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'Dark' coins rising

Maria Korolov | March 10, 2015
Cryptocurrency users are stepping up efforts to make payments untraceable and fully anonymous.

Adding security to Bitcoin
Silk Road itself attempted to confuse the trail by passing transactions through dummy intermediate accounts.

Bitcoin users can also set up a new address for each transaction. One tool for that is Dark Wallet, a project which held a successful crowfunding campaign on IndieGoGo in late 2013.

There are also places to create a Bitcoin wallet without any link to a physical user.

Another approach mixes Bitcoins from many different people together into one digital wallet, and then redistributes them or passes them on to the destination account.

Another approach is stealth payments, a technique that uses public and private key pairs to hide the identity of a transaction's participants, in a way similar to the way that online communications are encrypted.

More recently, some Bitcoin users have been combining both approaches -- combining the rings of multiple addresses with stealth payments to make Bitcoin payments completely anonymous.

CryptoNote, Darkcoin and Cloakcoin
Other developers have moved away from Bitcoin and started from scratch.

CryptoNote, for example, is an alternative approach to creating cryptocurrencies. Here, each transaction is signed with keys from multiple users. There's still a ledger, but no way to tell which of the users was the actual sender of the money.

To protect the identity of the recipient, there are multiple unique one-time addresses derived from the recipient's public key.

Several new cryptocurrencies have been developed based on the CryptoNote idea, including reference implementation CryptoNoteCoin, Bytecoin, DarkNote, DarkNetCoin, and Fantomcoin.

The software is open source, and the the CryptoNode site offers an "easy forking guide" to help people create their own version of the cryptocurrency.

Darkcoin attempts to solve the identity problem with a decentralized network of "Masternodes" servers that anonymize transactions by combining several transactions into one in the transaction record.

It's particularly popular with online gambling casinos.

Cloakcoin, launched last year, also promises anonymous sending and receiving of the currency.

"DarkCoins is like using cash which is basically untraceable," said Adam Kujawa, head of malware intelligence at Malwarebytes Corp. "And Cloakcoin is like paying for something by dropping a dollar into a pile of other money before having the recipient take out what they are meant to get."

Anonymity also a weakness
To a technologist, it might seem that the answer always lies with a better algorithm.

To a hacker, it might seem that secrecy and anonymity is synonymous with security.

Privacy advocates, money launderers, gamblers and criminals may be searching for bullet-proof anonymity, but if they do ever find it, that anonymity could be their own downfall.

After all, if the authorities don't know who you are, you don't know who they are, either.

 

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