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Samourai Wallet: Wasabi’s CoinJoin Management Lacks Privacy

Samourai Wallet raised concerns over the alleged lack of privacy ensured by the CoinJoin implementation of competing wallet Wasabi.

The official Samourai Wallet Telegram account raised concerns over the alleged lack of privacy ensured by the CoinJoin implementation of competing wallet Wasabi on July 18. 

According to Samourai Wallet, Wasabi wallet CoinJoin transactions are often not as private as they are purported to be. The company pointed out:

“With Wasabi if you are mixing 10 BTC [Bitcoin], I can trivially track that 10 BTC as it is peeled down into smaller UTXOS (unspent funds). […] Additionally Wasabi outputs are in the order in which they are registered, allowing you to make educated guesses that cluster outputs that you can later cross reference when inputs are inevitably merged to make a spend.”

In the same message, Samourai explained that the mixing leftover change is part of the mixing transaction, and this links the funds. The company notes, “You literally leave crumbs along the trail.”

A company executive, who goes by the nickname of SW, claimed that in “Wasabi’s implementation of ZeroLink there is routinely 30–60% of inputs issued from the same previous transaction” which decreases anonymity. 

He admits the issues described in the Telegram post only become a problem when combined with user behavior:

“The peeling chain and unmixed change can be mitigated against by the user staying around until their entire amount has been mixed for example, but when viewed holistically and crucially with lack of a PostMix spending strategy these architectural differences have serious consequences when common user behavior intervenes.”

According to SW, such behavior has also been demonstrated by the Wasabi team in the transaction of its donation to the Tor anonymous network. Analyzing the transaction, he claims to have linked a Wirex account address and 38 fully mixed inputs to the donation. SW said:

“My point is not to kick a competitor when they are down, my point is, if this can happen to the experts who run Wasabi then this is absolutely happening on a broader scale with less sophisticated users, and they likely have no idea it is happening, let alone what steps they need to make to prevent it.”

SW explained that, while many believe that users should learn complex coin control techniques to prevent anonymity loss, he believes that placing such a burden on users is dangerous. 

As Cointelegraph reported in late June, the co-founder and CEO of major U.S.-based cryptocurrency exchange Coinbase, Brian Armstrong, attracted criticism after praising private crypto transactions.

As a recent Cointelegraph analysis, some consider Bitcoin’s increasing anonymity a threat to privacy-focused coins.

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Privacy-Focused Coin Zcash Forks Into New Blockchain Network Ycash

Privacy-focused digital currency Zcash has forked into new blockchain network Ycash, whose total supply amounts to a 21 million coins.

Privacy-focused digital currency Zcash (ZEC) has forked into a new blockchain network dubbed Ycash, whose total supply amounts to 21 million coins.

According to a tweet by the Ycash Foundation, the first block of Ycash was mined today, July 19, at 7:36:51 PM PDT. Ycash forked off Zcash blockchain at block height 570,000 and is independent from both the Electric Coin Company, the firm behind Zcash, and the Zcash Foundation.

The Ycash project was initially announced in April, when the Ycash team member Howard Loo revealed in a forum post that they are launching the first friendly fork of the Zcash blockchain. Per the post, the Ycash project is set to “restore a goal — mining on commodity hardware — that appears to have been largely abandoned on the Zcash blockchain.”

In a post published on its official website, the Ycash team explains that Ycash is built upon the Zcash codebase and has shared blockchain history similar to Zcash’s, which means that every user in control of Zcash private keys as of block height 570,000 is able to use those private keys to access the same number of Ycash.

The post also says that 90% of the total 21 million Ycash coins are distributed through the mining process, while 5% of the coins starting at block height 570,000 are going to the Ycash Development Fund, which is managed by the Ycash Foundation.

In late June, the Electric Coin Company announced its intention to build a new scalable Zcash blockchain. The company is reportedly considering implementing sharding, a scalability solution that Ethereum devs also plan to integrate into that network in the near future.

Earlier this week, another privacy-focused cryptocurrency Grin completed the first hardfork so far on its mainnet. The latest blockchain hardfork is designed to discourage Grin mining through dedicated application specific integrated circuits and also includes a new iteration of its bulletproof rewind scheme for Grin wallets.

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US Treasury Secretary Says Cash Is Not Laundered As Much As Bitcoin Is

Treasury Secretary Steven Mnuchin rejected the idea that cash is laundered all the time, implying that Bitcoin is.

Treasury Secretary Steven Mnuchin said that the authority will be preventing Bitcoin (BTC) from becoming an “equivalent of Swiss-numbered bank accounts.”

U.S. secretary of the treasury to closely monitor Bitcoin regardless of price

In a press briefing reported by CNBC on July 18, Mnuchin criticized Bitcoin and other cryptocurrencies as they can be used for illicit purposes such as money laundering, adding that the department intends to enforce strong regulations on the space.

The official emphasized his own intent to closely monitor Bitcoin to prevent illegal activity regardless of its price, claiming that there are billions of dollars in Bitcoin and other crypto for nefarious activities.

Mnuchin believes that cash is not laundered like Bitcoin is

As Mnuchin clearly said that Bitcoin’s vulnerability to money laundering is the main reason for the Treasury to regulate it tightly, CNBC’s host Joe Kernen questioned his point in an interview on “Squawk Box” on July 18. 

Kernen argued that Bitcoin and other existing currencies’ capabilities to be used for nefarious activities cannot be a reason for banning them, noting that “cash is laundered all the time.” Mnuchin did not back off from his position, replying that such a statement is not accurate.

The Secretary elaborated that the U.S. has the strongest anti-money laundering (AML) system in the world, adding that the government combats “bad actors in the U.S. dollar every day to protect the U.S. financial system.”

Following the interview, Kernen expressed sarcasm about Mnuchin’s idea that cash has not been laundered all the time, but the authorities are combating illicit activities in its system. He tweeted:

“‘the existing system has never been used for illicit activities but we’re going to make sure crypto is isn’t used for illicit activities like the current system.’ Got it.”

On July 15, Mnuchin expressed concern over Facebook’s proposed cryptocurrency and its potential illicit use, noting that he is not comfortable with Libra cryptocurrency, which can be used for tax evasion, extortion, illicit drugs and human trafficking, among others.

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Tor Project’s Bitcoin Crowdfunding Campaign Hits Goal in 25 Hrs

Launched on July 15, Tor Project’s new Bitcoin-based crowdfunding campaign reached the softcap of $10,000 in 25 hours.

Tor Project’s new Bitcoin (BTC)-based crowdfunding campaign has reached the softcap of $10,000 in 25 hours after the launch.

The new crowdfunding program, known as BitcoinForTor, was launched on July 15 in collaboration with open-source payment processor BTCPay Server. By July 16, the project has raised the minimum amount expected to be secured, BTCPay announced.

Having reached the softcap, Tor Project has not halted the fundraising campaign. It is inviting cryptocurrency users to continue donating with Bitcoin within the next 13 days, claiming that protecting privacy online “requires financial support beyond 10k.”

At press time, the amount raised within BitcoinForTor program accounts for $10,927, with a total of 373 contributors.

BitcoinForTor crowdfunding details

BitcoinForTor crowdfunding details. Source: BitcoinForTor

As mentioned on the project’s website, funds received from the campaign are going directly to the The Tor Project’s Ledger Nano S wallet. The raised funds will be spent to support global community devoted to human rights such as privacy and freedom online, the campaign notes.

Nicolas Dorier, software developer at crypto-focused fintech firm Metaco SA, has encouraged the initiative, claiming that Tor is not just a great software, but an “essential piece of many projects in Bitcoin.”

Earlier this year, Cointelegraph reported that Tor Project started accepting donations in a number of cryptocurrencies such as Bitcoin, Ethereum (ETH) and Litecoin (LTC) on its major donational portal.

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CBDCs Hold No Interest Without Full Anonymity: Banxico Deputy Governor

The deputy governor of Mexico’s central bank argued that a CBDC of “less than full anonymity” is not interesting for the public.

Central bank digital currencies (CBDC) will not hold much interest for the general public unless they provide full anonymity, the deputy governor of Mexico’s central bank has argued. The executive’s remarks were published by the Bank for International Settlements on July 11.

Javier Calafell, deputy governor of the Bank of Mexico (Banxico), delivered a speech on potential strengths and weaknesses of CBDC during an event held by the United States Federal Reserve Bank and the OMFIF Foundation on July 9.

While outlining CBDCs’ advantages such as security of payments and cost effectiveness, Calafell believes that there are a number of significant factors that prove their ineffectiveness. According to the official, the existing digital systems already satisfy payment functions of CBDC, while its “back-up” function does not make much sense since the central bank handles the main part of the payment systems.

Calafell argued that cash is unlikely to see a significant decline in demand in the foreseeable future, which makes it difficult to expect that the issuance of CBDCs will change the trend meaningfully.

The Banxico official highlighted the issue of privacy as a major impediment to the adoption of CBDCs, citing “reputational risks” associated with a fully anonymous CBDC. The general public will not be interested in a CBDC if it does not provide sufficient privacy, Calafell declared, claiming that a “CBDC design with anything less than full anonymity is likely to dent interest among the general public.”

At the same time, the Banxico executive cautioned against disregarding the subject of CBDCs, as well as issues surrounding the technology. Calafell outlined that CBDCs are “still in a very early stage of development,” while the global community should not miss the potentials of new technologies.

Calafell concluded:

“In any event, while we have to be open and attentive to new technologies, it is also true that w

need to be cautious in adopting them, especially when, as in the case of CBDCs, we are dealing with an issue with potential major implications and still many unknowns.”

Previously, the Banxico published a circular requiring local crypto exchanges and banks to receive a permit from the bank in order to provide crypto-related services.

Recently, the International Monetary Fund released a report forecasting that global central banks will be issuing digital currencies in the future.

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Coinbase CEO Praises Privacy While Allegedly Blacklisting Anonymous Transactions

Co-founder and CEO of major U.S.-based cryptocurrency exchange Coinbase Brian Armstrong attracted criticism after praising private crypto transactions.

Co-founder and CEO of major U.S.-based cryptocurrency exchange Coinbase Brian Armstrong attracted criticism after praising private crypto transactions in a tweet published on June 22.

In the aforementioned tweet, Armstrong notes that “a scalable, sufficiently decentralized, chain that supported private transactions by default (privacy coins) would be a game changer.” He then compares anonymous cryptocurrency transactions to cryptography on the web, pointing out that it is increasingly predominant. He also used messaging as an example:

“Same with messaging, end to end encryption started out fringe and is now the expected default.”

Armstrong also cited the recent news about the Electric Coin Company (ECC), the firm behind second-biggest anoncoin zcash (ZEC), intending to build a new scalable zcash blockchain as an example of privacy by default. In response, Luke Dashjr raised a question towards what he perceives to be an unclear stance on privacy on Coinbase’s part:

“Why does @Coinbase seem to blacklist people who might get their coins from certain sources, if you support privacy? I’m a bit confused…”

To which bitcoin core developer answered stating that — according to him — as long as it is possible to distinguish “dirty” coins, the exchange is forced to block them. Self-proclaimed bitcoin (BTC) maximalist Giacomo Zucco stepped in disagreeing:

“Complete nonsense. They can distinguish ‘privacy coins’ better than they can distinguish bitcoins from coinjoins. […] If they are forced to blacklist CJs, they’ll be forced to blacklist ‘privacy coins.’”

Then, when a different user asked whether Coinbase blocks CoinJoin transactions, Zucco claimed “Of course. And (the very few and low-anonymity set anyway) shielded Zcash txs.” According to a post published by the exchange in late November 2018, Coinbase does not fully support zcash shielded addresses:

“Initially, we will support deposits from both transparent and shielded addresses, but only support withdrawals to transparent addresses. In the future, we’ll explore support for withdrawals to shielded addresses in locations where it complies with local laws.”

As of press time, Coinbase, Giacomo Zucco and several representatives of zkSNACKs, the company behind CoinJoin-enabled BTC wallet Wasabi wallet, have not responded to Cointelegraph’s inquiry. As a consequence, it has not been confirmed whether Coinbase is blocking CoinJoined BTCs.

As Cointelegraph reported at the time, data provided by zkSNACKs CTO Adam Fiscor revealed at the end of April that mixed bitcoin transactions now represent 4.09% of the total after CoinJoins have risen by 300% in the space of nine months.

As a recent Cointelegraph analysis explains, bitcoin’s increasing anonymity is considered a threat to privacy-focused coins by some.

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Firm Behind Zcash to Introduce New Version of Protocol With Sharding

The Electric Coin Company, the firm behind second-biggest anoncoin zcash, is building a new scalable zcash blockchain.

The Electric Coin Company (ECC), the firm behind second-biggest anoncoin zcash (ZEC), intends to build a new scalable zcash blockchain, cryptocurrency news outlet Forklog reports on June 22.

Per the report, chief engineer at ECC Nathan Wilcox said that the firm should “make Zcash usable by 10 billion people by 2050” if it can. Still, Decrypt notes that achieving this would require zcash’s blockchain to be able to manage thousands — or millions — of transactions per second.

Forklog states that ECC is considering implementing sharding, a scalability solution that Ethereum devs also plan to integrate into that network in the near future.

Still, ECC engineer and product designer Daira Hopwood noted that, to obtain the desired features, ZEC would need a completely new blockchain.

The firm would ensure that coins would be transferred onto the new chain, resulting in a conservation of users’ wealth. The new chain would also process all transactions privately, in contrast with the current chain where under 2% of the transactions are anonymous.

Zcash — with a total network value of $744 million —  is the 24th largest coin by market capitalization. ZEC has seen its value decrease by over 0.40% over the last 24 hours, trading at $113.09 at press time, according to Coin360 data.

As Cointelegraph reported earlier this month, the nonprofit Zcash Foundation has partnered with blockchain company Parity Technologies to release a new, open source software client for zcash.

News broke last month that biggest privacy coin and zcash competitor, monero (XMR), plans to switch to a new proof-of-work (PoW) algorithm in October.

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Russian Central Bank Head: CBDC Under Consideration, But Not For Near Future

The head of Russia’s central bank has said that while the launch of a CBDC is being explored, it is not a matter for the near future.

The head of Russia’s central bank, the Bank of Russia, has said that while the launch of a central bank digital currency (CBDC) is being explored, it is not a matter for the near future.

The news was reported by Russia government-backed media agency TASS on June 15.

A CBDC is a digital currency issued by a central bank that has the status of legal tender and other properties of centralized, fiat money.

TASS reports that Bank of Russia’s head Elvira Nabiullina told an audience at a student conference in the Russian city of Skolkovo that a CBDC cannot be realized immediately, but that numerous central banks — including Russia’s — are exploring the possibility.

She reportedly underscored the need to ensure the robustness of distributed ledger technology — which underlies many proposed models of CBDCs —  before any prospective currency issuance:

“If we are talking about a national currency that works as a whole in the country —  that is, not about private assets — of course, this requires the technology to provide reliability and continuity. Technologies must be mature, including distributed ledger technologies.”

Nabiullina further connected the phenomenon of CBDCs with the wider question of whether or not a given country is ready to go cash-free, noting that while some jurisdictions have made significant steps and become virtually cashless already, elsewhere cash remains in high demand:

“It’s not so much because people want to perform some dubious operations. People often value their privacy, anonymity. Of course, the spread of non-anonymous digital currencies indicate in some sense society’s readiness.”

Nabiullina further advised CBDC researchers to evaluate the advantages of CBDC issuance and weigh them against the benefits of other technologies, such as fast payments systems.

As previously reported, the Bank of Russia released a policy brief on CBDCs this April, where it argued that they could be a less risky and more liquid type of asset that could potentially reduce transaction costs in the economy. Nonetheless, the brief underscored CBDCs’ lack of anonymity as a potential disadvantage as compared with cash.

This May, Nabiullina revealed that the bank may be interested in creating a gold-pegged crypto for conducting mutual settlements with global jurisdictions.

That same month, a report from Russian government-backed TV channel RT alleged that Venezuela and Russia are discussing the opportunity to close mutual trade settlements using the Russian ruble and Venezuelan state-owned petro (PTR) cryptocurrency.

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General Motors Leads $23M Funding Round for Spring Labs Blockchain Firm

Blockchain startup Spring Labs recently raised $23 million in Seed A funding round, says funds will go towards security products built on its Spring Protocol blockchain platform.

United States-based blockchain startup Spring Labs has raised $23 million in a Seed A funding round, according to a press release on June 12.

Spring Labs will purportedly use the funds to improve its blockchain-based platform Spring Protocol and develop three new fraud protection products that are designed to combat fraud in the auto financing sector.

According to the press release, the new products are Spring Verify, Spring Defense, and Spring Protect, which are designed for identity verification, fraud monitoring/mitigation, and loan stacking prevention, respectively.

The products will purportedly provide information to lenders anonymously, for the purpose of financing activities such as unsecured consumer lending, small business lending, credit card issuance, and secured auto lending.

According to the report, auto financing fraud has nearly quintupled from 2011 to 2018, purportedly becoming a relatively easier way to commit fraud as other credit options become more secure than auto lending options.

The report estimates that industry losses range between $4–$6 billion each year, largely due to auto credit established with fake ID credentials. Somewhat like a clone firm scam, Spring Labs says that scammers will typically mix in some real information along with the fake, in order to establish falsified credit accounts.

Among the investors for this seed A funding round were Galaxy Digital, the cryptocurrency investment bank founded by crypto enthusiast Michael Novogratz, and automotive giant General Motors (GM).

As previously reported by Cointelegraph, GM announced that it was joining the Spring Founding Industry Partners (SPIF) Program in February. The SPIF is reportedly a project launched by Spring Labs which aims to provide security solutions through research and collaboration.

Chief strategy officer at GM Mike Kanarios commented on GM’s decision to join the project as a partner, saying:

“As the captive finance arm for General Motors and one of the world’s largest auto finance providers, we are continually innovating and evolving our fraud prevention and detection capabilities to better serve and protect our customers and dealers.”

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Enigma’s Ethereum-Based Private Smart Contract Testnet Goes Live

The testnet of private smart contract network Enigma has been launched.

The testnet of private smart contract network Enigma has been launched, the developers announced in a Medium post published on June 11.

Per the announcement, the test network, dubbed Discovery, allows developers to start developing their decentralized applications (DApps). Furthermore, contracts hosted on the Discovery testnet will reportedly be immediately deployed on the Ethereum (ETH) network once Enigma has been implemented on the mainnet.

The newly launched network reportedly enables privacy for general computations, which enables DApp developers to create secure applications, according to the post.

The author of the post further notes that the developers have been using and modifying the network for three months and are now releasing it as open source software. The Enigma network relies on the Ethereum blockchain for consensus, but it hosts independent smart contracts written in a different smart contract (Rust, instead of Solidity.) As well, Enigma smart contracts are reportedly capable of calling any function of any Ethereum smart contract.

As Cointelegraph reported at the time, Enigma announced its partnership with chip manufacturing behemoth Intel on privacy research in June last year. Cointelegraph has also previously spoken with Enigma founder and CEO Guy Zyskind about the partnership, with Zyskind noting that they planned on making blockchains even more trusted and permissionless.

At the end of May, big four auditing firm EY open sourced the code of its Nightfall Ethereum private transactions solution and released it on GitHub.