In addition to the many advantages, crypto-finance also carries a sufficient number of dangers, primarily associated with the loss of anonymity by the owner of the funds.
You have to pay for security, and you have to pay for the lack of it. Winston Churchill
Cryptocurrency And Deanonymization
When buying fiat or exchanging cryptocurrency for it, users of exchanges and exchangers leave their digital footprint there — the data stored in the service database. If they are leaked, the transaction participant can be deanonymized, and the amount of money in the account can interest criminals or, which is also unpleasant to the regulatory authorities.
Since absolutely all wallets and their balances are visible, the owners can be tracked by the chain of transactions to the moment of cashing out, and perform an attack on the exchange service.
The preconditions for the emergence of fully anonymous coins appeared back in 2012 during the creation of the Bytecoin cryptocurrency. This cryptocurrency uses the Cryptonote protocol based on the EdDSA ring signature algorithm, which provides additional obfuscation and privacy.
One-time keys are used to make payments, even when transactions are between wallets of the same owner. This ensures that transactions are disconnected and all network members can use plausible deniability in case of conflicts.
In addition to transactions, additional information is stored on the blockchain: geographic coordinates of universities, quotes from computer games, books (for example Neuromancer).
When it became known that 80% of the coins were distributed at the beginning of the pre-mining, the exchange rate dropped drastically. In this regard, it was decided to fork the Bytecoin network. This is how the Monero cryptocurrency appeared with zero pre-mining.
DASH And Privatesend
The structure of the DASH cryptocurrency consists of both standard nodes and masternodes. Masternodes are needed for instant transactions (InstantSenD) and anonymous payments function (Privatesend). To become a member of the Masternode, you must have 1,000 DASH in your account.
Masternodes are run by volunteers and have no central authority. Privatesend performs the function of mixing coins performed by random masternodes, which ensures the anonymity of payments. If you use several wallets when exchanging cryptocurrency, and Privatesend when dividing the main balance into parts, it will give additional security to the transaction and allow you to keep the main balance secret.
Anonymous Free TON Token: On A Contest Basis
The Free TON community decided to follow a path similar to that of ZCASH. In June of this year, a contest was held to describe the anonymous token design. Two applications were submitted, of which the only one received the required number of points to win and receive the prize. The first place prize was 120,000 TON Crystal.
Now a contest has been announced for the anonymous token implementation on the Free TON blockchain. Because there were only two submissions for the previous one, it was decided to allow participants with their own implementations. But to do so, they must provide not only a working protocol but also its full description. Only those participants who score at least 6.0 points can qualify for the reward.
1st place — 400 000 TONs
2nd place — 300 000 TONs
3rd place — 150 000 TONs
The contest is scheduled to launch soon, so don’t miss your opportunity to win.
At the moment, the main solution for the implementation of an anonymous Free TON token is ZK-STARK.
This is an upgrade of ZK-SNARK. ZK-STARK is a transparent computation confirmation protocol that does not require preliminary configuration and disclosure of information to a third party. Such protocols are also called Arthur-Merlin protocols.
ZK-STARK was proposed in 2018 by Eli Ben-Sasson, a professor at the Israel Institute of Technology, together with Iddo Bentov, Yinon Horesh, and Mikhail Riabzev.
The main task of the protocol is to ensure correct and fast operation without violating the privacy of the user. Moreover, ZK-STARK uses post-quantum cryptography, which makes the protocol resistant to attacks by quantum computers.
Zk-STARK uses a new technology of Interactive Oracle Proofs or IOP. This system is based on the combination of interactive proof systems and Probabilistically checkable proof.
The interactive proof is the exchange of messages between two parties: a prover and a verifier. The probabilistically checkable proof is a type of proof that requires a constant number of bits of that proof to be checked. This uses only a logarithmic number of random bits.
For Free TON, the zk-STARK protocol can be useful not only in the implementation of an anonymous token but also in the transition to governance 2.0, when all decisions will be made using voting.
Lots of blockchains built to run smart contracts are trying to solve the problem of secret verification (KYC). ZK-STARK can be the solution that will meet all the requirements while remaining resistant to attack.
We have yet to find out what solution the Free TON community will choose. But one of the most important conditions is that the provided implementation must be unique — not some kind of “mixer” or something that resembles Privatesend.