The first coins to use Mimblewimble [privacy technology designed for cryptocurrencies] —distinct efforts called Grin and Beam—both launched in January. But arguments have since erupted over how private that underlying protocol actually is, after an independent researcher demonstrated an attack he says leaves its privacy model fundamentally crippled. Mimblewimble advocates say there are potential fixes. But Mimblewimble’s limitations—as well as vulnerabilities in Zcash and Monero detailed in recent weeks—are a reminder of just how hard it is to guarantee privacy in the realm of digital money.
Privacy coins are a reaction to the realization that Bitcoin isn’t private at all. Popular perception holds Bitcoin as clandestine, but both the cops and the robbers are well past that. All bitcoin transaction data is public and open to all for analysis; combine that with some strategic subpoenas to get the personal data cryptocurrency exchanges are required to collect on their customers, and it’s pretty trivial to untangle who’s who. Doing so has become a big business. Federal procurement data indicates agencies like the Federal Bureau of Investigations and the Department of Homeland Security now spend millions annually on software to help track down the people behind transactions. So the dark web has largely turned to privacy coins in the hopes of staying concealed.
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