Anonymity: why Dark is the new Black

Thursday 14 August 2014

There’s a new anonymity protocol in town, and it’s going to blow the competition out of the water. Teleport, currently in implementation by BitcoinDark, isn’t about ring signature algorithms or complex mixing. It’s about best practice, old-school street smarts and a complete ecosystem designed from the ground up for privacy. Oh, and pirates. A lot of pirates. But best of all, it’s cryptocurrency agnostic. Whether or not a coin has been designed with privacy in mind, BitcoinDark will take it, anonymise it and hand it back to you.

BitcoindarkA couple of months back this article looked at the growing cryptocurrency trend towards anonymity (amongst other things). An increasing number of coins now offer various levels of privacy, and it seems like something that is only going to become more important as time goes on.

Given that bitcoin rose to prominence largely due to the ‘anonymous’ transactions it facilitated on the Silk Road, it’s ironic that bitcoin itself is anything but anonymous. It’s pseudonymous, at best (you can see exactly where the money is going, you just can’t always tell who it’s going to). In reality, it’s surprisingly easy to glean enough information to track the owner of almost any account. And that’s a problem for a lot of people.

Your money, your business
It’s not just criminals who care about anonymity. In the grand scheme of things, the few million dollars spent on the Silk Road and its successors is pretty minor – certainly less than the physical cash that is handed over on the streets for drugs every day. Imagine you’re a tech company, working at the cutting edge of your field. Any competitor who can see where the money’s come from and going to – customers, suppliers, consultants, employees – can start to get a picture of what’s going on, who to look into more closely, and who to compromise. That’s the same whether you’re using conventional banking or bitcoin. Add a whole host of personal reasons for keeping your cashflow away from the prying eyes of various different parties, and it’s potentially a very big market. So perhaps it’s not surprising that anonymous protocols are catching on.

Darkcoin is currently the most popular anon coin. It uses DarkSend, an implementation of CoinJoin – essentially a sophisticated mixing protocol. It’s not bad, but it’s not perfect, either. (The money can theoretically be unmixed, and there are potential vulnerabilities opened up by the way the network operates its masternodes.) The same goes for coins like Monero, which are based on CryptoNote, an implementation of ring signatures (these allow several keys to sign a transaction, making it far harder to track who is sending what). Unfortunately, CryptoNote comes at the price of immense blockchain bloat – making it unsustainably unwieldy.

In both cases, some correlations are still possible, and everything is kept on the blockchain, openly and permanently. Advances in computing could make coins based on mixing and ring signatures one day as transparent as bitcoin. That’s why Teleport is such a big deal.

The future’s Dark

Teleport is a totally different approach to anonymity. It’s not so much complex or sophisticated, in the way that CryptoNote or CoinJoin are. It’s more street smart. Its core idea doesn’t rely on advanced mathematics or superior encryption – more best practice, implemented within a framework designed for privacy from the ground up.

It’s currently being integrated into BitcoinDark (BTCD), a relatively new coin, but the great thing is that it will work with any cryptocurrency – either if it’s built into their protocols itself, or through third party services that will act as a bridge through to BTCD and back out again, including a quick Teleport. So, how does it work?

You can read a preliminary version of the darkpaper here. Most coins have white papers, but not BTCD. The purpose of a white paper is to put a concept on public record in enough detail for other experts to implement and critique. White papers generally use terminology that is so complex that they are essentially inaccessible to almost everyone. Teleport’s darkpaper, by contrast, comprehensively sets out the new concept of anonymity in a way that’s not only extremely accessible – particularly given the highly complex subject material – but even something approaching fun. Pirates feature heavily, in a series of illustrations designed to explain everything from the ways bitcoin transactions are traceable, through the background of ring signatures and other anonymity solutions, via onion routing and broadcasting, to the core idea of Teleport itself. It’s a little unconventional, to say the least, but as a result it will probably be far more widely read than just about any other cryptocurrency white paper – Satoshi Nakamoto’s seminal one on peer-to-peer cash included.

BitScan treasure map

Treasure maps
The concept behind Teleport is simple, once you get hold of it – though actually creating a functional coin with it is a whole lot more complicated. Fundamental to the idea is that a cryptocurrency transaction is simply a batch of data submitted to the network, with the transaction then being added to the blockchain. Rather than submit that data, you can package it up and send it to another user – over an encrypted link, of course. In other words, you’re not sending someone money. You’re sending them the capability of making a transaction.

In the Teleport system, this package of transaction information – the ability to make a transaction – is called a telepod. The recipient executes the transaction, and the money is sent into a designated address that has never been used before. They then sweep the balance into another new and unused address (to prevent the sender double-spending it) and there it is: the money is in the possession of the new owner, but there’s no link to that owner whatsoever. From the point of view of the blockchain, it just looks like the original sender has moved his own money into a new account. The same thing can happen dozens or hundreds of times, and all anyone looking at the blockchain will see is that the same account was ‘cloned’ time and again. There’s zero evidence of who cloned it. Here’s how the darkpaper expresses it:

‘Alice acquires a treasure map drawn by pirate Jack Sparrow. Understanding that some pirates may be untrustworthy, Alice digs up the treasure and moves it to a different chest in another location. She copies the map and updates it with a new ‘X marks the spot’, crossing out the previous one and discarding the old map. Alice loses her new map to Bob in a game of chance. Bob, suspecting that Alice may have kept a copy of the map, moves the treasure, makes a copy of the map himself and updates it with a new ‘X’, again discarding the original. He later uses the new map as payment for Catherine. In such fashion, the map and the location of the treasure change hands many times over. However, if care is taken when passing each map on, then there is no evidence for the identity of any of the previous owners. The only thing we know for sure is that the treasure and the first map once belonged to Jack Sparrow.’

Hyperspace
Thus the money is ‘teleported’ outside of the blockchain, into unused addresses owned by new recipients, until someone wants to remove it from what the paper terms ‘hyperspace’ – that is, back to a regular account that has a connection with the rest of the network. At this point, there are potential problems, since addresses that are linked to others can be traced using a variety of techniques (also detailed in the paper, using pirate analogies). Fortunately, there are some solutions to this. One is to use the BTCD cash card – like a prepaid credit card, to which balances are cashed out. Obtain one anonymously, and no one can trace the cash you send to it. Another way, one that keeps the coins on the blockchain, is to cash it out through the original creator of the telepod – that is, the account to which everything can be traced back. Since this is already public knowledge, there’s no downside there. A network of tradebots is also under way so that other cryptocurrencies can be sent to the BTCD network, anonymised through Teleport, and transferred back to the original cryptocurrency.

And there it is: robust anonymity without the vulnerabilities of mixing or the problems of blockchain bloat. Time will tell whether Teleport has issues of its own, but another viable approach to anonymity must be welcomed – especially as it can be applied to any coin. The future’s Dark, indeed.

Brandon Hurst


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