If the spread of social media to the Middle East sparked the Arab Spring, imagine what will happen when people get their hands on crypto tools that allow them to send money, form groups and enter into financial contracts — all with more secrecy than Bitcoin provides. That’s the startling pitch from Amir Taaki, an early Bitcoin developer now working with an international group of anarchist coders on next-generation software designed to find out. The coders believe their system will present a graver threat to governments than other internet advances of the past 20 years. The group is preparing to launch a testnet, a critical early milestone on the path to releasing a finished product, as soon as Thursday afternoon, according to several members and the text of a draft announcement shared first with POLITICO. Fourteen years after Bitcoin’s release, law enforcement and cybersecurity officials continue to grapple with the fallout from the first generation of cryptocurrency-related technology — from money laundering, to unregistered securities offerings, to ransomware attacks. But even as regulators and law enforcement figure out how to handle the first wave of blockchain networks, developers around the world are racing to deploy more advanced variations on the original concept. While many of these next-generation tools are being designed to ensure greater legal compliance than their predecessors — or even for use by governments themselves, as crypto’s underlying technology grows in legitimacy and institutional heft — the planned launch shows that radical anti-government ideas remain a driving force in the evolution of many crypto networks. The anarchist project calls itself DarkFi, a reference both to “DeFi” — the nickname for crypto-based decentralized finance — and a 2014 speech by former FBI Director James Comey about the “Going Dark” problem that widespread encryption presented for law enforcement agencies hoping to surveil digital activity. Representatives of the group say its members are spread across parts of Europe and the Middle East. Though they frame the software as a tool for shielding users from government-imposed violence, law enforcement officials say the proliferation of enhanced encryption is making it harder to catch drug dealers, terrorists and human traffickers This all troubles Bill Callahan, a former Drug Enforcement Administration agent who oversaw money laundering investigations during a two-decade stint at the agency. He said that the potential for advanced encryption to cloak crime is worrisome — and that for the sake of public safety, new encryption tools need to strike a balance between personal freedom and government oversight. “We have a reasonable expectation of privacy,” said Callahan, who now works at Blockchain Intelligence Group, which conducts forensic investigations of crypto activity. “We don’t have an absolute expectation of privacy.” Like many of the newer crypto tools being developed for use by governments and legally compliant businesses, the DarkFi project leans heavily on zero-knowledge proofs, a cryptographic technique invented by mathematicians in the 1980s that allows for targeted verification of encrypted information in a way that allows most aspects of the information to remain secret. Experts who reviewed DarkFi’s announcement and its website at POLITICO’s request said the project appeared to be technically sophisticated, even as they expressed skepticism of its developers’ vision. In a sense, the idea is an extension of the mission of the original cryptocurrency, Bitcoin, which was invented specifically to challenge government control of money and banking. As it has spread and gained wider adoption, governments have found ways to mitigate the threat posed by the original cryptocurrency and its immediate successors. And developers are still trying to perfect blockchain systems that integrate next-generation functionality and secrecy in a single system. Doing so will help fulfill “the destiny of crypto,” Taaki said, to bring about individual freedom at the expense of governments. Matthew Green, a Johns Hopkins computer science professor who was instrumental in the development of the privacy-focused cryptocurrency ZCash, said that he, too, believes that advances in encryption and network design could bring further crypto-driven disruption. But, at least, for now, he said governments have shown they can and will find ways to crack down on networks used for criminal activities. “We’re more in the taking-the-cap-off-of-the-toothpaste phase,” he said. “The toothpaste won’t be out of the tube probably for 10 years.” Read the rest of the story here.
| 
