Interesting Parts in CIA Leaks

Schneier wrote:

  • 8,761 classified CIA documents […] 2012-2016 […]it sounds like this cache of documents wasn’t taken from the CIA and given to WikiLeaks for publication, but has been passed around the community for a while — and incidentally some part of the cache was passed to WikiLeaks. […]  extraordinary collection […] several hundred million lines of code, gives its possessor the entire hacking capacity of the CIA.[…]
  • […]there is absolutely nothing illegal in the contents of any of this stuff. It’s exactly what you’d expect the CIA to be doing in cyberspace[…]
  • […] these tools are a few years out of date

Danezis in UCL blog wrote:.

  • “If CIA implants, Command & Control and Listening Post software were classified, then CIA officers could be prosecuted or dismissed for violating rules that prohibit placing classified information onto the Internet. Consequently the CIA has secretly made most of its cyber spying/war code unclassified.”

Other observations which many sources reported:

  • Frankfurt is a major CIA outpost for hacking ops.
  • CIA is masquerading to make things look like cyberattacks come from Russia.

redh-bad-wolf

 

 

 

 

Donald Trump Under 51% Attack

Tomorrow 20 January, Trump will become the next US president. It will allow us to test again the concept of a 51% attack: more than 51% of Americans disapprove of Trump.

Here come the bad news. Possibly 90% would not help either. We have been losing control of the wealth and resources of this planet since the end of 1980s, and this concerns the 90% of us, the whole of the so called middle class included.
octopusglobe

ADDITIONS: there are also many good people among the rich and influential.

Is PGP Bankrupt?

In the last few years, we have seen an increased awareness that PGP/GPG is a dinosaur of 1990s crypto, and it does not satisfy the need of modern users for secure communication.

PGP model has many perverse effects: like creating a single point of failure where all sensitive communications are compromised with cracking one single key, which sooner or later quantum computer will crack.

Possibly PGP can be fixed and have forward security added etc, but for now many security researchers do not advocate to use PGP.

UPDATES:
Now are there any trustworthy alternatives on this planet? I believe there aren’t. I would recommend users NOT to trust anyone who says them some app is secure, like in this article which advocates Signal/What App . They are going to be disappointed.

 

Blockchain Privacy – Part 3: Ring Signature Mixes

Now we’ve covered why privacy is essential for widespread cryptocurrency adoption, and how stealth addresses can help assist the pseudonymity (stealth addresses defined and explained in Part 2, pseudonymity discussed in Part 1), it’s time to explain how to combine cryptography and Ethereum’s smart contract functionality to add another layer of obfuscation to public blockchains!

COOL THING 2: RING SIGNATURES

Ring signatures generally satisfy several essential properties, namely anonymity, unforgeability, and collusion resistance. The definition of anonymity here is that an adversary has no more than a negligible advantage of correctly identifying the individual that produced the signature.

Ring signatures offer honestly participating users with ‘unconditional anonymity’, and are formed without a complex setup procedure or the requirement for a trusted third party, trusted setup, or any form of group leader. Users are simply required to be part of an existing public key infrastructure.

Ring signatures are constructed in a way that the ring can only be ‘completed’, and so will only verify correctly, if the signer has knowledge of some secret information, most commonly a private key corresponding to one of the public keys in the ‘ring’. This is done through a zero-knowledge proof of membership.
In the signature generation algorithm, a number is generated at random for each of the other public keys in the ring, and then the signer uses the knowledge of their own private key, or some other ‘trapdoor information’, to ‘close’ the ring.

screen-shot-2016-11-06-at-13-18-49

Ring signatures offer users anonymity by hiding transactions within a set of others’ transactions. If there are many users contributing very similar amounts to a ring, then the ring is said to have good liquidity, meaning the transactions can occur quickly, and also that transactions can be effectively mixed, with a high resistance to attempted mixing analysis attacks.

Linkable ring signature algorithms provide a scheme that allows users to sign on behalf of a group, again without revealing the individual signer’s identity, but with the additional property that any signatures produced by the same signer, whether signing the same message or different messages, have an identifier, called a tag, linking the signatures. With this tag, third parties can efficiently verify that the signatures were produced by the same signer, without learning who that signer is.

In our case, we use linkable ring signatures in a mixing contract.animix

Ring Signature Mixing Contract

Our linkable ring signature scheme relies on the hardness of EC-DDH, and the general scheme is as follows:

  1. A contract is made to verify ring signatures, receive and distribute coins. Parameters for the specific mix (such as the transaction value of each amount to be deposited into the ring, or the minimum number of users with which the contract will execute) are entered into the contract.
  2. Each sender randomly generates an ephemeral elliptic curve key pair. The public key of this pair is sent to the intended transaction recipient. The two parties then generate a shared secret as in the stealth address protocol, and the sender submits the freshly formed public key to the ring mixing contract.
  3. Along with the freshly generated public key, users wishing to participate in the mix send the agreed denomination of the cryptocurrency, for example 1 Ether, to the contract. When a sufficient number of users have sent their public keys to the contract, with sufficient defined in respect to the original contract parameters, users can read the list of public keys which together form the ring.
  4. Each intended recipient can construct the secret key corresponding to a public key submitted to the contract. If the mix user is simply someone wanting to mix their coins, rather than transfer the coins into a recipient’s account, the user can still generate an ephemeral key pair and create a new stealth address for their coins to be transferred into.
  5. Intended recipients send the signature to the contract. The signature includes a tag, which is unique to each signer, message, and ring.
  6. The contract verifies that the tag is formed correctly, corresponding to one of the public keys in the ring. The signature and tag will only verify if:
    • The message signed is the correct message,
    • The ring in question is correct,
    • The tag is correctly formed,
    • The tag has not been seen before.
  7. Funds are released to each sender of a verified signature and tag.

There are grittier details about adding opcodes to the EVM, hashing to secp256k1, indistinguishability and random oracle assumptions, etc, but we’ll gloss over them here!

Combining cool thing #1 and cool thing #2

The combination of stealth addresses and ring signatures makes revealing blockchain anonymous almost impossible (in cryptography the property is generally referred to as infeasibility). Combining these two techniques, we arrive at a scheme that satisfies the following properties:

  1. Anonymity: The probability of an adversary identifying who created a transaction is at most negligibly higher than if the adversary were to guess entirely at random.
  2. Efficiency. The transactions take less than a second to generate, and when used with Ethereum’s ~15 second block time, your transaction could be mined before a ZCash zkSNARK has even finished generating 😉

Now breathe. And please tell me if you hated everything I said or have a million questions or want to let me know I’m wrong in a thousand ways!!!! (Or if more animal pictures are required).

Blockchain Privacy – Part 2: Stealth Addresses

Privacy

In Part 1 we covered why privacy is essential for widespread cryptocurrency adoption, and concluded that neither Bitcoin nor Ethereum, or even ZCash is suitable for the task we’re wanting to solve: anonymity with efficiency. (Also the bonus property of needing no trusted setup)!

COOL THING 1: STEALTH ADDRESSES

The benefits of using stealth addresses can be explained through this slightly contrived example:

Say Alice has a store, and she has her public key stuck to her till, so people can make payments to her in bitcoin/ethereum/ZCash. Alice is aware of the transaction analysis that people can perform on public blockchains, and her competitor Eve knows that about 98% of store payments are in Ether, so if she tracks Alice’s blockchain address, she will be able to monitor how Alice’s business is doing in near-real time. This makes Alice’s business vulnerable. For example, Eve could even learn to predict when Alice runs out of stock and then sell items to Alice at an unfair price. Instead of Alice changing her public key sticker every day, she can use stealth addresses!

Stealth addresses work as follows:

Say Alice has long-term, publicly known public key A, and corresponding private key a, such that A = a \cdot G, with G the generator of an elliptic curve (EC) group (if you don’t know what that means, we can just pretend they’re coordinates plotted on a graph with the property that A is an excessively obscure representation which does not reveal the secret a). A is an elliptic curve point (as is G — it’s defined along with the curve we’re working on) and a is a 256 bit integer.

stealth1

Bob wants to pay Alice. Normally he would just send Ether to Alice, but as we know, blockchain analysis would make this transaction entirely public. So instead, Bob’s wallet generates an ephemeral key pair, for use in just this one transaction, with B an elliptic curve point, and b a 256 bit integer. Bob (or Bob’s wallet, acting on his behalf) sends B to Alice, and they can both calculate the shared secret b \cdot A = a \cdot B = a \cdot b \cdot G = b \cdot a \cdot G.

stealth2

Bob can  then send the Ether to an address formed K(A + H(b \cdot A) \cdot G) (…with K being the function used to map from public keys to public addresses in Ethereum), and Alice can spend the money with private key a + H(a \cdot B).

stealth3

For any eavesdropper to compute the shared secret b \cdot a ( = a \cdot B), they would have to crack the ECDH (elliptic curve Diffie-Hellman) problem. This is infeasible. So Alice’s privacy is protected so far!!
While we’re here, here are the definitions of ECDLP & EC-DDH. Both are useful in different parts of our huge scheme. The assumed hardness of the ECDLP is essential for privacy in the stealth address system, and the hardness of EC-DDH is the requirement for our ring signature scheme, described in Part 3. Assume E here is for Eve, our adversary (conventionally, the adversary is called A for adversary, but we have A as Alice’s public key, so we can call the adversary E to avoid confusion between E, the malicious actor, and A \in E(\mathbb{F}_q), the elliptic curve point).

Definition 1 Elliptic Curve Discrete Logarithm Problem (ECDHP)
E has no advantage in solving following:
Given G, a \cdot G and b \cdot G \in E(\mathbb{F}_q),
find S = (ab) \cdot G.
Definition 2 Decisional Diffie-Hellman Assumption (EC-DDH)
E has no advantage in the following:
Given a \cdot G, b \cdot G, c \cdot G \in E(\mathbb{F}_q), with a, b, c \cdot \mathbb{Z}_n, decide whether c \in G = ab \in G.

Although the maths may look somewhat difficult to follow, Bob can send his one-time-use public key in the ‘data’ slot of the transaction, and so Alice can simply scan all transactions, find B, form the stealth private key, and spend the money as she wishes. The extra computations can all be automating inside and Alice and Bob’s wallets, and the communication is compressed down into 1 transaction needed, just like an entirely transparent result. This functionality is entirely possible with Ethereum & any wallet with stealth address capabilities.

However, if Eve is transferring money to Alice, and is really invested in finding out Alice’s income, she could produce a transaction (or many dust transactions) with stealth addresses for Alice, and then monitor the blockchain to see if Alice ever joins those accounts together or with others, in order to make an input to a higher value transaction in the future. This sounds unlikely to be relevant, but blockchain analysis (such as taint analysis) has been known to have crippling effects on the anonymity of public blockchain systems.

So we will work to prevent it. Using cool thing number 2.

D-Day For Z.Cash

Today the first ever truly anonymous crypto currency ZEC went live. The full P2P client can be downloaded from here [Linux only for now].

The total number of ZEC coins will be only 21 million, like in bitcoin. Zerocash also reproduces few other unreasonable properties known from bitcoin: bizarre monetary policy with inelastic monetary supply and block halving every 4 years,  get-it-rich-quick or “gold rush” syndrome, etc. All the things which make a crypto currency with very high volatility, which I anticipate will be AT LEAST as bad as for bitcoin, and probably a lot worse. This of course, will be a tremendous barrier for wider adoption of Zerocash by people other than libertarians or tax dodgers.

Volatility Stage 1: Klondike Revisited

gold_mineEarly miners are already selling their coins. To start with, Poloniex has started trading them at UNBELIEVABLY large prices and only tiny fractions like 0.001 ZEC were traded. In the first hour and half, prices were moving like crazy between 500 and 3000 BTC per ZEC. In the next hour it went below 20 BTC, in the next 24 h it went below 5 BTC, and after another 24 hours, it went down to 1 BTC.

It is worth noting that the Zerocoin price as anticipated by a prediction/futures market has peaked at around 1 BTC in the days/hours preceding the release.

Volatility Stage 2

It is unlikely that an equilibrium market price will be reached in the coming days. We expect further very high volatility for Zerocoin. The monetary policy of Zerocoin is genetically programmed to impose a certain pattern [known in advance] of progressively increasing monetary supply to the infant market. In particular, ZEC has artificially small block mining rewards for the first 34 days of mining. At the same time crypto currency investors have hundreds of millions of dollars in cash to play with, and many investors have been investing in altcoins rather than bitcoin. This is because traditionally altcoins are more volatile than bitcoin, so more profits can be made from trading. Moreover, maybe the only way for some investors to hope for really fabulous returns is to see some altcoin challenge the dominant position of bitcoin in the market.
Though only fools bought Zerocoins early on, many investors are now playing the game of guessing at which moment in ZEC history will be the best moment to buy, which question has no objective answer as it depends on actions of other investors.

Future Market Expectations

Zerocash certainly adds value to the cryptocurrency market. Now the question is how much is the added value? Here is a plausible evaluation and a plausible scenario for the future of ZEC:

  • For some time it will be just a game where foolish investors are going to jump-start a (decreasingly) profitable mining market. In my opinion for now, Zerocoin is worth zero, in fact the system does not even work properly yet.
  • The crypto currency market is today worth about 10 Billion USD. Now, not every user or miner of crypto currency cares about high levels of privacy. We conclude that the added value will be not more than a small fraction of 10 G$.
  • I believe that Zerocash can hardly hope to achieve and sustain a 100M-ish market cap in the coming months, similar to what Monero has already achieved,  which is maybe a fair measure of how much the market value an anonymous crypto currency in 2016.
    • Achieving a similar result within a few months will be already a great success for the Zerocash team.
    • The aforementioned futures market can apparently be seen as a bet on sth like 350M$ market cap at the end of 2016, cf. here.  Probably by far too optimistic.
  • Then only within a few years, the market cap of ZEC is likely to know some organic growth and larger adoption, and then it should be worth billions of dollars.

Will ZeroCash Be Banned?

An interesting question is whether some government [United States, EU, maybe Russia] is going to ban or forbid zerocash. Such a ban could be decided just because the production of money is according to some, a state monopoly in the United States. This is however largely disputed and for example bitcoin is tolerated today in most countries.

dark_markets

In contrast, a truly anonymous crypto currency could be just banned in many jurisdictions. While bitcoin is very rarely claimed to be a threat to national security (even less to the US currency), ZeroCoin is definitely a huge challenge to national security. It could lead to a re-definition of the term of so called “domestic terrorism”, which term was quite surprisingly used in the  Liberty dollar case where it was rather totally inappropriate (cf. here). However anonymous crypto currency is such a tremendous threat to the established legal and financial order, taxation, and such a powerful enabler for organized crime, that we should expect legislators to introduce new specific forms of crime related to anonymous digital currency. Interestingly, Zerocash allows also for non-anonymous usage.

Illustrations are under 123rf licence.

Controversy Around Profitability of AltCoin Investment

There is a considerable controversy around whether investing in a balanced basket of cryptocoins is a good idea.

Two serious sources show that this sort of investment enjoys steady growth without a lot of downturns, cf. DLT10 Index and a recent detailed study which concentrates on a shorter period with excellent returns since Jan 2016 (cf. also this curve for the whole of 2016).

A rebuttal paper was published by Coindesk: over a period of a few years, bitcoin is claimed to outperform altcoins.

Oligarchy vs. Innovation

I would like to insist on the moral aspect of investment and what it means for the jobs in the technology sector.

By investing in medium-sized altcoins, we make blockchain better and bring a lot of innovation and truly advanced technology to the market:

  • smart contracts with Ethereum,
  • ring signatures and stealth address payments with Monero,
  • zero-knowledge proofs with Zerocash,
  • monetary policy innovation with Bitshares,
  • etc..

37492118 - big black fish swallowing plenty of colorful fish of different sizes and colors. business or political concept of monopolistic company or union absorbed small companies. career concept of careerist who does not consider interests of his colleagues

By investing in bitcoin alone, we promote stagnation and poor technology which is barely trying to get better. A dystopian financial network which does not function well. Bitcoin is the “Microsoft of cryptocurrency”, cf. interview by Dr Courtois in Nature, it has a toxic culture, it is owned and controlled by China, it has a bad habit to censor the dissident voices, it uses super-dodgy cryptography, and it is simply sad that bitcoin will at times outperform its competitors.

Notes:
Many properties of bitcoin are self-defeating[Courtois] and lead to a programmed decline of bitcoin for example through skyrocketing fees [+557% in 2016!].  A very interesting curve to study is the so called bitcoin dominance curve. At moments bitcoin dominance reaches a peak [e.g. in Jan 2016 and again in Jan 2017]. Then it will reach a minimum, which happened in mid-March 2016 with the explosion of the Ethereum market. The long term trend is also, well less bitcoin dominance, more place for altcoins, which IMHO are THE investments which create some real value in this market. Let a thousand flower bloom.