№2 - Anonymous payments: DASH or Bitcoin+Mixers?

alex-ru

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Sometimes it is important to preserve not only one's personal anonymity, but the anonymity of one's finances as well. And, when your money require anonymity, errors are inadmissible!


THE NEED

The governments of many countries are productively working on establishing complete monitoring and control over the movement of funds both, of their citizens and the citizens of other countries. A stereotype is being imposed on the public opinion: "If someone hides something, that most likely means that this person a criminal evades paying of taxes, sponsors terrorism or is involved in other sins." In some countries the use of cash, precious metals, cryptocurrencies, offshores, and other tools making financial monitoring more difficult automatically makes you suspicious.

But the common sense tells the people that the expression "Money loves silence" is not related to a crime, but is grounded in elementary everyday carefulness. Nobody being in sound mind shouts about how much money they have in the pocket, does not write everywhere about their income amount nor flaunts everyone a bank statement with a list of card transactions.

The organizations also seek to cover the detail of their financing activity; they do not publish lists of customers with their order details because it will at a minimum upset customers and attract ill-wishers (including competitors).

And, if the citizens of developed countries can at least hope that spying at their finances is driven by some national interests, in the countries with the high level of corruption people justifiably fear that their private information will most likely get to people with hostile intentions.

Okay, I will not immerse in philosophy and simply state the fact that the majority of people and businesses have the desire (and often the need) to preserve anonymity of their finances. And they are driven not by some bad intentions but by the desire to protect themselves from falling become victims of others' malicious or criminal plans.


BITCOIN

Unfortunately the set of legal tools for preservation of financial anonymity is rather limited and inconvenient in use. The appearance of the first cryptocurrency (Bitcoin) in 2009 brought people a hope that they will after all receive anonymous money in a fast, convenient, and uncontrolled by anyone way. In fact, some promising and the revolutionary ideas and technical decisions were incorporated into the Bitcoin concept.

Years went by... Today, in 2015, Bitcoin has become the most known and popular cryptocurrency, leading by the number and the volume of financial transactions conducted with it. Unfortunately, these are among the few criteria by which Bitcoin managed to hold its leadership in the world of cryptocurrencies.

The reason being that since its start-up, the Bitcoin network underwent no important changes and now remains close to its initial technological level (if one does not account for some front-end improvements which do not affect the network operation principles). For example, over the last years, nothing has been done towards implementation of anonymity mechanisms, which is in conflict with users' expectations, but is being lobbied by the current Bitcoin developers (unfortunately, the unknown creator of Bitcoin removed himself from its further development).

In my opinion, the cause «of a stagnation» lies in the blocking of technological development of the Project because of the lack of motivation, management, and funding. It is not a secret that miners and large investors are the primary beneficiaries of the Bitcoin project. None of them (with the rare exception) strives for revolutionary changes, limiting efforts to advertising of already available stable technology and a hope for the growth of Bitcoin's applicability (at the expense of, among other things, a departure from the original «independent» concept in the direction of complying with requirements of various local authorities and organizations).

But let's return the topic of anonymity. Yes, Bitcoin is better than a bank account in terms of independence – you can become a participant of the system and manage your coins on your own. Nobody will be able to block your resources or to confiscate them – this is the important advantage of decentralized cryptocurrencies. But the Bitcoin is worse than even a bank account in terms of providing anonymity of payments because the transactions by all users are recorded in an open form in a publicly accessible database (blockchain) and are stored there forever which enables their tracking and analysis directly or through a publicly accessible software.

At the moment of payment, its size, residual balances, and all previous and subsequent transactions by participants become accessible to any interested person. Until a match between the address under analysis and a particular individual is set, this information is abstract. But, as soon as an interaction with the physical world occurs (for example, when an IP address, bank details for encashment, the address of delivery of goods, etc., are recorded), it is possible to unambiguously trace all the financial story of a particular person.

Those willing to «confuse a bit» a history of their transactions can send their coins through a sequence of their or other (for example, exchanges, casino, etc.) addresses. But regardless of the number of such transactions, the entire transactions chain is recorded and is available for further analysis.

Those seeking greater anonymity can use third-party services that offer mixing of the Bitcoins (so-called "Mixers"). As any other «add-in services» that make Bitcoin's current infrastructure and extended functionality, they serve primarily the interests of their owners. When passing your Bitcoins and trusting the provision of their anonymity to third-party organizations or private individuals, you must realize all associated risks. And blocking of «inconvenient user» accounts is the not the worst case scenario for the users of services – Bitcoin enhancers.

Okay, I will not immerse in the analysis, I will only say that, at the moment, the Bitcoin is not the best by the speed of payments or the provision of anonymity, or the dynamics of improvements. Many important Bitcoin functions (and this concerns the anonymity of transactions too) are executed not through Bitcoin itself, but through the use of third-party (typically, centralized) «add-ins» services, which adds uncertainty and risks to the overall architecture of the Project.
 
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alex-ru

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DARKCOIN

Darkcoin is a cryptocurrency created in the beginning of 2014, based on the Bitcoin source code. Leveraging the best of the Bitcoin technology, the Darkcoin team aimed to advance further and to modernize the cryptocurrency technology up to the level of «ideal electronic money». Provision of real anonymity of payments plays the key role in it. Over the last year, Darkcoin has undergone a number of revolutionary changes and gone far forward, having significantly modernized its key operation principles.

Here are the key tasks which are already implemented in Darkcoin:
  • Independence and uncontrollability. Individual governments, services, developers, users, attacks, etc., cannot have destructive effect on the Project's operations, including the provision of anonymity.
  • Reliable technologies of the provision of anonymity. Only validated cryptography technologies are used. The anonymization mechanisms are realized at a protocol level, which protects the system against third-party effects and risks.
  • Proprietary decentralized technology platform. The network of over 2200 Masternode that provides logical and physical protection against possible attacks; it is the basis on which unique functionality (above all, for the provision of anonymity) is implemented.
  • Convenience to users. The recent introduction of InstantX technology allowed to reduce the time of the guaranteed crediting of payments within the Darkcoin network to 5 seconds. A possibility to increase the security level, while, at the same time, improving the ease of use demonstrates the unique features of Darkcoin.
Let's skip the enumeration of all features and the detailed analysis of advantages. I will state only that for now it is the most popular anonymous cryptocurrency focused on the provision of real privacy. There is a number of other cryptocurrencies, which are, mainly, at a «theoretical stage» yet, that offer alternative approaches to the provision of anonymity (the majority of these projects remain at the level of theories and promises). Their analysis is beyond the scope of this article. I will only say that the Darkcoin team is following all technological advances in the field of anonymity provision. If something really worthy and practically applicable is identified, Darkcoin promptly integrates such solutions into its code and continues to provide the best level of financial anonymity to its users.


"IDEAL" ANONYMIZATION

The general principle of any anonymization of cryptocurrency transactions lies in the following: at one of the stages of money transfer, a collective transaction (or a group of transactions) where several payers participate is made. The ideal anonymization mechanism must conceal an unambiguous match of coins and their senders. As a result, a sender of monetary funds becomes uncertain for the payee and third-party observers .

Uncertainty lies in the fact that the money under the analysis could have been sent with equal probability by any participant of a collective transaction. Thus, the greater the number of payers participating in a collective transaction, the lower is the probability to «guess correctly» the actual sender. And it becomes impossible to unambiguously prove the money-sender match. However, practical realization of the described ideal concept can sometimes contain weaknesses and hidden vulnerabilities.

Security experts know that the ease of use and the security level are normally at the opposite ends. Anonymity provision is an important and marketable function, but it's inevitable trade off is in some discomfort. It is important to achieve compromise at which the maximum level of anonymity is reached with the minimum level of accompanying costs. A theoretical absolute anonymity that is absolutely inconvenient or even unusable in the real life will be in low demand.

If someone needs an absolute protection against NSA, FSB, and similar agencies, they need to research the latest facts that the spy «bookmarks» are already infiltrated to hard disks, SIM cards and other components of a basic hardware level, which makes all systems formed on their basis, including software applications for the provision of security and anonymity, vulnerable. Therefore, if one seriously intends to oppose NSA, an «ideal cryptocurrency» will be of no help, they will need a complete set of modern hacker tools and, in ideal, a bunker in the mountains of Afghanistan. :)

Darkcoin was developed as an easy-to-use and effective cryptocurrency for the mass use, which will provide scalable and easily integratable anonymous payments for millions ordinary people, as opposed to a sophisticated closed cryptosystem of a military kind for "super spies". Darkcoin managed to reach this objective; now the system is being further refined, enhanced, and promoted.

Let's wrap up. At the moment, Bitcoin does not provide real anonymity to its users; the third-party services (Bitcoin-"Mixers") allow to achieve anonymity only with a number of reservations. Darkcoin cryptocurrency has internal (at a network protocol level) mechanisms of advanced anonymity.

Let us skip technical details of the already implemented Darkcoin technologies, as well as of some additional methods which Darkcoin can integrate later, as this is a fairly big science-related question. Interested readers can research these topics on their own, following the references in the end of this article. I will consider only the practical side of the topic and compare: what the users of Darkcoin, Bitcoin, and Bitcoin-Mixers currently get.
 

alex-ru

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MAIN DIFFERENCES: BITCOIN (B), BITCOIN+MIXER (BM), and DARKCOIN (D).
  • Anonymization technology
B: Absent.
BM: "CoinJoin" is a simplified technology with a number of limitations. Blending of funds received by a mixer occurs only within a group of users of the particular Mixer who are using its services at a particular point of time. It limits the real depth of anonymization (especially, because the users can not control if the actual depth of mixing corresponds to the stated one).
D: "DarkSend+" is a preliminary denomination and anonymization «in a background mode» at the protocol level. Any users of the Darkcoin network can participate in the collective transactions, which allows to quickly execute anonymization of an arbitrary depth (defined by the number of blending rounds) and volume (quick selection of suitable partners with the necessary amount of coins).
  • Convenience
B: Sufficiently convenient.
BM: Bitcoins are sent to the Mixer. Anonymization is controlled through the third-party interfaces (website, browser plug-in …), which connect you to a remote Mixer server.
D: Simple control of balance, transfers, anonymization level, etc., from the single interface of your local wallet. The anonymized Darkcoins are paid directly to a payee.
  • Transaction speed
B: Usually, up to 10 minutes, but can be longer in some cases.
BM: Double time of a Bitcoin transaction (sending of money to Mixer + receiving them back) plus time for the anonymization. The more the depth of anonymization and the amount of blended funds, the more time will be required to select the necessary number of suitable blending partners.
D: Approximately 5 seconds, using InstantX technology, if previously denominated and anonymized (in a «background» mode) funds are used.
  • Security of funds
B: Money are secure because the anonymization is not done.
BM: For time of anonymization the funds must be transferred to the third party (Mixer). They do not belong to you until the blending operation is successfully completed by the Mixer.
D: The funds are always secure because anonymization is occurring in the form of a collective transaction coordinated and protected by a Darkcoin's decentralized Masternode network at a protocol level. It is technically impossible to steal money.
  • Decentralization (uncontrollability)
B: Bitcoin's «transparent» payments are decentralized, but anonymity is not provided for.
BM: Anonymization of funds is done on remote servers of a centralized Mixer, which are controlled by the owners. Monitoring and control of ongoing operations by the Mixer operators, as well as by those who can receive access to their servers, are possible.
D: The payments and the anonymization mechanisms are distributed and are made using a decentralized Masternode network. During anonymization, a random Masternode sequence is selected, therefore it is almost impossible to track the chain of all anonymization rounds even if the ill-wishers manage to take control over a significant part of a network. The cryptocurrency architecture uses mechanisms that reliably protect Darkcoin against attempts to compromise the network decentralization and anonymity.
  • Source code availability
B: Bitcoin's source code is open.
BM: The back-end of the Mixer services is under the sole control of their owners (or those who managed to get access to their server). The users can not observe or control algorithms of a mixer's server platform operation; an arbitrary code can be executed there, which can be focused on, among other things, log maintenance and de-anonymization of user transactions.
D: Source code of both, front-end (purses) and network infrastructure (Masternode) is published for the universal control as to the absence of hidden functions. It also concerns the transparency of anonymization mechanisms. With the help of the source code the users can compile on their own the Wallet application to guarantee the absence of any undocumented features.
  • Protection against blending partners (Sybil Attack)
B: Not applicable.
BM: Any anonymization operation presupposes the creation of uncertainty by inviting additional participants of a collective transaction. But, if some blending participants are «false players» wishing to deanonymize «common transaction partners», the level of uncertainty (and, therefore, of anonymity as well) decreases. Mixers' clients is a fairly narrow pool of customers and the mixing itself take place in a single center. Therefore, if someone wants to run an attack of this type (to mix one's coins) on the Mixer's customers, the attack is most likely to succeed.
D: For Darkcoin this situation is not too dangerous because a large quantity of users, as well as a great number of points of possible blending (Masternode) are always present in the network, which makes the danger of such an attack unlikely. As an additional level of protection, one can increase the number of blending rounds.
  • Other differences
There is a number of other differences, which are beyond the scope of this review. You can study them on your own, following the references in the end of the article.


CONCLUSION

If you appreciate inviolability of your private life, you need to take care about maintaining reliable anonymity of your financial transactions. Darkcoin cryptocurrency is currently one of the most effective solutions to this task.

Besides its direct purpose (the best cryptocurrency), Darkcoin can be used as «the world's best Mixer» for Bitcoin, Dollar, Euro, Yuan, and other currencies. I call Darkcoin «the best Mixer in the world» because of its technological superiority in the area of anonymity (its basic features are described in this article), as well as the world's largest base of users ready to blend their coins with yours.

The vast Darkcoin's customer base allows you to blend funds at random multiple times, which guarantees the maximum possible level of uncertainty. And, in practice, this possibility has even greater influence on the provision of anonymity than all the technologies that support the Darkcoin cryptocurrency.

So you will be able to anonymize your Bitcoins with the help of Darkcoin functionality, having exchanged them at the BTC-DRK exchange. You will then be able to securely use the successfully anonymized Darkcoins or to exchange them for Bitcoins or other currencies. In this case, your time and money spent will be insignificant compared to the use of the traditional Mixer services; and security and anonymization quality will be significantly better.

Download a Wallet from the site www.darkcoin.io right now and in a few minutes you will be able to assess all benefits of the advanced cryptographic technologies, which will provide to you the real financial security and anonymity.

P.S. I would like to ask the readers to relay this information to everyone who may be interested in it. Financial anonymity is in demand not only by a cryptocurrency community, but by all people striving to protect their right to freedom and personal privacy.


ADDITIONAL MATERIALS

1 http://wiki.darkcoin.eu/wiki/Main_Page
2 http://cdn.anonymous...alysis-v002.pdf
3 http://www.coinjoins...u.com/advisory/
4 https://www.wi.uni-m...oeser-paper.pdf
5 http://arxiv.org/pdf/1405.7418v3.pdf
6 http://eprint.iacr.org/2012/584.pdf

P.S. This English translation isn’t perfect so everybody feel free to get any parts and ideas from here - and make your own articles and so on. :)
* Some statements in this publication can be controversial and may not take into consideration all current changes. For example, the DarkWallet project went further than the traditional Bitcoin Mixers, having implemented a number of improvements. I invite everyone to discuss, refine, and edit this publication.

My other articles:
№1 DASH - an assessment of investment potential
№3 Dash ("Digital Cash") - Decentralized Startup
 
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tungfa

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Very cool
this should go straight on the DarkNet
(Sunday is my Dark day, I will post it then)
Tx for this
 

SonicDash

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Sep 28, 2015
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Very cool
this should go straight on the DarkNet
(Sunday is my Dark day, I will post it then)
Tx for this
Careful about talking about your Darknet day/s, or even posting your schedule about them.
This may de-anonymize you, and I don't want to know who you are. Only what you are about. <3
 
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tungfa

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Masternode Owner/Operator
Apr 9, 2014
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Careful about talking about your Darknet day/s, or even posting your schedule about them.
This may de-anonymize you, and I don't want to know who you are. Only what you are about. <3
in my world it is 'sunday' every day
:D
 
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