The introduction of Bitcoin to the world sparked a revolution of finance and economics. Bitcoin set money’s value free from government constraint; now the value could be determined solely by the market. Instead of depending on centralized third parties for every financial transaction, people could exchange value around the world cheaply and in a completely decentralized manner. Bitcoin ushered in the age of truly digital cash. But Bitcoin isn’t the whole story. By creating an open-source money, Satoshi Nakomoto, the inventor of Bitcoin, unlocked vast vistas for others to explore. Over the years many developers have taken up the challenge and built upon the foundation that is Bitcoin to solve many real-world problems. One such person is Evan Duffield, and his project: Dash.
The Importance of Anonymity
With a background in both software development and finance, Duffield was captivated by Bitcoin from its earliest days. Most particularly, he was intrigued by the idea of digital cash: a technology that could replicate the features of physical cash but without the drawbacks inherent in conventional currency. According to Duffield, “I started tinkering with Bitcoin in 2011, really early in it’s development. I decided I wanted to dive into cryptographic currency and like all things, the best way to learn something new is to sink or swim.” As he studied Bitcoin more deeply, however, he discovered a weakness in its design: a lack of true anonymity.
Why is anonymity important? Some might argue anonymity is only essential for those who wish to engage in illegal activities. But this is not the case. Anonymity is necessary for cash for two reasons. First, it gives each transaction privacy, so that no one can pry into the financial transactions of others. Imagine giving public access to everyone’s credit card transactions. Such information, aside from just violating individuals’ privacy, could be used to manipulate people in many ways. Second, anonymity makes the currency “fungible,” meaning every unit of the currency is worth the same as any other unit. Why is this true? If people could track coins to specific people and transactions, efforts could be made to “taint” coins, for example, if they were involved in illegal activities previously, making them worth less than others.
Unfortunately, Bitcoin does not supply true anonymity; each transaction is broadcast on a public blockchain for anyone to study. True, those transactions are not publicly linked to specific individuals, but with enough forensic research one can draw connections between transactions and individuals.
Duffield at first wanted to improve anonymity in Bitcoin itself, but he found that his suggestions were not accepted by the core Bitcoin developers. So, in the grand tradition of open source technology, he decided to fork the project and create his own digital coin. He called it “Darkcoin,” reflecting the anonymity of the currency, and released it on January 18, 2014. Calling Darkcoin a “more private blockchain,” Duffield marketed it as a “privacy-centric” currency.
Thus was a new coin born.
The initial reception was nothing short of remarkable. People quickly realized that Darkcoin solved a real-world digital currency problem, and the price reflected that realization. Users flocked to the coin, and soon its market capitalization was one of the highest of any digital currency. In its first year Darkcoin overcame a number of technical hurdles – inventing a whole new way of doing money isn’t for the faint of heart – and became one of the top digital currencies on the market.
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