Bitcoin Private and Cloak Cryptocurrencies

There is a huge emphasis on privacy with a lot of new coins but I do feel that a lot of coins focus on a single issue and leave the overall business and usability aspect out.  How do these newer coins fare?

Cloak

My first impression is why doesn’t the non-www version work while the www version does?  Does their team not know how to properly configure nginx or is it just a simple mistake and oversight?

Cloakcoin.com-Forbidden-ConfigError

They call their encryption ENIGMA which I am not sure is a joke or if they aren’t aware of the ENIGMA encryption box in Germany that was compromised during WWII?  I would more so be worried that it is a read between the lines joke or a hint that the team is doing something more than they claim?  Sorry but I just can’t get over the fact that they would not know about the Enigma box from Germany that was decoded.

For my second point I do like the privacy aspects but this is where I have concerns.  On one head they tout privacy, but then to have more privacy they obfuscate transactions by using other clients wallets?  Why would you allow a third-party and random strange to process or handle any part of the transaction?  I do realize they say it is fully encrypted and obfuscated so the random third party stranger on the network shouldn’t know anything about you or your transaction, but to me it violates the principle of privacy and security.  It reminds me of how everyone believed the TOR network is a good idea and secure, but in reality whoever runs an exit node can spy on other users, including the NSA.  This architecture of Cloak makes me worried that a vulnerability could be found and that privacy could be worse than most other Bitcoin-style coins.  Even if a simple vulnerability was not found, you are essentially passing private information to random strangers on the network, the NSA or other large funded organizations could use this to spy on other users or even perhaps modify transactions and create chaos on the network.

I also find it confusing how they say it is private but you have to enable “ENIGMA” on top of “Cloak Shield” to truly make it private?

Here are the parts I’ve picked on from their website:

Alice’s Cloak wallet then automatically sends a request to the network for other Cloak wallets who have elected to become ENIGMA mixer nodes to obfuscate her transaction. All of this is done privately and securely throughout with no identities or true IP addresses revealed.

Bob has cloaking mode enabled in his wallet and the wallet generates a secure CloakShield encryption channel for communications with Alice’s wallet. Bob’s wallet sends Alice a secure connection, containing encrypted inputs and outputs to commence the transaction.

With this confirmed, Alice, with full anonymity, creates an encrypted ENIGMA transaction containing her true inputs and outputs and Bob’s cloaking (obscured) inputs and outputs. Bob and Alice both sign the ENIGMA transaction before it is submitted to the network for inclusion into a PoS block.

Going back to the concerns I have above, I really don’t like how Alice’s wallet would ever communicate with anyone other than the receiver or the Cloak network.  By introducing Bob, there is the chance that Bob could decipher and identify what Alice is doing.  Of course that’s not what should happen, but I believe it is a huge security whole to involve random third parties in confirming or obfuscating transactions.  The situation reminds me a lot of the vulnerabilities in the TOR network.  Essentially Bob is like an exit node, running transactions for Alice.  Bob shouldn’t know who Alice is or what she is doing, but what if there is an implementation error or other issue?  This could be avoided by not using any random third party.

I think Cloak does a great job but they’ve actually introduced a huge security hole by doing the random, third party, processes the transaction part.  It would be like saying “my data is encrypted so I’ll send encrypted copies to everyone”.  Sure it is encrypted but if someone can ever hack your encrypted data either through bruteforce or an algorithm/implementation error then you are done for.  The best solution is to never send private and sensitive data to an extra, third party.

I do think the Cloak project has worked hard and it has some great ideas but aside from privacy and what I believe are security holes in how they implement it, they have done a great job but it is not a coin that does everything right.

Bitcoin Private

For those who know me, I am very much against forks.  As I’ve stated before they decrease, value, lead to scams and confusion.  This can be evidenced with Bitcoin Gold regardless of who you believe was responsible.  Right off the bat Bitcoin Private is warning of scammers trying to confuse you with a warning on their website.

BitcoinPrivate-BTCP-Scam-Private-Keys

The problem with these types of coins, hardforks or what I think are really counterfeits is that you need to give up the very “private keys” of your real, valuable Bitcoin to claim the “new counterfeit coin”.  This is a huge security problem, regardless of who made the wallet what if the wallet is designed or hacked to maliciously steal your real Bitcoins?  There is no easy and secure way to claim your coins from these counterfeits.   Once you give up your private keys to Bitcoin Cash, Bitcoin Gold, Bitcoin Private they could steal your real Bitcoins.

Now there is a way around it, you could transfer your coins to another wallet but it’s a huge pain and a mistake could cost a novice user all of their Bitcoin.

Now in all fairness I appreciate this team at least has official wallets ready for download, unlike Bitcoin Cash.

Users who have the currency called “ZClassic” are also involved here, which is also another confusing fork of ZCash.

This is what I mean about all of the confusion.  It creates an environment where holders and buyers are easily confused about which is the real “Bitcoin”, which is the real ZCash.  And really, I can’t see any reason why people are forking except as a cash grab and counterfeiting spree.

For this reason I don’t trust Bitcoin Private anymore than I trust the other forks (although I trust Bitcoin Gold the least).  I personally feel there is no good reason to trust any of them.  If they want to make a new or better currency they should really just make their own, or at least copy it under a new name.  But of course forking, creates unwilling participants and owners of the new currency, while enriching and rewarding the hardforkers for their counterfeiting.

For those reason if I had to pick between the two, I think Cloak has our best interests at heart and hardforked coins are just a scam, counterfeit and cash grab by unscrupulous people.

Verge XVG Mining Exploit Results in $1.1M Heist

In all fairness it was just 3 hours, they have corrected the issue and have apologized which is the way to handle it.  This won’t make me panic sell my Verge coins.


XVG-Verge-ApologiesforMiningAttack
However, a scam closely followed right into the tweet discussion about this with a fake Verge account scamming users by apologizing for the hack (very ironic).

 

 

Because of how well they handled it I have a lot of faith in their team.  Lately a lot of blockchains have been attacked and exploited which is only natural.  Contrary to popular belief blockchain is not invincible or infallible.  Likewise, the people who code the applications and algorithms that run them are only human, so let’s give them a break.

To close this attack vector permanently it looks like a hardfork will be necessary (I generally dislike hardforks but this is a case of necessity).  But once again I’ll say it is a flaw in the majority of permissionless blockchains.  The client side shouldn’t care about this (just as we don’t care about the backend of our bank we only care about using our money).

I see the value of XVG has plummeted as a result, even though similar issues have happened with Bytecoin and Monero due to a flaw that allowed the creation of extra coins in Cryptonight.  I would fathom that a lot, if not most blockchains have been attacked and this has gone undetected and/or unreported.  It is likely just a matter of time.  This still puzzles me more because I think the Ethereum, parity issue, Bitcoin Gold Scam and what I suspect was a similar issue with Raiblocks didn’t impact the value as much.  With that said, this is one more reason I feel PoW is unsustainable and doesn’t help secure networks at all, as even without technical exploits you can still cause damage by having more hashing power than others.

I am not overly concerned about this issue and a big part of that is how the team handles things and it looks like they’ve taken ownership of the problem and have corrected it (something rare in this industry).

Hardforks Are Scams Says Charlie Lee LTC Creator

Charlie has been saying exactly what I’ve been.  Hardforks are essentially scams that devalue the original coin and cause confusion.  At the same time, I’m sure he meant well but it never helped that he announced he sold all of his LTC.  It’s akin to a CEO selling all of their stock and saying “I still believe in the company”.  Granted this happened well before this scam hardfork so the hardfork is surely what caused the latest drop.

CharlieLee-LTC-Litecoin-Founder-Says-Forks-Scam-Confusing

As we can see after Litecoin Cash, the real and original Litecoin went down in value.

Charlie also correctly warns not to give your private keys to these scammers.  Whether Bitcoin Cash, Bitcoin Gold, Litcoin Cash and the many scam coins they require you to give your private keys to their wallets (if they even create one).  The risk there is that the developers or wallet creator will steal your original coins and this has happened already with the Bitcoin Gold Scam.

LitecoinSlide

I think exchanges should outright refuse to deal with these scam coins.

The underlying issue is simply that why are hardforks possible at all?  Counterfeiting is so easy with these opensource, public and permssionless blockchains.  To me it is a complete security and privacy flaw that was well-intentioned but simply doesn’t work.

Going forward, community maintained coins that cannot be forked, that are secure, private and are real time will be the long-term ones to invest in and the long-term winners.

Pablo Escobar’s Brother Trafficks an ICO and new Bitcoin Fork!

Pablo Esobar’s brother makes some very bold claims surrounding his new cryptocurrency launch.

https://www.ccn.com/pablo-escobar-brother-diet-bitcoin/

One of those claims is that Bitcoin was created by the CIA, however this may be contradicted by the fact he also claims he met a Satoshi Nakamoto of Japan.  As proof he shows a Passport bearing the same name:

satoshi-passport

Of course it is possible someone from Japan could be working for the CIA, most people don’t believe a single person created Bitcoin.  So I do think there is credence to believing a large organization such as the CIA or other resourceful and skilled group created Bitcoin (so I call this one plausible).

Some critics have said his website for his coin Diet Bitcoin was nearly copied from the original bitcoin.org and that so are the specs.  I’m going to be fair in that I don’t see how Diet Bitcoin is any worse than other Bitcoin forks such as Bitcoin Gold.  As many know I am against hardforks as I see them as counterfeiting, being confusing and just simply wrong but it also illustrates weaknesses in any currency which can be copied in such a manner (where I believe forks should be impossible to keep the network secure and ensure integrity).

 

 

Bitcoin’s Hard Fork of BCH Bitcoin Cash a milestone for cryptocurrency

The hard fork occurred on August 1st, 2017 with some nodes of the Bitcoin network implementing the “Segwit update”.  Although a lot of potential chaos could have happened, many in the industry called it correct that the most probable scenario is that the split would occur with the creation of BCH and Bitcoin users would not lose any coins and would be rewarded with an equal amount of BCH.  However, most exchanges and users were advised to backup their wallets and not do any transactions in the meantime.

Beyond this a lot of questions and issues need to be sorted out in the cryptocurrency world for things to stabilize and be universally accepted by businesses and individuals.  The key issues in my mind are “volatility”, “stability”, “security” and “regulation”. Really a serious issue with either of my three cores issues puts people and businesses at big risk although new updates and coins keep coming out with some promising the solution to these various issues.

Volatility

This is in reference to the extremely unpredictable nature of many currencies and Bitcoin is a core example with rapid swings.  Now people have often been warned that “don’t store your coins for the long-term” and this comes from the Bitcoin team itself as no one can be certain of the future of any coin at this moment.

Some have lamented that cash is the same, this is true but with the caveat that cash is backed by a government and central bank (all of who which do not really like cryptocurrency unless it is managed or under their control-more on regulations later).  Cash of course has had its issues whether run on banks, robberies, theft, fraud and other misuses of currency however cash is what most of us know and there is some safety and security in the “right cash” and at least often some predictability.

Take for example a record high of Bitcoin at the time in 2013 of approximately $1300 USD but sometime in 2015 trading was just at $267 USD.  The point here is that at this time cryptocurrency can be very volatile and unpredictable.  It can create chaos in everyday life for both business and individuals.  A risk that many businesses echo is the above scenario what if you accept payment based on USD in a cryptocurrency and the value plummets by 80% or some other high number suddenly?  It creates huge issues to say the least and time should address them but until there are more coins that have some consistency in their valuation without rapid descents there will be some reluctance.

Stability

There have been many instances on both the networks and exchanges for Bitcoin and Etherum where there are a ton of unconfirmed transactions.   I still have trouble understanding this but there are various numbers of “confirmations” before once can be comfortable they really have the currency that has been sent.  What if the network stops working or slows down creating massive fraud or inability to process transactions?

Fortunately there are new coins coming out which are instant that solve this issue but still there are many in the wild, common and highly valued that do not have these features.

There is also of course the concern that massive DDOS attacks could take out the network of a cryptocurrency or effectively shutting it down.

Security

The biggest threat is that there is the assumption that blockchain is secure and irreversible and it is impossible to play around in ways you shouldn’t.  However, this also relies on someone not finding a weakness or exploit against the blockchain, and what is more probable going forward is that an organization with massive computing power ultimately finds this and exploits this in various ways.

There are also other considerations such as people losing their coins to viruses or hackers, this has even happened to exchanges such as Coinbase executives.  One thing for sure is that it is not wise to leave your coins in an exchange if not for the risk that in the recent Bitcoin Fork the exchange refuses to give you the split/new currency.

Regulation

This is the biggest uncharted territory but governments and large financial institutions have made their position clear and my interpretation is that “we love blockchain” but “we hate that it is not under our control yet”.  This will have significant repercussions worldwide on how individuals and businesses deal with cryptocurrency.  Significant regulation and the introduction of state-run/central cryptocurrencies could potentially wipe out or make worthless some coins overnight. On another note it appears to be increasingly difficult to buy or sell out of the cryptocurrency markets with banks making it increasingly difficult for the coin exchanges to operate.

Conclusion

Bitcoin and other cryptocurrencies have made it far beyond the naysayers and through many difficult and unpredictable times.  Ultimately I believe cryptocurrency will continue to evolve and improve but as with any tool there are always going to be some pitfalls and bottlenecks.