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14 years after the release of Bitcoin, law enforcement and cybersecurity officials are still affected by the effects of first-generation cryptocurrency-related technologies, from money laundering to unregistered securities offerings to ransomware attacks. I keep working on it. But even as regulators and law enforcement find ways to deal with the first wave of blockchain networks, developers around the world are racing to roll out more advanced variations of the original concept.
Many of these next-generation tools are designed to ensure better legal compliance than their predecessors, but as the technology underlying cryptocurrencies gains more legitimacy and institutional importance, , designed for use by the government itself, but its planned release shows that radical anti-government ideas remain the driving force behind many evolutions. crypto network.
The Anarchist Project calls itself DarkFi. This is the nickname for crypto-based decentralized finance, “DeFi,” 2014 speech Former FBI Director James Comey described the “Going Dark” problem that pervasive encryption has created for law enforcement agencies hoping to monitor digital activity.
Representatives of the group say its members are spread across Europe and parts of the Middle East. While they frame the software as a tool to protect users from government-imposed violence, law enforcement officials believe the prevalence of hardened encryption will keep drug dealers, terrorists, and human traffickers out. He says it’s getting harder to catch.
Bill Callahan, a former drug enforcement officer who worked for the DEA for 20 years and oversaw money-laundering investigations, said the potential for high-level encryption to hide crimes is troubling and not for public safety. You mentioned that new encryption tools are being used. A balance must be struck between individual liberty and government oversight.
“We have reasonable expectations about privacy,” said Callahan, who now works for the Blockchain Intelligence Group, which conducts forensic investigations into crypto activity. “We have absolutely no expectation of privacy.”
Callahan, who was unfamiliar with the details of DarkFi, said those building and operating crypto networks could be held legally responsible for criminal activity committed on them. . “If malicious actors are allowing this to be used, they risk being held accountable,” he said.
The risk only increases if the developer publicly claims intent to disparage law enforcement. “It will probably be Document A,” Callahan said.
Like many new cryptographic tools being developed for use by governments and legally compliant enterprises, the DarkFi project relies heavily on zero-knowledge proofs. Most aspects of the information can remain confidential.
An expert who reviewed DarkFi’s announcement and its website at the request of POLITICO said the project appeared technically sophisticated, even if skeptical of the developer’s vision. .
Matthew Green, professor of computer science at Johns Hopkins University and co-founder of Cirance, a startup aimed at integrating advanced cryptography into legally compliant systems, said: increase. Crypto version.
“This is no small project,” he said. “They are trying to do something very powerful.”
“They know how and they are thinking right,” said Evan Shapiro, San Francisco-based CEO of the Mina Foundation, which supports another next-generation crypto network backed by venture capital investors. .
But in key ways, Shapiro said, DarkFi lags behind a handful of venture-backed cryptographic protocols with similar technical ambitions while being designed for more. said. For traditional commercial purposes. He said that on a technical level, DarkFi is likely to be little different from these more commercial projects, even if it attracts applications and users aligned with anarchist visions.
Taaki, who has been in London and Syria in recent years and did not answer questions about his current location, said the new platform is more likely than commercial-oriented projects that cannot afford to defy government pressure to ensure legal compliance. It says it allows a lot of confidentiality. .
In other words, the group believes that the decade-plus high-tech cat-and-mouse game between rogue crypto coders and governments is just beginning.
In a way, this is an extension of the original cryptocurrency, Bitcoin’s mission, specifically invented to challenge the government’s control of money and banks. As it spread and became more widely adopted, governments found ways to mitigate the threat posed by the original cryptocurrency and its successors.
For example, even though Bitcoin uses pseudonymous addresses, all transactions on the network are publicly recorded, and law enforcement officials have refined their techniques to trace them back to individual users. rice field. Despite the total amount of illicit cryptocurrency activity continuing to rise in recent years, the share of transaction volume has plummeted to new lows as legal use explodes. report It was released last year by analytics firm Chainalysis.
When technically, A report funded by the Department of Defense’s Defense Advanced Research Projects Agency and published last year stated: some vulnerabilities Bitcoin that attackers with central government resources can use to disrupt the network itself.
Since Bitcoin was born, thousands of successors have tried to improve Bitcoin’s design elements. Starting with Ethereum, which launched in 2015, many new systems offer more advanced features such as smart contracts that can automate financial activities. Other currencies like Monero, which has become the cryptocurrency of choice for illicit use since its launch in 2014, offer a higher level of confidentiality.
But developers are perfecting blockchain systems that combine next-generation functionality and confidentiality into one system. Doing so will help achieve the “crypto destiny” of bringing individual freedom at the expense of the government, Taaki said.
Among DarkFi’s promised features is the ability for people to form organizations to raise and distribute funds in complete secrecy. Taaki said this was partly inspired by the group’s experience of using existing technology to form a crypto-based organization and incarcerated he supports Wikileaks founder Julian Assange.
However, technical and political obstacles stand in the way of this anarchist vision.
“It’s really hard to build a private blockchain that can do things like Ethereum,” said Green, who helped develop ZCash, an early privacy-focused cryptocurrency released in 2016. says.
Green also said he believes advances in cryptography and network design could lead to more disruption from cryptocurrencies. But at least for now, the government has shown it can crack down on networks used for criminal activity and will find ways to do so, he said.
“We are in the stage of uncapping the toothpaste,” he said. “Toothpaste, he probably won’t come out of the tube for ten years.”
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