Dark Wallet May Make Bitcoin Even Harder to Trace

Credit: Defense Distributed/YouTubeCredit: Defense Distributed/YouTube

The digital cryptocurrency Bitcoin already has a lot of built-in security and privacy features. But thanks to a Bitcoin storage app called Dark Wallet scheduled to be released tomorrow (May 1), Bitcoin may become even more difficult to trace. Dark Wallet’s creators have said they created the software to help criminals disguise their activities online.

Dark Wallet is developed by a group called unSystem whose members include Cody Wilson, creator of the world’s first 3D-printed gun, the Liberator. Both projects share similar political goals: to thwart any and all government regulations.

MORE: FAQ: What is Bitcoin?

Bitcoin is not inherently illegal or malicious, though it’s often the currency of choice for criminals because it operates independently of any government and is difficult to trace. But Dark Wallet’s creators say their app was created with criminals in mind.

“It’s just money-laundering software,” Wilson said at a debate at the New York Museum of Modern Art.

The Dark Wallet app, which will be available as a browser extension for Google Chrome or Mozilla Firefox, appears as if it will be free to use. The project was partially crowdfunded on Indiegogo last fall, where it raised a little more than its goal of $50,000.

In March, the U.S. Commodity Futures Trading Commission announced it was considering whether to regulate Bitcoin and other electronic currencies. The New York State Department of Financial Services has stated it intends to regulate Bitcoin and to work with established Bitcoin exchanges to do so.

The members of unSystem see this trend toward Bitcoin regulation as a threat. In a decidedly libertarian YouTube video advertising its (now closed) IndieGoGo campaign, the group compared government regulation to a straitjacket.

Created in 2009, Bitcoin is a decentralized, digital-only currency that uses a peer-to-peer computer network to maintain transactions and generate, or “mine,” new bitcoins via a complicated mathematical algorithm. Bitcoins are sent and received via a Bitcoin address, a long string of numbers that resembles alphanumeric gibberish. Individuals can register and use multiple Bitcoin addresses.

Each address also comes with encrypted “public” and “private” keys. A public key is needed to send bitcoins to the corresponding address, and a private key is needed to access the bitcoins belonging to that address. Private keys are stored in an application called a wallet.

As it currently exists, Bitcoin transactions are very anonymous, but not at all private. All bitcoin payments are publicly recorded in an official log called the blockchain and identified by their Bitcoin address. 

Dark Wallet makes bitcoin transactions private as well as anonymous. It does this using a technique called CoinJoin, which automatically combines every transaction with that of another randomly chosen transaction.

Every time this happens, the transaction becomes twice as hard to trace, according to unSystem member Amir Taaki, as reported by Wired.

Email jscharr@techmedianetwork.com or follow her @JillScharr and Google+.  Follow us @TomsGuide, on Facebook and on Google+.

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