Most people which have heard about cryptocurrencies like Bitcoin assume that they are completely anonymous, however this is quite far from the truth, these transactions are not only transparent, they are transparent to the general public as well.

 

The majority of investors in cryptocurrency invest via an Exchange. Exchanges are organisations that accept FIAT currency and exchange it with cryptocurrency, FIAT being government disseminated currency like the U.S Dollar.

Exchanges are becoming increasingly regulated, and authorities are able to link a “real world” banking transaction to the respective cryptocurrency conversion on the Exchange and thus link that wallet identity to the individual thus tracking the individuals cryptocurrency transactions on the network becomes rudimentary.

 

Surely private transactions should be outlawed only criminals would use them?

This is a common stance with many once they hear about privacy coins and privacy protocols, however this isn’t the case, privacy isn’t built for nefarious activities, just as cash isn’t outlawed and cash transactions cannot be easily tracked, so any argument against privacy coins should also be put to cash and the users of cash in our societies.

 

Claiming that the majority of people that use cash must be criminals would be just as ridiculous.

There are many reasons that an average person would want to trade anonymously, some of them may be as benign that they do not want institutions to use their spending habits to target them, and other reasons may be a little more serious where individuals are in controlling abusive relationships, and one of the the many ways control is implemented in these relationships is controlling the money supply and spending channels of those within their control.

Why Ethereum?

 

Ethereum is the second most popular token, there are many users of this token which provides scalability and flexibility via their smart contract abilities to implement more complicated transactions between individuals, specifically automated escrow payments.

So in summary, why Ethereum? the answer is because it provides users more choice on how they want to transact with their tokens.

Let’s look at some of the cryptographic concepts that have been implemented within various cryptocurrencies to implement privacy within their transactions.

Ring Signatures

A ring signature is a digital signature that is created by bringing a group of signers together. An outside observer is unable to identify which of the individuals linked to the ring is the actual person sending the tokens creating an environment of plausible deniability.

Ring Confidential Transactions (RingCT)

This is a cryptographic implementation that provides a methodology to prove that the amount sent and received in a transaction are equal utilizing a cryptographic proof, without needing to specify the actual amount therefore obfuscating the amount sent creating another layer of privacy within the transaction.

Stealth Addresses

This is a protocol where a user utilizes a one time address for each transaction, so the senders of money can only see their contribution, and cannot track the wallet of other individuals contributions creating an additional layer of privacy.

knowledge Succinct Non-Interactive Argument of Knowledge proofs (zk-SNARKs).

In essence zero knowledge proofs are a way to prove that something is true, without revealing the object itself. In a real world example, I might not want to hand over a digital version of identity document to a website, I might have a “letter’ from the local authorities stating that I am who I say I am, and hand over that letter, rather than sharing the actual document which could compromise my security.

In the digital world, this is implemented utilizing public key cryptography where digital artifacts are signed utilizing a key pair, if the message can be decrypted by the senders public key, then the receiver knows that the sender signed it with their private key.

This allows anonymity on the network, because transactional information doesn’t have to actually be transmitted on the network, that obfuscating what has been sent.

CoinJoin

Similary to ring signatures which creates plausible deniability on a group of signers, CoinJoin joins groups of transactions of the same value creating plausible deniability, this shouldn’t be confused with a mixer which is a different instrument all together.

CoinJoin transactions need an independant third party to put them together.

CoinShuffle

This is similar to CoinJoin however it doesn’t require a 3rd party to put the transactions together, and it is in its essence a mixer or tumbler.

Mobius

The latest cryptocurrency project with the goal of implementing privacy on Ethereum was presented during the Symposium on Privacy Technology (PETS). The 18th Privacy Enhancing Technologies Symposium (PETS) in Barcelona that was held from 24th to 27th July, brought together two researchers Rebekah Mercer and Sarah Meiklejohn from Aarhus University and University College London, respectively. They have jointly exhibited their judgements on a technique called Mobius, an Ethereum based tumbler or mixing service. [1]

The USPs (Unique Selling Point) of this platform are the low transaction fees, and optimized memory usage.

Transactions using Mobius are only slightly more expensive than standard Ethereum transactions estimated have a transaction premium of (est) $0.05–$0.08, and their execution takes milliseconds.

How does it work?

Mobius will be able to hide the addresses of the sender and the recipient and implement it in a cryptographically unrestricted manner.

This functionality is implemented in the cryptographic mechanism utilising a ring signature which allows the protocol to hide payment information, mixing the payment data of all the participants of the joint Mobius contract thus acting like a tumbler.

At the same time, the new project promises not to have the drawbacks inherent in decentralized mixer services, which require most of the off-line processes or perform many actions on the blockchain itself, which slows down the processing of transactions and raises commissions.

Tumbler mechanisms are known for being slow, taking transactions off-chain performing multiple events and being costly, however the researchers of this project believe that they have solved these common drawbacks.

As mentioned many of the concepts within Mobius have been tried and tested within various privacy token implementations.

Mobius also uses stealth-key technology for the sender and receiver to communicate securely utilising a one-time stealth address system.

The other benefit of the protocol is that it is DoS resistant, and even malicious senders will not be able to pick up the pseudonyms of wallets they are sending money to.

Off-chain efficiencies are achieved due to it’s handshake protocol, which allows the sender and receiver to only exchange 2 messages prior to sending an almost unlimited number of transactions.

The Security Goal

As defined in their whitepaper, the security goal of Mobius spans the following dimensions:

Anonymity, Availability & Theft Prevention.

Anonymity

In order to achieve anonymity, the senders and receivers addresses need to be anonymous, thus someone should not be able to derive which recipient received the money from a given sender in a tumbler transaction.

In order to analyse the effectiveness of this goal, one needs to analyse the attacks that are possible in this transaction.

(a) an eavesdropper who is acting as neither the sender nor the recipient; (b) a malicious sender (or set of senders); (c) a malicious recipient (or set of recipients); and (d) the tumbler itself. [3]

Mobius is unable to achieve anonymity when there is a malicious recipient, whereas most cryptographic protocols are not able to achieve anonymity when there is a malicious sender.

Availability

In summary this is achieved where any sender is able to utilise the tumbling service, this isn’t within the control of the cryptographic protocols, it is within the control of the network availability and Ethereum is a stable platform thus this aspect is linked to the state of the blockchain platform.

The other attack vector when it comes to destabilizing the availability of the system is that once the amount is in the tumbler, is limiting the ability of a trusted intended recipient to be able to withdraw their funds from the tumbler.

Because the system is resistant to attack even if all but the recipients actors are taken over, the system remains available to the recipient.

Theft Prevention

This is achieved, by not allowing anyone other than the intended recipient to draw the funds via the public key cryptography mechanism, and it doesn’t allow a recipient to draw the amount multiple times from the tumbler utilizing the ledger architecture of consensus.

Where can I find it?

Currently Mobius has not been implemented on Ethereum yet.

The source code for this protocol has been given to Clearmatics a Blockchain startup, and according to the researchers, implementation is as easy as a “cut and paste” which eliminates complexities inherent within projects of this nature.

The solution is also well documented by the developers and the Mobius team, making it easy to implement it on the Ethereum blockchain.

Challenge

As with off-chain protocols being implemented on platforms like Bitcoin specifically referring to the Lightning Network, the challenge with this implementation is how to make the user experience seamless as that is key to mass user adoption, if this will complicate the transactions for the user, they won’t use it.

Vitalik also made a statement not too long ago on Reddit: “I tend to need privacy much more than a couple of years ago,”

Conclusion

The researchers themselves have queried the need for such a service on Ethereum, however it stands to reason that such a service if implemented in an abstracted manner will be able to achieve efficiencies and privacy for users of the Ethereum network in an opt-in fashion.

Mercer said: “Mobius achieves great things in terms of availability and theft prevention but without compromising on communication, which hopefully will encourage people to mix more often.” [2]

References

[1] https://medium.com/@sahurashmi436/ethereum-based-tumbler-mobius-to-tender-monero-like-privacy-and-anonymity-af85d49d28eb
[2] https://www.cryptodigitalnews.com/2018/07/28/monero-style-privacy-is-ready-for-ethereum-who-will-implement-it/
[3] — White Paper — https://eprint.iacr.org/2017/881.pdf