Some of the emerging methods for deanonymizing users of cryptocurrencies stem from mapping network traffic to unveil IP addresses and making connections between identities. Privacy concerns around network-layer tracking by government surveillance programs and other avenues for unveiling identities across the Internet have led to several important developments to preserve privacy.
The Tor Network and The Invisible Internet Project (I2P) are two of the leading overlay networks for users to protect their privacy over the public medium of the Internet. Other solutions include Mixnets, which are routing protocols using chained proxy servers to mix input messages.
In regards to cryptocurrencies, several privacy-oriented projects and upgrades to Bitcoin explicitly focus on enhancing protections at the network level.
Recent Revelations in Network Layer Attacks
Blockchain forensics methods for identifying users primarily focus on the protocol layer of analyzing a cryptocurrency’s transaction flow.
For instance, Bitcoin is pseudonymous, meaning that it is not actually anonymous, and links can be made between user addresses (public keys) and transaction inputs/outputs.
Most anonymity technologies integrated with cryptocurrencies today (i.e., zk-SNARKS, bulletproofs, and Ring CTs) focus on obfuscating transaction details over public networks to decouple any ability to link transactions to an identity at the protocol level.
RingCTs in Monero and zk-SNARKs in ZCash provide crucial mitigation against third-parties deanonymizing users, but they are also much more cumbersome than standard cryptographic transactions because they require proofs that are tacked on to each transaction.
However, both Monero and ZCash have recently integrated vital efficiency enhancements to these confidential transactions, with the recent bulletproof implementation in Monero and Sapling upgrade in ZCash.
While significant effort has focused on protocol-layer protections, publications mapping IP addresses through tracking transaction broadcast origins and subsequently making connections with identities (through public keys) have amplified concerns that protocol-layer solutions are not the only means needed to safeguard privacy.
When transactions in a public blockchain network — like Bitcoin — are broadcast from a node using the P2P network of TCP links, they use a gossip protocol (diffusion in Bitcoin) where the propagated transaction reaches a majority of the nodes very rapidly. Researchers have shown that by using supernodes connected to all of the network’s nodes, probabilistic inferences can be made about the origin of the transaction’s broadcast IP.
Successfully reducing the ability to make connections between IP addresses and public keys requires modifying the network stack to provide better protections against observers of transaction graphs. In Bitcoin, Dandelion++ is the proposed network-layer anonymity protection that is pegged for inclusion into the protocol in 2019.
However, Dandelion++ is not the only solution available, and other projects are working on implementing their own solutions.
Overlay and Mixnet Projects
Both Tor and I2P are anonymity-focused and volunteer overlay networks. They do not provide perfect privacy, as privacy is a constantly evolving battle, but make deanonymizing users through network traffic mapping significantly more challenging. I2P and Tor have been around for years, and use end-to-end encryption to send data packets through relays of volunteer nodes, masking the origin and destination of the communication.
Tor uses what is called ‘onion routing’ (Tor stands for “The Onion Router”) where each relay in the network is randomly selected and propagates the message to the next node without knowing the origin or destination. As such, third-parties who attempt to use a relay for peering would not know the source or final IP address of the message.
Some drawbacks of Tor are that when you are using Tor, it is easy to know that you are using Tor, and the U.S. government — along with the previously mentioned academic paper on Bitcoin — have demonstrated attacks that can cut off Tor functionality for targeted users. Interestingly, Tor originated from the United States Naval Research Laboratory and was further enhanced by DARPA to protect intelligence communications in the 1990s.
I2P works similarly to Tor but employs ‘garlic routing’ rather than onion routing. Garlic routing is an off-shoot of onion routing and aggregates encrypted messages together. I2P is used in a variety of services, including programs using BitTorrent.
Kovri — Monero’s C++ implementation of I2P — is Monero’s baked-in network-layer solution to provide better privacy protections for users. However, recent events concerning its development and the mention of Sekreta as a possible alternative have left the fate of Kovri unclear at this point. It is worth mentioning that most of Kovri’s initial implementation has been completed after years of research and development.
Sekreta consists of a ‘universal’ API along with a set of libraries and socket-based application server designed to improve on the shortcomings of other overlay network designs. Created to be more user-friendly, Sekreta also aims to be more robust in the case of compromised underlying systems than Tor or I2P.
Mixnets are another network-layer privacy solution that use chained proxy servers that take in specific inputs (messages), mix them, and send them back out in random order to their destination. This is another method to mitigate peering through end-to-end communication, and each message is encrypted using public-key encryption.
Mixnets were proposed by cryptography pioneer David Chaum in 1981 but fell behind in favor of overlay networks like Tor and I2P over the years. However, they have been making a resurgence, with the Binance-backed Nym project a prominent example.
Nym is an anonymous authentication protocol for unlinkable and publicly verifiable credentialing, which they note can be an anonymous replacement for Google and Facebook sign-ins. Nym uses the Sphinx packet format with a Mixnet to obfuscate message origins and recipients and even creates dummy messages to make analyzing network traffic patterns more challenging. Interestingly, they are building a cross-compatible wallet for Mimblewimble blockchain protocols, as well as potential integration with other privacy-oriented cryptocurrency wallets.
Nym may also open the door for decentralized VPNs, which would remove the third-parties that oversee VPN services.
Bitcoin’s Lightning Network (LN) also uses Sphinx as its format for its onion routing protocol. Other proposed optimizations for the LN include HORNET — a high-speed onion routing protocol — and giving LN users more control over their network routing of payments through source-routing.
BEAM — a full Mimblewimble implementation — recently launched, and Grin — another open-source Mimblewimble implementation — also is set to launch in the next few days. Integrating Nym with a novel transaction construction protocol like Mimblewimble has the potential to produce robust networks for anonymous transfers of value. Grin and BEAM incorporate Dandelion as a network-level privacy protection too.
Mixnets are also subject to their own vulnerabilities, however. Since mixers do not perfectly mix inputs and outputs, observers can use timing attacks creating gaps or artificial bursts to analyze patterns of incoming and outgoing messages through mixes.
Making Strides in Privacy
The persistent data scandals that have come to dominate mainstream headlines throughout the last several years have left a growing portion of the mainstream concerned about their privacy.
With privacy at a premium, the initiatives to innovate overlay networks, mixnets, and cryptography within cryptocurrencies has provided a viable alternative for anonymously exchanging information and value.
Efforts to subvert privacy are continually evolving, and it is refreshing to see so many projects with a heavy emphasis on matching those adverse efforts. Protocol upgrades such as zk-SNARKs and bulletproofs present significant strides in cryptography and their combination with network-layer solutions like mixnets and overlay networks have crucial long-term implications for the broader notion of privacy.
Coin Metrics Report Details Surges in ETH, Doge Trading
Coin Metrics: Altcoins Are Taking Over
While bitcoin is still the world’s number one digital currency by market cap (it is currently trading for about $35,000 per unit), the asset has experienced some serious dips over the past month, while by contrast, Dogecoin and Ethereum have exhibited gains and are regularly moving up the digital ladder.
Coin Metrics garnered much of the information for its report by looking at data from Binance, arguably the largest and most popular crypto exchange on the planet in terms of daily trading volume. Additional statistics were gathered from exchanges such as Coinbase and FTX. Coin Metrics points out that thus far, 2021 has been the year for “smaller altcoins,” suggesting that a great many of them have surged heavily between the months of January and early May. From there, however, a serious crypto crash has taken precedence, with Coin Metrics unable to pinpoint what, exactly, might have been the cause.
For the most part, numerous altcoin pairs are offered on Binance, which explains why the company’s trading volume for many of the world’s smaller assets likely overtook that of bitcoin. The report says:
ETH volume surpassed BTC volume on Coinbase by a wider margin than on Binance. Coinbase did not offer Dogecoin trading in May (although they introduced it in early June), so it did not have a Doge rush similar with Binance, but it did have a relatively high amount of volume for some other altcoins, led by MATIC, ADA and Ethereum Classic (ETC)… Continuing the trend, ETH volume edged out BTC on FTX, although not by much, but comparatively, the top altcoins made up a lower percentage of total volume on FTX than on Binance and Coinbase.
Some of the world’s smaller exchanges – such as Huobi – also saw Ethereum and Dogecoin trading surge to levels beyond what people were doing with bitcoin. The report continues to say:
Similar with Binance, DOGE volume surged on Huobi, taking the spot as the third most traded currency by volume.
Bitcoin Hasn’t Been Fully Cut Out Yet
The only place – according to the document – where bitcoin trading appears to remain dominant at the time of writing is the CME in Chicago, Illinois. The company delves in bitcoin futures trading and has recently opened the door to ETH futures, though this is still in its early stages. Coin Metrics writes:
The markets continued to move mostly sideways over the last week. Bitcoin and Ethereum usage both stayed relatively flat, with daily active addresses dropping 2.5 percent and growing by 3.3 percent, respectively. Ethereum daily transaction fees dropped by over 35 percent week over week as gas prices continued to fall, and bitcoin transaction fees followed a similar pattern, dropping by 40.5 percent.
Bitcoin Taproot upgrade finally achieves activation lock-in!
The much-anticipated Bitcoin Taproot upgrade passed the Speedy Trial, which was a signaling period which gauged support for the upgrade from bitcoin’s mining sector. Since SegWit, Taproot has been touted as the next significant upgrade for Bitcoin.
Data from Taproot.watch, a webpage created by Bitcoin developer Hampus Sjöberg, released an interesting yet hilarious video to announce the completion of the lock-in stage.
— Hampus Sjöberg 🥕🟩 (@hampus_s) June 12, 2021
On the official page, it read:
“This period has reached 1815 Taproot signaling blocks, which are required for lock-in.”
Different mining pools tweeted their support for the upgrade on their respective platforms with Slush Pool being the first to do so.
TAPROOT LOCKED IN AT BLOCK 687285 BY SLUSHPOOL 🟩 pic.twitter.com/FFDdibtmGt
— pourteaux (@pourteaux) June 12, 2021
AntPool also supported the upgrade.
“As of block 687284, Taproot signalling has reached 1815 blocks this period, guaranteeing that absent very deep reorgs, it is guaranteed to lock in. Following that, it will activate at block 709632, probably around mid-November 2021.”
He also addressed that ‘there is a lot of work left of course’, which included:
a) PSBT extensions to communicate Taproot keys/scripts/signatures,
b) MuSig2 standardization so the software can cooperate in signing,
c) Output descriptors,
Why is it so important?
“With this upgrade, you’ll see Bitcoin to be the settlement network. Funds are transferred from one institution to another, say one bank to another.”
“The update would lower the data size of smart contracts, in turn lowering transaction costs. Taproot is also expected to enhance smart contract functionality and efficiency.”
Jeremy Rubin, a Bitcoin Core contributor and founder of Judica projected a similar optimistic narrative,
“With taproot, you get optimization of Bitcoin, much different from how people know Bitcoin today- little too inefficient or reveal too much information about what you’re trying to do. Taproot helps to be private and efficient.”
Subscribe to our Newsletter
Next-Gen Decentralized NFT Platform, NEFTiPEDIA Announces Launch of its ICO In 3 Days
NEFTiPEDIA, a next-generation decentralized NFT platform that operates in a way that contributes to the elevation of digital artists, creators, and investors has announced the launch of its ICO which is set to happen in 3 days.
NEFTiPEDIA has designed a commission-free platform to enable its artists to maximize income, following its aim to help them increase revenue via NFTs.
Following NEFTiPEDIA’s plans to storm the marketplace while launching its ICO, it aims to serve the marketplace with different categories of products including cosmetics, vehicles and property.
“….we believe NEFTiPEDiA will become a community-run marketplace and the industry will make our project as a kind and remarkable one in the world,” the announcement reads.
The development will see the platform provide a decentralized marketplace for Artists, where they can sell and validate their NFT links to fans and interested buyers.
NEFTiPEDIA Offers Exciting Prizes to Users
The team behind the project have allotted a total of 250,000,000 $NFT tokens for its users to enjoy in the upcoming ICO.
To further celebrate the intended development, the platform has proposed a referral scheme where winners can enjoy amazing and exciting prices.
Users who wish to participate in the program are required to sign up for the platform’s ICO panel and get a referral code.
The code can as well be shared with friends, giving users the opportunity to win exciting prizes.
A minimum of 5 referrals is required for participants to be considered for winning.
“Only those referrals ended in purchase will be added to the count. After the completion of ICO in 30 days, winners will be announced. Notably, winners will bear all the applicable tax.” The team further elaborated on the conditions for winning.
World Economic Forum Seeks to Offer Clear Policy Landscape For DeFi
The Colombian President’s Advisor to Peter Schiff: Stop Talking and Short Bitcoin
World Economic Forum Releases a DeFi Policy Toolkit for Fair and Executable Regulations
Pokemon GO: How to Get Alolan Slowpoke
1,100 people arrested by Chinese Police on crypto-related money laundering charges
Axie Infinity Price Prediction 2021-2025: AXS Token Can Hit $40 by 2025
Battlefield 2042 officially revealed
How Does Bitcoin Mining Work? Is It Profitable in 2021?
XRP lawsuit: Is the SEC ‘triply wrong’ about its latest filing?
MT5 Will Phase Out MT4, but It Will Take Time
Trouble Looms For Bitcoin As U.S Looks to Bar Holders From Converting Crypto To USD
XRP lawsuit: What’s the ‘existential threat’ Ripple is facing?
TrustDice Review: Features & Promotions
The UNICEF is investing in five crypto startups via Ethereum (ETH)
LegendsOfCrypto Performance Update
Revolut App Launches Dogecoin Trading To Its Platform
Third-Party Results of Credits’ Blockchain Speed Test
Skins of soccer superstars Marco Reus and Harry Kane to arrive in Fortnite this week, according to data miner
Leading Blockchain Game Splinterlands Completes Digital Land Sale of 150k Plots
Pokemon GO: A Very Slow Discovery Challenge Explained
News1 week ago
Norton Adds Ethereum Mining To Its Suite of Antivirus Software Services
Blockchain1 week ago
I Bought and HODLed Bitcoin Since 2012: Legendary Skateboarder Tony Hawk
Uncategorized1 week ago
Localbitcoins Adds Bitcoin Cash and Other Cryptocurrencies as Payment Methods
Blockchain1 week ago
GTA 6 may Pay Players With In-Game Cryptocurrency Rewards
Uncategorized1 week ago
Ethereum Co-Founder Has His Doubts Over Cardano’s “Scientific Method”
1 week ago
Overwatch League to host first live homestand with fans in 2021
Blockchain5 days ago
World Economic Forum Seeks to Offer Clear Policy Landscape For DeFi
Uncategorized1 week ago
Did Elon Musk Just Pump…CumRocket?