One of the common threads in bitcoin coverage over the years has been commentary on its use in online marketplaces, particularly those hosted on dark nets such as Tor’s hidden services. This has always struck me as interesting, as there are a small number of currencies which are inherently more appealing to such uncontrolled marketplaces.
We hear a lot of talk about the anonymity of bitcoin, but mainstream media coverage never seems to touch on the fact that bitcoin transactions are effectively pseudoanonymous. They can all be traced, and indeed bitcoins which have been tainted by association with dubious bitcoin addresses (identities, effectively) can be traced forever, leaving some potentially significant AML issues for coin exchanges.
In this context, enter privacy-focused cryptocurrencies such as Monero, a cryptocurrency which has been gaining traction for some time as its transactions can’t be traced despite using a public blockchain. Its use of some rather clever cryptographic mechanisms means that Monero transactions can obscure both the parties involved and the value of the transaction being made.
These elements were already enough to expect these types of currencies to gradually take over dark net transactions, but Monero in particular has, as of the 17th of December, added support for what is known as ‘multisig,’ or multiple signature support. It’s a clever means by which a transaction can be created whose funds will not actually be released until approved by a certain number of users via cryptographic signatures.
In other words, you can now create a Monero transaction which doesn’t complete execution until two of a set of three (or three of a set of five) have approved the transaction via cryptographic means. It’s a cryptographic escrow service in the blockchain, effectivelty, and its uses in marketplaces where trust may be minimal to nonexistent seem pretty clear.
It’s interesting stuff. It seems likely that, at some point, we’re going to start seeing more about these privacy-focused cryptocurrencies in the mainstream press. Unfortunately, it also seems likely that it’s going to become even more difficult to regulate and monitor cryptocurrency transactions as these coins develop.