platforms and Quadriga was granted a money services business license for multiple years of operation, which gave the firm the appearance of legitimacy. Regulators did little to protect Canadians despite Quadriga failing to file taxes from 2016 onward. The entire administrative team had resigned and this was public knowledge. Many people had suspicions of what was going on, including Ryan Mueller, who forwarded complaints to the authorities. These were ignored, giving Gerald Cotten the opportunity to escape without justice.
There are multiple issues with the SOC II model including the prohibitive cost (you have to find a third party accounting firm and the prices are not even listed publicly on any sites), the requirement of operating for a year (impossible for new platforms), and lack of any public visibility (SOC II are private reports that aren't shared outside the people in suits).
Securities frameworks are expensive. Sarbanes-Oxley is estimated to cost $5.1 million USD/yr for the average Fortune 500 company in the United States. Since "Fortune 500" represents the top 500 companies, that means well over $2.55 billion USD (~$3.4 billion CAD) is going to people in suits. Isn't the problem of trust and verification the exact problem that the blockchain is supposed to solve?
To use Quadriga as justification for why custodians or SOC II or other advanced schemes are needed for platforms is rather silly, when any framework or visibility at all, or even the most basic of storage policies, would have prevented the whole thing. It's just an embarrassment.
We are now seeing regulators take strong action. CoinSquare in Canada with multi-million dollar fines. BitMex from the US, criminal charges and arrests. OkEx, with full disregard of withdrawals and no communication. Who's next?
We have a unique window today where we can solve these problems, and not permanently destroy innovation with unreasonable expectations, but we need to act quickly. This is a unique historic time that will never come again.
For the last few months we’ve been following new zero-knowledge proof projects in Rust. This month, with Secret Network upgrading their mainnet with secret contracts, it seems like a good opportunity to explore Rust blockchains that are using a completely different privacy-preserving technology: secure enclaves. Secure enclaves are processes whose environment is protected from inspection by other processes, even the kernel, by special hardware. This protection particularly involves the encryption of a process’s memory. Software that wants to compute in secret can put those computations inside a secure enclave and, if everything works as expected, neither a local user, nor the hosting provider, can snoop on the computations being performed. The most notable implementation of secure enclaves is Intel’s SGX (Secure Guard Extensions). Secure enclaves are an attractive way to perform private computation primarily because they don’t impose any limitations on what can be computed — code that runs inside SGX is more-or-less just regular x86 code, just running inside a special environment. But depending on SGX for privacy does have some special risks: software that runs in an SGX enclave must be signed (if transitively) by Intel’s own cryptographic keys, which means that Intel must approve of any software running in SGX, that Intel can revoke permission to use SGX, and that there is a risk of the signing keys being compromised; and it’s not obvious that secure enclaves are actually secure, there have already been a number of attacks against SGX. Regardless, as of now, hardware enclaves provide security features that aren’t feasible any other way. There are two prominent Rust blockchains relying on SGX:
Secret Network is a programmable blockchain based on Cosmos / Tendermint that runs smart contracts written in Rust, and compiled to WASM, inside of secure enclaves.
MobileCoin is a private currency that aims to integrate with Signal, and that uses SGX to add additional confidentiality on top of RingCT transactions and its variant of the Stellar Consensus Protocol.
Outside of the blockchain world there are some other Rust projects using SGX, the most notable being:
Teaclave SGX SDK is an SDK for running Rust code inside SGX enclaves, developed at Baidu, and now an Apache project. MobileCoin uses a heavily modified fork.
Fortanix is a provider of various Rust+SGX services, and they provide an SGX SDK, for which mainline Rust has some built-in support.
Thanks so much to our anonymous donors. We don’t often receive donations, so this was a nice surprise! We intend to put all monetary contributions to use funding events or new contributors, and we’ll let you know what we do with the funds when we spend them.
Each month we like to shine a light on a notable Rust blockchain project. This month that project is… Aleo. Aleo is a zero-knowledge blockchain, with its own zero-knowledge programming language, Leo. We don’t have a lot to say about it, but we think it looks cool. We hope they blog more.
Syscoin Platform’s Great Reddit Scaling Bake-off Proposal
https://preview.redd.it/rqt2dldyg8e51.jpg?width=1044&format=pjpg&auto=webp&s=777ae9d4fbbb54c3540682b72700fc4ba3de0a44 We are excited to participate and present Syscoin Platform's ideal characteristics and capabilities towards a well-rounded Reddit Community Points solution! Our scaling solution for Reddit Community Points involves 2-way peg interoperability with Ethereum. This will provide a scalable token layer built specifically for speed and high volumes of simple value transfers at a very low cost, while providing sovereign ownership and onchain finality. Token transfers scale by taking advantage of a globally sorting mempool that provides for probabilistically secure assumptions of “as good as settled”. The opportunity here for token receivers is to have an app-layer interactivity on the speed/security tradeoff (99.9999% assurance within 10 seconds). We call this Z-DAG, and it achieves high-throughput across a mesh network topology presently composed of about 2,000 geographically dispersed full-nodes. Similar to Bitcoin, however, these nodes are incentivized to run full-nodes for the benefit of network security, through a bonded validator scheme. These nodes do not participate in the consensus of transactions or block validation any differently than other nodes and therefore do not degrade the security model of Bitcoin’s validate first then trust, across every node. Each token transfer settles on-chain. The protocol follows Bitcoin core policies so it has adequate code coverage and protocol hardening to be qualified as production quality software. It shares a significant portion of Bitcoin’s own hashpower through merged-mining. This platform as a whole can serve token microtransactions, larger settlements, and store-of-value in an ideal fashion, providing probabilistic scalability whilst remaining decentralized according to Bitcoin design. It is accessible to ERC-20 via a permissionless and trust-minimized bridge that works in both directions. The bridge and token platform are currently available on the Syscoin mainnet. This has been gaining recent attention for use by loyalty point programs and stablecoins such as Binance USD.
Syscoin Foundation identified a few paths for Reddit to leverage this infrastructure, each with trade-offs. The first provides the most cost-savings and scaling benefits at some sacrifice of token autonomy. The second offers more preservation of autonomy with a more narrow scope of cost savings than the first option, but savings even so. The third introduces more complexity than the previous two yet provides the most overall benefits. We consider the third as most viable as it enables Reddit to benefit even while retaining existing smart contract functionality. We will focus on the third option, and include the first two for good measure.
Distribution, burns and user-to-user transfers of Reddit Points are entirely carried out on the Syscoin network. This full-on approach to utilizing the Syscoin network provides the most scalability and transaction cost benefits of these scenarios. The tradeoff here is distribution and subscription handling likely migrating away from smart contracts into the application layer.
The Reddit Community Points ecosystem can continue to use existing smart contracts as they are used today on the Ethereum mainchain. Users migrate a portion of their tokens to Syscoin, the scaling network, to gain much lower fees, scalability, and a proven base layer, without sacrificing sovereign ownership. They would use Syscoin for user-to-user transfers. Tips redeemable in ten seconds or less, a high-throughput relay network, and onchain settlement at a block target of 60 seconds.
Integration between Matic Network and Syscoin Platform - similar to Syscoin’s current integration with Ethereum - will provide Reddit Community Points with EVM scalability (including the Memberships ERC777 operator) on the Matic side, and performant simple value transfers, robust decentralized security, and sovereign store-of-value on the Syscoin side. It’s “the best of both worlds”. The trade-off is more complex interoperability.
Syscoin + Matic Integration
Matic and Blockchain Foundry Inc, the public company formed by the founders of Syscoin, recently entered a partnership for joint research and business development initiatives. This is ideal for all parties as Matic Network and Syscoin Platform provide complementary utility. Syscoin offers characteristics for sovereign ownership and security based on Bitcoin’s time-tested model, and shares a significant portion of Bitcoin’s own hashpower. Syscoin’s focus is on secure and scalable simple value transfers, trust-minimized interoperability, and opt-in regulatory compliance for tokenized assets rather than scalability for smart contract execution. On the other hand, Matic Network can provide scalable EVM for smart contract execution. Reddit Community Points can benefit from both. Syscoin + Matic integration is actively being explored by both teams, as it is helpful to Reddit, Ethereum, and the industry as a whole.
Total cost for these 100k transactions: $0.63 USD See the live fee comparison for savings estimation between transactions on Ethereum and Syscoin. Below is a snapshot at time of writing: ETH price: $318.55 ETH gas price: 55.00 Gwei ($0.37) Syscoin price: $0.11 Snapshot of live fee comparison chart Z-DAG provides a more efficient fee-market. A typical Z-DAG transaction costs 0.0000582 SYS. Tokens can be safely redeemed/re-spent within seconds or allowed to settle on-chain beforehand. The costs should remain about this low for microtransactions. Syscoin will achieve further reduction of fees and even greater scalability with offchain payment channels for assets, with Z-DAG as a resilience fallback. New payment channel technology is one of the topics under research by the Syscoin development team with our academic partners at TU Delft. In line with the calculation in the Lightning Networks white paper, payment channels using assets with Syscoin Core will bring theoretical capacity for each person on Earth (7.8 billion) to have five on-chain transactions per year, per person, without requiring anyone to enter a fee market (aka “wait for a block”). This exceeds the minimum LN expectation of two transactions per person, per year; one to exist on-chain and one to settle aggregated value.
Tools to simplify using Syscoin Bridge as a service with dapps and wallets will be released some time after implementation of Syscoin Core 4.2. These will be based upon the same processes which are automated in the current live Sysethereum Dapp that is functioning with the Syscoin mainnet.
The Syscoin Ethereum Bridge is secured by Agent nodes participating in a decentralized and incentivized model that involves roles of Superblock challengers and submitters. This model is open to participation. The benefits here are trust-minimization, permissionless-ness, and potentially less legal/regulatory red-tape than interop mechanisms that involve liquidity providers and/or trading mechanisms. The trade-off is that due to the decentralized nature there are cross-chain settlement times of one hour to cross from Ethereum to Syscoin, and three hours to cross from Syscoin to Ethereum. We are exploring ways to reduce this time while maintaining decentralization via zkp. Even so, an “instant bridge” experience could be provided by means of a third-party liquidity mechanism. That option exists but is not required for bridge functionality today. Typically bridges are used with batch value, not with high frequencies of smaller values, and generally it is advantageous to keep some value on both chains for maximum availability of utility. Even so, the cross-chain settlement time is good to mention here.
Ethereum -> Syscoin: Matic or Ethereum transaction fee for bridge contract interaction, negligible Syscoin transaction fee for minting tokens Syscoin -> Ethereum: Negligible Syscoin transaction fee for burning tokens, 0.01% transaction fee paid to Bridge Agent in the form of the ERC-20, Matic or Ethereum transaction fee for contract interaction.
Zero-Confirmation Directed Acyclic Graph is an instant settlement protocol that is used as a complementary system to proof-of-work (PoW) in the confirmation of Syscoin service transactions. In essence, a Z-DAG is simply a directed acyclic graph (DAG) where validating nodes verify the sequential ordering of transactions that are received in their memory pools. Z-DAG is used by the validating nodes across the network to ensure that there is absolute consensus on the ordering of transactions and no balances are overflowed (no double-spends).
Unique fee-market that is more efficient for microtransaction redemption and settlement
Uses decentralized means to enable tokens with value transfer scalability that is comparable or exceeds that of credit card networks
Provides high throughput and secure fulfillment even if blocks are full
Probabilistic and interactive
99.9999% security assurance within 10 seconds
Can serve payment channels as a resilience fallback that is faster and lower-cost than falling-back directly to a blockchain
Each Z-DAG transaction also settles onchain through Syscoin Core at 60-second block target using SHA-256 Proof of Work consensus
Z-DAG enables the ideal speed/security tradeoff to be determined per use-case in the application layer. It minimizes the sacrifice required to accept and redeem fast transfers/payments while providing more-than-ample security for microtransactions. This is supported on the premise that a Reddit user receiving points does need security yet generally doesn’t want nor need to wait for the same level of security as a nation-state settling an international trade debt. In any case, each Z-DAG transaction settles onchain at a block target of 60 seconds.
Syscoin 3.0 White Paper (4.0 white paper is pending. For improved scalability and less blockchain bloat, some features of v3 no longer exist in current v4: Specifically Marketplace Offers, Aliases, Escrow, Certificates, Pruning, Encrypted Messaging)
16MB block bandwidth per minute assuming segwit witness carrying transactions, and transactions ~200 bytes on average
SHA256 merge mined with Bitcoin
UTXO asset layer, with base Syscoin layer sharing identical security policies as Bitcoin Core
Z-DAG on asset layer, bridge to Ethereum on asset layer
On-chain scaling with prospect of enabling enterprise grade reliable trustless payment processing with on/offchain hybrid solution
Focus only on Simple Value Transfers. MVP of blockchain consensus footprint is balances and ownership of them. Everything else can reduce data availability in exchange for scale (Ethereum 2.0 model). We leave that to other designs, we focus on transfers.
Future integrations of MAST/Taproot to get more complex value transfers without trading off trustlessness or decentralization.
Zero-knowledge Proofs are a cryptographic new frontier. We are dabbling here to generalize the concept of bridging and also verify the state of a chain efficiently. We also apply it in our Digital Identity projects at Blockchain Foundry (a publicly traded company which develops Syscoin softwares for clients). We are also looking to integrate privacy preserving payment channels for off-chain payments through zkSNARK hub & spoke design which does not suffer from the HTLC attack vectors evident on LN. Much of the issues plaguing Lightning Network can be resolved using a zkSNARK design whilst also providing the ability to do a multi-asset payment channel system. Currently we found a showstopper attack (American Call Option) on LN if we were to use multiple-assets. This would not exist in a system such as this.
Web3 and mobile wallets are under active development by Blockchain Foundry Inc as WebAssembly applications and expected for release not long after mainnet deployment of Syscoin Core 4.2. Both of these will be multi-coin wallets that support Syscoin, SPTs, Ethereum, and ERC-20 tokens. The Web3 wallet will provide functionality similar to Metamask. Syscoin Platform and tokens are already integrated with Blockbook. Custom hardware wallet support currently exists via ElectrumSys. First-class HW wallet integration through apps such as Ledger Live will exist after 4.2. Current supported wallets Syscoin Spark Desktop Syscoin-Qt
The DeFis Yearn (DSY) public chain is about to launch. Another blockchain world’s myth is about to be born!
1.What is DeFis Yearn (DSY)? According to the official introduction, DSY is based on the Ethereum (ETH, Ethereum) developed by Vitalik Buterin. It has improved and added DPoS master node network, side chain network, anonymous transaction, DeFi efficiency performance optimization and added POC as a block Encrypted digital currency with multiple new functions such as chain data storage. The goal of DeFis Yearn is to build a world-type distributed computer system developed and governed spontaneously by the community. Following this vision, our platform will allow the creation of blockchain applications to be given the possibility of keeping application data private. This will be possible through a series of "zero-knowledge" encryption tools, which will become possible to be made usable. Combining revolutionary technology, DSY integrates three functions that operate independently in the traditional sense. They are: transaction, communication and competitive governance to accelerate innovation. With the help of blockchain technology and computing infrastructure technology that can be distributed across the world, this innovation process can be carried out in a safe and anonymous manner. The system integrates a number of first-class technologies and provides an open platform for innovative development that is not restricted by permissions and can flexibly adapt to user preferences. https://preview.redd.it/j0ohsvxz5an51.png?width=553&format=png&auto=webp&s=17116221a1ce6670716d1512f48ce8fd00d8e5ee 2.What pain points does DeFis Yearn (DSY) solve? Putting DeFis Yearn (DSY) on the mainstream public chains in the blockchain world, DeFis Yearn is undoubtedly the most avant-garde and has great explosive potential. This is embodied in that DeFis Yearn has broken through the bottleneck of the current public chain in many aspects. . From the perspective of the functional properties of currencies, the anonymous transfer technology created by DeFis Yearn has well complemented the privacy flaws of most digital currencies on the market. Secondly, from the perspective of the design of the public chain consensus mechanism, DSY adopts the POW+DPOS+POC fusion consensus mechanism. First of all, the POW mechanism is similar to the current mainstream currencies BTC, ETH, etc., which are intended to be protected and guaranteed by computing power Digital currency has a good and fair distribution mechanism, and the POW currency distribution mechanism is still the most scientific at present. However, the POW mechanism has a huge disadvantage, that is, each transfer requires more nodes to confirm, which leads to the problem of slow transfer speed of the POW mechanism digital currency. In the long run, the number of users of digital currency is gradually increasing over time, and digital currency with a pure POW mechanism will eventually be unable to carry the increasing number of users in the later stage. Bitcoin in 2017 and Ethereum today are both encountering This kind of crisis, as a currency digital currency, the core value of its currency is gradually collapsing. When a currency transfer requires an extremely expensive fee and it takes a long time to arrive, it can no longer be called a good currency. , Let alone compete with other types of currencies, because the poor transfer experience will gradually drive away existing digital currency users. https://preview.redd.it/hovsbj226an51.png?width=553&format=png&auto=webp&s=558b0004f606c8533d0c4bfa78b87462ce9ce17f So, can this problem be solved? Of course, thanks to the emergence of the DPOS consensus mechanism, DPOS was born to improve the transfer speed bottleneck of POW. DPOS has a theoretical million-level TPS and is currently the only consensus mechanism that can carry large-scale commercial and massive users. This is why DeFis Yearn (DSY) introduces the DPOS consensus mechanism. In the early stage of DSY operation through POW, it provides computing power protection and a good currency distribution mechanism for DSY. After the market has a certain amount of currency in circulation, the DPOS mechanism is introduced to solve the transfer bottleneck of the pure POW mechanism and solve the POW mechanism that has been criticized. The problem. In addition, according to DSY official data, DSY will adopt the DAO decentralized governance mechanism, which is by far the most efficient governance mechanism. It can pave the way for DSY in the rapid development of the blockchain world. Turn off the highway. https://preview.redd.it/0vn62zn36an51.png?width=447&format=png&auto=webp&s=8a48ebe90bd13c54c04db3c4925e87913308989f Since the POW+DPOS mechanism is so perfect, why should we introduce the POC mechanism to achieve the integration of the three consensus mechanisms of POW+DPOS+POC? The reason is simple. There is still a problem with the POW mechanism, which is meaningless energy consumption. POC not only solves the problem of energy consumption, but also provides users with the function of decentralized storage. POC gives miners the value of existence and contribution to human society in a true sense. In addition, the integration of the POC mechanism can effectively increase the gold content of the DSY public chain, so that in addition to the text information of the transfer, the DSY chain also carries various forms of content. At that time, DSY has an excellent privacy protection mechanism in terms of currency attributes. ——Anonymous transfer, which can carry various ecological DAPPs and provide content storage based on the properties of the blockchain. It is a decentralized encrypted storage navigation system and a decentralized program operation system, which greatly increases the gold content of the DSY public chain , Which also enables all DSY holders to enjoy the dividends brought by the ecological development of the chain. Does DSY plan to implement currency applications in the real world? In fact, offline payment is a pain point that all digital currencies cannot solve. After all, there is a certain gap between digital currencies and legal currencies. But fortunately, as can be seen from the project development route in the official DSY white paper, DSY will implement offline payment functions and will support payment through the world's largest legal currency payment institution-PayPal. In addition to international payment tools, DSY also supports offline payments in some local areas, such ascommonly used in IndiaPaytm Paytm, Yandex.Money in Russia, WeChat and Alipay in China, etc. Users can use DSY decentralized wallet to directly complete offline fiat currency scan code payment, DSY will automatically convert the corresponding fiat currency amount to pay to the other party. This feature will undoubtedly be a phenomenon-level innovative application in the blockchain world in 2020. https://preview.redd.it/4ei1t3n56an51.png?width=431&format=png&auto=webp&s=0380b319ef7edadbdabf559ec08b93456d35dac2 How to get DSY? From the official information and development progress report, DeFis Yearn will first open a small number of DSY tokens for crowdfunding, and then complete the mainnet launch, so we can get DSY from several channels, whether through early crowdfunding , Mining or future exchange purchases. From the perspective of DSY's technological breakthrough and powerful offline application functions, DSY will undoubtedly bring a new round of impact to the blockchain world, and it is expected to cast another myth. This is mainly because the popularity of DSY mainnet is too high. , Has attracted the attention of a large number of domestic and foreign capitals, and everyone is looking forward to this moment. Under the multiple favorable circumstances, how strong DSY can perform, let us wait and see. https://preview.redd.it/dpozm2z66an51.png?width=495&format=png&auto=webp&s=ce177696502ae833e56198863924c04c9e6601f9
DSY public chain will first launch the DEFI sector, another blockchain myth is about to be born!
1. What is DeFis Yearn (DSY)? DSY is based on Ethereum (ETH, Ethereum) developed by Vitalik Buterin. It has improved and added DPoS master node network, side chain network, anonymous transaction, DeFi efficiency performance optimization, and added POC as blockchain data storage. The goal of DeFis Yearn is to build a world-type distributed computer system developed and governed spontaneously by the community. Following this vision, our platform will allow the creation of blockchain applications to be given the possibility of keeping application data private. This will be possible through a series of "zero-knowledge" encryption tools, which will become possible to be made available. Combining revolutionary technology, DSY integrates three functions that operate independently in the traditional sense. They are: transaction, communication and competitive governance to accelerate innovation. With the help of blockchain technology and computing infrastructure technology that can be distributed across the world, this innovation process can be carried out in a safe and anonymous manner. The system integrates a number of first-class technologies and provides an open platform for innovative development that is not restricted by permissions and can flexibly adapt to user preferences. https://preview.redd.it/2vbawe6r42m51.png?width=553&format=png&auto=webp&s=470964be382c1c5636ce11cdc4559eb47764969b 2. What problems does DeFis Yearn (DSY) solve? Putting DeFis Yearn (DSY) on the mainstream public chains in the current blockchain world, DeFis Yearn is undoubtedly the most avant-garde and has great explosive potential. This is embodied in that DeFis Yearn has broken through the bottleneck of the current public chain in many aspects. . From the perspective of the functional properties of currencies, the anonymous transfer technology created by DeFis Yearn has well complemented the privacy flaws of most digital currencies on the market. Secondly, from the perspective of the design of the public chain consensus mechanism, DSY adopts the POW+DPOS+POC fusion consensus mechanism. First of all, the POW mechanism is similar to the current mainstream currencies BTC, ETH, etc., which are intended to be protected and guaranteed by computing power Digital currency has a good and fair distribution mechanism, and the POW currency distribution mechanism is still the most scientific at present. However, the POW mechanism has a huge disadvantage, that is, each transfer requires more nodes to confirm, which leads to the problem of slow transfer speed of the POW mechanism digital currency. In the long run, the number of users of digital currency is gradually increasing over time, and digital currency with a pure POW mechanism will eventually be unable to carry the increasing number of users in the later stage. Bitcoin in 2017 and Ethereum today are both encountering This kind of crisis, as a currency digital currency, the core value of its currency is gradually collapsing. When a currency transfer requires an extremely expensive fee and it takes a long time to arrive, it can no longer be called a good currency. , Let alone compete with other types of currencies, because the poor transfer experience will gradually drive away existing cryptocurrency users. https://preview.redd.it/wuff86ft42m51.png?width=553&format=png&auto=webp&s=a872fbb5d335b4d42a41ac8139614d070a79022f So, can this problem be solved? Of course, thanks to the emergence of the DPOS consensus mechanism. DPOS was born to improve the transfer speed bottleneck of POW. DPOS has a theoretical million-level TPS and is currently the only consensus mechanism that can carry large-scale commercial and massive users. This is why DeFis Yearn (DSY) introduces the DPOS consensus mechanism. In the early stage, DSY provided computing power protection and a good currency distribution mechanism for DSY through POW operation. After the market has a certain amount of currency in circulation, the DPOS mechanism is introduced to solve the transfer bottleneck of the pure POW mechanism and solve the POW mechanism that has been criticized. The problem. In addition, according to DSY official data, DSY will adopt the DAO decentralized governance mechanism, which is by far the most efficient governance mechanism. https://preview.redd.it/77s0599w42m51.png?width=447&format=png&auto=webp&s=359565f9e5802ccf20d649d44be54c85d495451b Since the POW+DPOS mechanism is so perfect, why should we introduce the POC mechanism to achieve the integration of the three consensus mechanisms of POW+DPOS+POC? The reason is simple. There is still a problem with the POW mechanism, which is meaningless energy consumption. POC not only solves the problem of energy consumption, but also provides users with the function of decentralized storage. POC gives miners the value of existence and contribution to human society in a true sense. In addition, the integration of the POC mechanism can effectively increase the gold content of the DSY public chain, so that in addition to the text information of the transfer, the DSY chain also carries various forms of content. At that time, DSY has an excellent privacy protection mechanism in terms of currency attributes. ——Anonymous transfer, which can carry various ecological DAPPs and provide content storage based on the properties of the blockchain. It is a decentralized encrypted storage navigation system and a decentralized program operation system, which greatly increases the gold content of the DSY public chain , Which also enables all DSY holders to enjoy the dividends brought by the ecological development of the chain. Does DSY plan to implement currency applications in the real world? In fact, offline payment is a pain point that all digital currencies cannot solve. After all, there is a certain gap between digital currencies and legal currencies. But fortunately, as can be seen from the project development route in the official DSY white paper, DSY will implement offline payment functions and will support payment through the world's largest legal currency payment institution-PayPal. In addition to international payment tools, DSY also supports offline payments in some local areas, such as Paytm commonly used in India, Yandex.Money in Russia, WeChat and Alipay in China, etc. Users can use DSY decentralized wallet to directly complete offline fiat currency scan code payment, DSY will automatically convert the corresponding fiat currency amount to pay to the other party. This feature will undoubtedly be a phenomenon-level innovative application in the blockchain world in 2020. https://preview.redd.it/86q08p5y42m51.png?width=431&format=png&auto=webp&s=fda7373f2e1ca9fc6a33d237071766a5ee0effec How to get DSY? From the official information and development progress report, DeFis Yearn will first open a small number of DSY tokens for crowdfunding. After the crowdfunding is over, it will be launched on the decentralized exchange of the DEFI sector, and then the mainnet will be launched. We can obtain DSY from multiple channels, whether through early crowdfunding, decentralized exchanges or future centralized exchanges. From the perspective of DSY's technological breakthrough and powerful offline application functions, DSY's first decentralized exchange in the DEFI sector will undoubtedly bring a new round of impact to DEFI, and it is expected to create another myth of DEFI. This is mainly Because the popularity of DSY’s mainnet is too high, it has attracted the attention of a large number of domestic and foreign capitals. Everyone is looking forward to this moment. With multiple good conditions, how strong DSY can perform, let us wait and see! https://preview.redd.it/xr38t52052m51.png?width=495&format=png&auto=webp&s=914b340678a01811e20586679f8d3a0eab98a271
As interest picks up in crypto again, I want to share this post I made on privacy coins again to just give the basics of their evolution. This is only part 1, and parts 2 and 3 are not available in this format, but this part is informative and basic. If you’re looking for a quick and easy way to assess what the best privacy coin in the current space is, which has the best features, or which is most likely to give high returns, then this is not that guide. My goal is to give you the power to make your own decisions, to clearly state my biases, and educate. I really wanted to understand this niche of the crypto-space due to my background and current loyalties, and grasp the nuances of the features, origins and timelines of technologies used in privacy coins, while not being anything close to a developer myself. This is going to be a 3-part series, starting with an overview and basic review of the technology, then looking at its implications, and ending with why I like a specific project. It might be mildly interesting or delightfully educational. Cryptocurrencies are young and existing privacy coins are deploying technology that is a work in progress. This series assumes a basic understanding of how blockchains work, specifically as used in cryptocurrencies. If you don’t have that understanding, might I suggest that you get it? ,, Because cryptocurrencies have a long way to go before reaching their end-game: when the world relies on the technology without understanding it. So, shall we do a deep dive into the privacy coin space?
FIRST THERE WAS BITCOIN
Cryptocurrencies allow you to tokenize value and track its exchange between hands over time, with transaction information verified by a distributed network of users. The most famous version of a cryptocurrency in use is Bitcoin, defined as peer-to-peer electronic cash.  Posted anonymously in 2008, the whitepaper seemed to be in direct response to the global financial meltdown and public distrust of the conventional banking and financing systems. Although cryptographic techniques are used in Bitcoin to ensure that (i) only the owner of a specific wallet has the authority to spend funds from that wallet, (ii) the public address is linked but cannot be traced by a third party to the private address (iii) the information is stored via cryptographic hashing in a merkle tree structure to ensure data integrity, the actual transaction information is publicly visible on the blockchain and can be traced back to the individual through chain analysis. This has raised fears of possible financial censorship or the metaphorical tainting of money due to its origination point, as demonstrated in the Silk Road marketplace disaster. This can happen because fiat money is usually exchanged for cryptocurrency at some point, as crypto-enthusiasts are born in the real world and inevitably cash out. There are already chain analysis firms and software that are increasingly efficient at tracking transactions on the Bitcoin blockchain. This lack of privacy is one of the limitations of Bitcoin that has resulted in the creation of altcoins that experiment with the different features a cryptocurrency can have. Privacy coins are figuring out how to introduce privacy in addition to the payment network. The goal is to make the cryptocurrency fungible, each unit able to be exchanged for equal value without knowledge of its transaction history – like cash, while being publicly verifiable on a decentralized network. In other words, anyone can add the math up without being able to see the full details. Some privacy solutions and protocols have popped up as a result:
CRYPTONOTE – RING SIGNATURES AND STEALTH ADDRESSES
Used in: Monero and Particl as its successor RING-CT, Bytecoin In December 2012, CryptoNote introduced the use of ring signatures and stealth addresses (along with other notable features such as its own codebase) to improve cryptocurrency privacy. An updated CryptoNote version 2 came in October 2013 (though there is some dispute over this timeline ), also authored under the name Nicolas van Saberhagen. Ring signatures hide sender information by having the sender sign a transaction using a signature that could belong to multiple users. This makes a transaction untraceable. Stealth addresses allow a receiver to give a single address which generates a different public address for funds to be received at each time funds are sent to it. That makes a transaction unlinkable. In terms of privacy, CryptoNote gave us a protocol for untraceable and unlinkable transactions. The first implementation of CryptoNote technology was Bytecoin in March 2014 (timeline disputed ), which spawned many children (forks) in subsequent years, a notable example being Monero, based on CryptoNote v2 in April 2014. RING SIGNATURES and STEALTH ADDRESSES
– Provides sender and receiver privacy – Privacy can be default – Mature technology – Greater scalability with bulletproofs – Does not require any third-party
– Privacy not very effective without high volume -Does not hide transaction information if not combined with another protocol.
Used in: Dash Bitcoin developer Gregory Maxwell proposed a set of solutions to bring privacy to Bitcoin and cryptocurrencies, the first being CoinJoin (January 28 – Aug 22, 2013)., CoinJoin (sometimes called CoinSwap) allows multiple users to combine their transactions into a single transaction, by receiving inputs from multiple users, and then sending their outputs to the multiple users, irrespective of who in the group the inputs came from. So, the receiver will get whatever output amount they were supposed to, but it cannot be directly traced to its origination input. Similar proposals include Coinshuffle in 2014 and Tumblebit in 2016, building on CoinJoin but not terribly popular ,. They fixed the need for a trusted third party to ‘mix’ the transactions. There are CoinJoin implementations that are being actively worked on but are not the most popular privacy solutions of today. A notable coin that uses CoinJoin technology is Dash, launched in January 2014, with masternodes in place of a trusted party. COINJOIN
– Provides sender and receiver privacy – Easy to implement on any cryptocurrency – Lightweight – Greater scalability with bulletproofs – Mature technology
– Least anonymous privacy solution. Transaction amounts can be calculated – Even without third-party mixer, depends on wealth centralization of masternodes
Used in: Zcoin, PIVX In May 2013, the Zerocoin protocol was introduced by John Hopkins University professor Matthew D. Green and his graduate students Ian Miers and Christina Garman. In response to the need for use of a third party to do CoinJoin, the Zerocoin proposal allowed for a coin to be destroyed and remade in order to erase its history whenever it is spent. Zero-knowledge cryptography and zero-knowledge proofs are used to prove that the new coins for spending are being appropriately made. A zero-knowledge proof allows one party to prove to another that they know specific information, without revealing any information about it, other than the fact that they know it. Zerocoin was not accepted by the Bitcoin community as an implementation to be added to Bitcoin, so a new cryptocurrency had to be formed. Zcoin was the first cryptocurrency to implement the Zerocoin protocol in 2016.  ZEROCOIN
– Provides sender and receiver privacy – Supply can be audited – Relatively mature technology – Does not require a third-party
– Requires trusted setup (May not be required with Sigma protocol) – Large proof sizes (not lightweight) – Does not provide full privacy for transaction amounts
Used in: Zcash, Horizen, Komodo, Zclassic, Bitcoin Private In May 2014, the current successor to the Zerocoin protocol, Zerocash, was created, also by Matthew Green and others (Eli Ben-Sasson, Alessandro Chiesa, Christina Garman, Matthew Green, Ian Miers, Eran Tromer, Madars Virza). It improved upon the Zerocoin concept by taking advantage of zero-knowledge proofs called zk-snarks (zero knowledge succinct non-interactive arguments of knowledge). Unlike Zerocoin, which hid coin origins and payment history, Zerocash was faster, with smaller transaction sizes, and hides transaction information on the sender, receiver and amount. Zcash is the first cryptocurrency to implement the Zerocash protocol in 2016.  ZEROCASH
– Provides full anonymity. Sender, receiver and amount hidden. – Privacy can be default? – Fast due to small proof sizes. – Payment amount can be optionally disclosed for auditing – Does not require any third-party
– Requires trusted setup. (May be improved with zt-starks technology) – Supply cannot be audited. And coins can potentially be forged without proper implementation. – Private transactions computationally intensive (improved with Sapling upgrade)
Used in: Monero and Particl with Ring Signatures as RING-CT The next proposal from Maxwell was that of confidential transactions, proposed in June 2015 as part of the Sidechain Elements project from Blockstream, where Maxwell was Chief Technical Officer., It proposed to hide the transaction amount and asset type (e.g. deposits, currencies, shares), so that only the sender and receiver are aware of the amount, unless they choose to make the amount public. It uses homomorphic encryption to encrypt the inputs and outputs by using blinding factors and a kind of ring signature in a commitment scheme, so the amount can be ‘committed’ to, without the amount actually being known. I’m terribly sorry if you now have the urge to go and research exactly what that means. The takeaway is that the transaction amount can be hidden from outsiders while being verifiable. CONFIDENTIAL TRANSACTIONS
– Hides transaction amounts – Privacy can be default – Mature technology – Does not require any third-party
– Only provides transaction amount privacy when used alone
Used in: Monero, Particl Then came Ring Confidential transactions, proposed by Shen-Noether of Monero Research Labs in October 2015. RingCT combines the use of ring signatures for hiding sender information, with the use of confidential transactions (which also uses ring signatures) for hiding amounts. The proposal described a new type of ring signature, A Multi-layered Linkable Spontaneous Anonymous Group signature which “allows for hidden amounts, origins and destinations of transactions with reasonable efficiency and verifiable, trustless coin generation”. RingCT was implemented in Monero in January 2017 and made mandatory after September 2017. RING -CONFIDENTIAL TRANSACTIONS
– Provides full anonymity. Hides transaction amounts and receiver privacy – Privacy can be default – Mature technology – Greater scalability with bulletproofs – Does not require any third-party
– Privacy not very effective without high volume
Used in: Grin Mimblewimble was proposed in July 2016 by pseudonymous contributor Tom Elvis Jedusorand further developed in October 2016 by Andrew Poelstra., Mimblewimble is a “privacy and fungibility focused cryptocoin transaction structure proposal”. The key words are transaction structure proposal, so the way the blockchain is built is different, in order to accommodate privacy and fungibility features. Mimblewimble uses the concept of Confidential transactions to keep amounts hidden, looks at private keys and transaction information to prove ownership of funds rather than using addresses, and bundles transactions together instead of listing them separately on the blockchain. It also introduces a novel method of pruning the blockchain. Grin is a cryptocurrency in development that is applying Mimblewimble. Mimblewimble is early in development and you can understand it more here . MIMBLEWIMBLE
– Hides transaction amounts and receiver privacy – Privacy is on by default – Lightweight – No public addresses?
– Privacy not very effective without high volume – Sender and receiver must both be online – Relatively new technology
Fresh off the minds of brilliant cryptographers (Sean Bowe, Alessandro Chiesa, Matthew Green, Ian Miers, Pratyush Mishra, Howard Wu), in October 2018 Zexe proposed a new cryptographic primitive called ‘decentralized private computation. It allows users of a decentralized ledger to “execute offline computations that result in transactions”, but also keeps transaction amounts hidden and allows transaction validation to happen at any time regardless of computations being done online. This can have far reaching implications for privacy coins in the future. Consider cases where transactions need to be automatic and private, without both parties being present.
Privacy technologies that look at network privacy as nodes communicate with each other on the network are important considerations, rather than just looking at privacy on the blockchain itself. Anonymous layers encrypt and/or reroute data as it moves among peers, so it is not obvious who they originate from on the network. They are used to protect against surveillance or censorship from ISPs and governments. The Invisible Internet Project (I2P) is an anonymous network layer that uses end to end encryption for peers on a network to communicate with each other. Its history dates back to 2003. Kovri is a Monero created implementation of I2P. The Onion Router (Tor) is another anonymity layer ) that Verge is a privacy cryptocurrency that uses. But its historical link to the US government may be is concerning to some. Dandelion transaction relay is also an upcoming Bitcoin improvement proposal (BIP) that scrambles IP data that will provide network privacy for Bitcoin as transaction and other information is transmitted.,,
Monero completed bulletproofs protocol updates that reduce RINGCT transaction sizes and thus transaction fee costs. (Bulletproofs are a replacement for range proofs used in confidential transactions that aid in encrypting inputs and outputs by making sure they add to zero). Sigma Protocol – being actively researched by Zcoin team as of 2018 to replace Zerocoin protocol so that a trusted setup is not required. There is a possible replacement for zk-snarks, called zk-starks, another form of zero-knowledge proof technology, that may make a trusted set-up unnecessary for zero-knowledege proof coins.
PART 1 CONCLUSION OF THE PRIVACY COIN GUIDE ON THE TECHNOLOGY BEHIND PRIVACY COINS
Although Bitcoin is still a groundbreaking technology that gives us a trust-less transaction system, it has failed to live up to its expectations of privacy. Over time, new privacy technologies have arrived and are arriving with innovative and exciting solutions for Bitcoin’s lack of fungibility. It is important to note that these technologies are built on prior research and application, but we are considering their use in cryptocurrencies. Protocols are proposed based on cryptographic concepts that show how they would work, and then developers actually implement them. Please note that I did not include the possibility of improper implementation as a disadvantage, and the advantages assume that the technical development is well done. A very important point is that coins can also adapt new privacy technologies as their merits become obvious, even as they start with a specific privacy protocol. Furthermore, I am, unfortunately, positive that this is not an exhaustive overview and I am only covering publicized solutions. Next, we’ll talk more about the pros and cons and give an idea of how the coins can be compared. There's a video version that can be watched, and you can find out how to get the second two parts if you want on my website (video link on the page): https://cryptoramble.com/guide-on-privacy-coins/
Rust blockchain development continued at its typical blistering pace, and again it's impossible to follow everything going on. This month we see continued advancement in zero-knowledge computing, an obvious focus from the entire blockchain industry on the DeFi phenomenon, and some new hackathons with opportunities for Rust developers. Every month seems to bring advancements in zero-knowledge proofs, and new implementations in Rust. It is a research area that will probably impact the general computing industry eventually, and one where the blockchain industry is leading the way, and one where Rust has a huge foothold. Even projects that are not written in Rust we see implementing their zero-knowledge cryptography in Rust. But this stuff is extremely technical, and improving at a rapid pace. We fear we will never understand it. There are several Rust blockchains now in development that are built around zero-knowledge VMs, whose smart contracts create zero-knowledge proofs:
Aleo. A new platform with its own zero-knowledge programming language, Leo.
Each month we like to shine a light on a notable Rust blockchain project. This month that project is… Fluence. This is a blockchain with built-in software license management. We’re excited about this because license management is a rare non-currency use case for blockchains that makes a lot of sense. While we might expect to see more blockchain platforms devoted solely to digital licensing, fluence is actually a complete distributed computing platform, with a unique vision about using license management to generate profit from open source software.
James Waugh shared big news from Secret Network. Privacy-preserving smart contracts are going live on Secret Network Tuesday, September 15! Now developers can build and deploy “secret contracts” with encrypted inputs, outputs, and state.
Zero-knowledge Proofs (ZKPs): Is solely focussed on answering questions with a Yes or No. Deterministic and Order-preserving Encryption (OPE): This classifier for secure computation includes partial encryption algorithms that allow for certain operations. The Numer.ai project uses an OPE algorithm. Zero-knowledge: If the statement is true, no cheating verifier learns anything other than the fact that the statement is true. ZK Proofs on the Blockchain Bitcoin transactions are publicly visible by all network participants, and information such as the sender, recipient, amount, etc. is are open to scrutiny, or at least the addresses are publicly traceable. So zero knowledge transactions promise to untie the Gordian knot which has prevented blockchains from being used for settlement in the finance sector. To recap, in a regular blockchain transaction, when an asset is sent from one bank to another, the details of that transaction are visible to every other bank on the chain. By contrast, in a zero knowledge transaction, the others only know that ... Zero-knowledge proofs allow for a transfer of information to take place between two parties without the originator having to use a password or reveal any data related to him/her. This helps weed out many of the potential risks that are involved with the use of password-only authentication protocols. Additionally, ZKPs also help in bolstering the security of a person’s online payments ... London-based software development firm Qredo has announced the beta program launch of an encryption platform consisting of an SDK and set of distributed cloud services to help developers create applications with private data and encrypted conversations. The implementation of the cloud-based Qredo Vault makes it impossible for anyone in the…
MIT Bitcoin Expo 2019 - Zero Knowledge Proofs and Smart Contracts with Bulletproofs - Duration: 27:11. MIT Bitcoin Club 1,768 views. 27:11. Fully Homomoorphic Encryption. Shai Halevi, IBM ... Presenting zero-knowledge blockchain for supply chains. Demonstrations: - MediLedger: drug counterfeit prevention & DSCSA - Responsible Gold: provenance from a mine to a vault. MIT Bitcoin Expo 2019 - Zero Knowledge Proofs and Smart Contracts with Bulletproofs - Duration: 27:11. ... Bi-Deniable Public-Key Encryption - Duration: 22:42. TheIACR 903 views. 22:42 . Efficient ... Just bought bitcoin worth $50,wish me luck kek. Join the discussion and get the slides on the zero knowledge ... ZK-TLV 0x09 - Ittai Abraham - The Bitcoin Breakthrough in the less of Distributed Computing (Part 1) - Duration: 26 minutes. 257 ...