The race to build a better Bitcoin is well underway, as libertarian entrepreneurs vie to create new cryptocurrencies with greater anonymity protection that would make transactions even less traceable.
Too bad that won’t do much to address Bitcoin’s real problems.
See also: What Bitcoin Needs To Grow Up
Bitcoin has had a tumultuous six months, ever since the digital cryptocurrency started blowing up in a speculative frenzy last November. It’s blown off a lot of steam since then, and Bitcoin trading volume dropped substantially since its peak—not the greatest sign for the much heralded currency of the future, even if it has rebounded a bit in the past month.
Even though Bitcoin continues to take steps toward mainstream acceptability—Dish Network recently became the largest company to accept bitcoin payments, and Apple has apparently lifted its earlier restrictions on Bitcoin apps—it remains beset with challenges.
Among these would be the incompetence of several Bitcoin focused organizations. Butterfly Labs, which failed to deliver $1 million in missing mining rig orders. Mt. Gox, which infamously “misplaced” users’ money and caused a major financial crisis. And let’s not forget the Bitcoin Foundation itself, which elected a Disney child star with little business credibility as its new director, and faced a wave of resignations.
They would also include an exploitable glitch in the software called transaction malleability. A flaw that means that it’s possible to alter the details of a transaction to make it appear as if one occurred when it really did not, the Bitcoin Foundation is working on it, albeit slowly—they’ve known about the issue since 2011 and there’s no resolution yet.
Responsible Bitcoin companies have patched this on a case-by-case basis, but the question is whether they should even have to, or if the Bitcoin Foundation should be working on a universal patch.
For whatever reason, however, members of the better-Bitcoin brigade are much more interested these days in ensuring untraceable digital transactions than in dealing with any of the currency’s other problems. It’s not terribly surprising, given that anonymity issues are largely technological rather than social or managerial. Yet it’s exactly that kind of technological obsession that has made Bitcoin such a crapshoot for ordinary users.
The Dawn Of Darkcoin
Bitcoin is pseudonymous. Darkcoin promises total anonymity.
According to Wired, there’s been a clear rise in favor toward cryptocurrencies that put a premium on anonymity. Darkcoin, for example, has jumped in value since May, to almost $8.98 from just 75 cents a coin. It now holds the fourth highest market capitalization among cryptocurrencies, after Bitcoin, Litecoin, and Nxt. (Bitcoin, of course, remains the leader by a landslide.)
Darkcoin is unique because it promises more anonymity than other currencies, something the pseudonymous Bitcoin has never promised. According to Evan Duffield, the software developer who launched Darkcoin this January, that’s a sore spot for a lot of people.
“A large community believes that the way Bitcoin’s blockchain is designed is a problem,” Duffield told Wired. “Darkcoin has this anonymity aspect to it, which is attractive to a lot of people.”
Darkcoin has the highest profile of the new anonycoins, although several other altcoins have risen to the challenge of creating a totally anonymous currency. Anoncoin and Zerocoin are two others that, using different approaches to the same problem, are attempting total cryptographic anonymity.
For its part, Darkcoin ensures theoretical anonymity with a feature called Darksend—in which any user’s transaction is combined with the transactions of two other users. Unlike Bitcoin, which records every user’s transactions on a public and widely shared cryptographic “blockchain,” Darkcoin transactions are more shadowy.
While there are many legitimate reasons to desire an anonymous currency, it’d be naive not to consider the possibility of illicit use. And that’s something Bitcoin users have worked fervently to distance themselves from.
The Quest For A Better Bitcoin
Jerry Brito, senior research fellow at the Mercatus Center at George Mason University and director of its Technology Policy Program, wrote about the changed Bitcoin environment at a recent conference, where hobbyists had given way to professionals: “Fewer ideologues and more [venture capitalists] roamed the show floor, the hallway talk was more of regulatory compliance and business models than cryptoanarchy.”
Where have all the Bitcoin idealogues gone? At the time of this writing, they’ve got more than 300 other cryptocurrencies to put their faith in.
In an uncertain digital world where fears of NSA spying and federal seizures abound, it appears that many are going toward more anonymous currencies, causing the Darkcoin boom.
A lot of people are embracing anonymity and the problems it would solve. But it’s financial uncertainty, not pseudonymity, that is Bitcoin’s biggest weakness. To build a better Bitcoin, this is not the problem developers should be looking to solve.
Photo by Darkcoin.io