Bitcoin is a digital currency that is quite well-known already, mainly due to various reasons. Upon introduction, bitcoin gained prominence due to its unique features. Bitcoin was believed to be anonymous, mainly due to its decentralized protocol and high standards of encryption. Except for a sequence of characters, the bitcoin network doesn’t have any other unique features that render the user readily identifiable. These special properties made bitcoin popular amongst the deep web users.
The extensive use of bitcoin across the deep web users, followed by the emergence and fall of Silk Road, helped bitcoin gain more prominence. While most of us understand bitcoin and how it “ticks”, there have been other digital currencies with their own set of features. Some of them were introduced way before bitcoin and there are few that emerged following bitcoin’s birth. However, not many could withstand the test of time and there are few that still exist in a form different from the original.
Comparison between bitcoin and other digital currencies.
The list of digital currencies that have come and gone is extensive. The ones listed above have had significant number of users and had to extensively be reported upon. They are different from each other in their own ways and they have had their share of controversies.
All these have one thing in common. Unlike fiat currencies, they are all digital currencies and they are community driven. Each of them, except for Linden Dollar has/had certain degrees of anonymity associated with it. However, some of them didn’t last long, in spite of widespread adoption due to technical, legal and regulatory complications.
Bitcoin is considered to be completely anonymous. But in reality, it is pseudonymous, meaning it offers partial anonymity. with enough determination and resources, transactions on Bitcoin network can be tracked. The same holds good for other currencies as well.
Some of the other digital currencies that promised anonymity includes Liberty Reserve which allowed users to sign up with just name, email id and birth date. The absence of cross verification procedure offered a certain degree of anonymity to its users. Liberty Reserve was forced to shut down for facilitating money laundering and operating without proper licensing.
MoneyPak reloadable debit cards turned out to be a failed adoption of conventional payment solution. While MoneyPak was intended to make electronic payments easier, the company did not think about its potential misuse. People could easily buy a preloaded MoneyPak debit card from shops by paying cash without furnishing any identification. These cards could then be used anywhere and it was virtually impossible to track the transactions. The loophole was exploited by many people, leading to rise in reports of MoneyPak frauds and scams. Green dot Corporation was forced to withdraw MoneyPak cards from shops earlier this year.
E-gold was a digital gold currency platform that allowed its users to convert their funds to gold and use it to transfer the value instead of paying with fiat currency. User funds on e-gold platform were backed by equivalent value in gold deposit. Users could assume any name to operate an E-gold account, offering a certain degree of anonymity to the users. However, the transaction records could still be used to track back the users. Like bitcoin, E-gold was pseudonymous at the best. E-gold was widely adopted across the United States before the government cracked down on the company, forcing it to shut down amid rising instances of frauds and scams.
Perfect Money is another P2P and P2B money transfer platform which initially filled the vacuum left behind by E-gold. The platform initially allowed users to anonymously register and transfer money. Initially, the people behind Perfect Money were unknown and the anonymity it offered was widely appreciated by many. However, it was later established that one Andrew Draper was behind Perfect Money. The company which was said to be registered in Panama now has Kowloon, Hong Kong as its address. It has also gone ahead and cleaned up its act by blocking access through Tor proxy.
Monero uses modified CryptoNote protocol based on ring signatures and stealth addresses for enhanced privacy. Monero’s opaque blockchain offers better privacy and more control over access to transactional data in comparison to bitcoin’s transparent blockchain. Monero claims to be a truly anonymous cryptocurrency. However, it has its own drawbacks when it comes to multi-signature protection and mining capabilities. Monero doesn’t have significant traction yet, and whether it can survive the regulatory regimen is still unknown.
There are other digital currencies like Dash, CloakCoin and AnonCoin which promises complete anonymity. However, their market capitalization and user adoption is far from desirable to attract attention at the moment.
Digital Laundry: An analysis of online currencies, and their use in cybercrime [Raj Samani, EMEA, McAfee, Francois Paget and Matthew Hart, McAfee Labs]