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Researchers at University of Illinois Present Privacy-Focused Cryptocurrency

Reading Time: 3 minutes by on January 24, 2017 Bitcoin, Finance, News, Tech
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Three researchers at the University of Illinois released a joint project called Dandelion, a cryptocurrency described as a network redesign of Bitcoin, focused on achieving anonymity and absolute financial freedom.

Over the past few months, experts including Monero lead developer Riccardo Spagni, better known as @fluffypony, conducted various discussions and presentations on the importance of financial freedom. In an event hosted by bitcoin exchange Coinbase, Spagni laid out several compelling reasons on why financial privacy is necessary for anyone using bitcoin.

In contrary to conjecture and flawed media coverage, financial privacy is crucial for everyone using bitcoin or other cryptocurrencies. For instance, on the public Bitcoin blockchain, with untangling software, it is possible for criminals to target users holding massive amounts of bitcoin. The transparency of the blockchain may lead to targeted crimes against the wealthy, as Spagni explained.

Also, salaries can be leaked, spending habits can be sold to advertisers, profit margins and revenues of private companies can be undisclosed and sordid purchases can be revealed to the public. The exposure of individual income or salaries could become a serious issue in the future, as it may lead to the condemnation and criticisms on high-ranking executives or employees within an organization.

Overall, in consideration of these potential situations, financial privacy is necessary for everyone in the world, even if they many not acknowledge and realize their need for financial freedom.

At the moment, the Bitcoin network is not anonymous. In spite of mainstream coverage establishing a correlation between bitcoin transactions and the surge of trading activities on the Dark Web, bitcoin by nature is not anonymous. The public blockchain of the Bitcoin network can be utilized with to unravel the transactional history of users for criminal activities and operations.

To provide a solution for bitcoin users, the Bitcoin Core development team and other unknown figures within the bitcoin community introduced solutions such as Mimblewimble and TumbleBit, two-layer solutions which can provide an unprecedented level of privacy to bitcoin users by mixing transactions and eliminating the transaction history.

Because each bitcoin transaction holds information of all past transactional data, the evaluation of one single transaction could lead to the disclosure of other transactions connected to that particular transaction. Thus, mixing transaction inputs and outputs as well as eliminating transaction history maximizes privacy for users that are in support of financial freedom.

Essentially, researchers at the University of Illinois are attempting to provide a cryptocurrency like bitcoin which guarantees anonymity to users. Like Zcash and Monero, it aims to hide transaction data from adversaries, but with a slightly different method.

According to the original research paper, Dandelion will mix messages or outputs from different users on a graph. Using a particular mixing technology, it disallows anyone else within the network to observe values or amounts of a transaction.

In the official document entitled “Dandelion: Redesigning the Bitcoin Network for Anonymity,” the researchers stated:

“In particular, the P2P network currently forwards content in a structured way that allows observers to de-anonymize users. In this work, we redesign the P2P network from first principles with the goal of providing strong, provable anonymity guarantees. We propose a simple networking policy called Dandelion, which achieves nearly-optimal anonymity guarantees at minimal cost to the network’s utility. We also provide a practical implementation of Dandelion.”

As of now, Dandelion has not been reviewed or experimented with by cryptographers or developers. But the research does throw up some interesting potential follow-up research, such as exploring the tradeoff between anonymity and latency of a blockchain network. It is still yet to go through a peer review process, which will decide both the short- and long-term roadmap of Dandelion.

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