"Did someone just say mixer?" (via Pixabay)
Alt coins

Decred cryptocurrency launches privacy mixing feature

The autonomous virtual asset is doubling down on its commitment to allowing users to remain anonymous

The community-governed virtual currency Decred has launched a privacy feature that builds a mixer into the cryptocurrency’s DNA.

Decred works on a hybrid proof-of-stake/proof-of-work mechanism in which miners create new blocks, but owners of DCR coins vote to make the blocks valid, in exchange for 30% of the block reward. As a result, a little more than half of the roughly 10.3 million extant Decred are staked.

That’s important because Decred’s new privacy feature—which the developers have been working on in secret for two years—is powered by that staking mechanism. Basically, because Decred has such a consistently high volume of staking transactions, they can be used to hide any purchase or sale of DCR. It is currently valued at $22.67, according to CoinMarketCap.

This “makes it easier and more effective to hide the sender’s identity within the shuffle of governance participation,” according to an August 28 blog post by Jake Yocom-Piatt, the Decred project lead. “Anyone who wants to participate in privacy can opt-in and route their transactions through the server, which then jumbles transactions to hide user identity.”

The privacy feature is available to stakeholders who create tickets—by locking in a set amount of their staked DCR in exchange for one vote on a newly mined block—as well as non-staking coin holders.

It works by allowing holders to add a mixer into DCR transactions which hides the identity of the person making the transaction. It does not, as yet, hide the transaction amount, although that is coming, said Yocom-Piatt. Privacy coins like Monero (XMR) do both.

“Decred will continue to…adapt to the changing privacy landscape around us, integrating new features as necessary, per the will of the stakeholders, to deal with threats as they arise,” Yocom-Piatt added. “As always, we strive to maximize the security of our blockchain and its users, and we will do it sustainably, to make Decred a superior long-term store of value.”

Mixers under fire

Privacy-focused cryptocurrencies are growing more controversial as political attention has been focused on virtual assets beyond Bitcoin (BTC) by Facebook’s Libra project. Facebook’s problematic privacy record aside, the ability to enforce “know your customer” (KYC) “anti-money laundering” (AML), and “countering the financing of terrorism” (CFT) regulations are gaining a higher political profile—President Donald Trump recently called this out on Twitter.

Beyond that, mixers are in the news right now following a Chainalysis webinar claiming that 8.1% of the transactions by centralized mixing services are hiding stolen funds. 

While that’s being reported as “only 8.1%” it’s worth noting that Bestmixer.io, the leading mixing service shut down by Dutch authorities in May, anonymized about 27,000 bitcoins in the year it was in business. At current prices that’s more than $256 million, and 8.1% of that is more than $20 million.

Humorously enough, the authorities were assisted by Internet security firm McAfee according to Europol. Founder, fugitive, and U.S. presidential candidate John McAfee, who sold the company in 2011, is a vigorous advocate of the privacy afforded by cryptocurrencies.

The Bestmixer.io shutdown caused a backlash in the privacy-conscious cryptocurrency community, with Vitalik Buterin proposing the addition of an on-chain mixer to Ethereum (ETH). And Chainalysis COO Jonathan Levin and Global Head of Policy Jesse Spiro noted the importance of privacy in cryptocurrencies going back to Bitcoin in testimony before the Financial Action Task Force (FATF) in June. 

As for Decred’s new privacy offering, if you want to dig into the technical details described in the blog post—its title is “Iterating Privacy,” which should give you a sense of what you’re getting into—the process is built on CoinShuffle++ technology. As opposed to more common techniques like ring signatures, zk-SNARKs, or Mimblewimble.

Leo Jakobson, Modern Consensus senior editor, is a New York-based journalist who has traveled the world writing about meeting and incentive travel, as well as the consumer and employee loyalty business. He also covered the East Coast side of the Internet boom and bust, small businesses, and New York City crime, nightlife, and politics. Disclosure: Jakobson owns no cryptocurrencies.

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