Iterating Privacy

Iterating Privacy

Decred’s privacy features and plans are ready to be revealed. The goal of our privacy features is to be simple, adaptable, and creative.

Rather than take the routes established by privacy-focused projects, e.g. ring signatures, zk-SNARKs, or Mimblewimble, we decided to take a mixnet approach, where we have integrated the mixnet with our Proof-of-Stake (“PoS”) governance system. Currently, just over 50% of all decred in circulation participate in PoS, which requires a steady flow of ticket purchases. This existing transaction flow, unique to Decred, functions as the natural basis for a mixnet. Per the approach with Decred’s PoS governance system, this yields a “many birds, one stone” scenario: stakeholders gain anonymity and they simultaneously create a substantial background volume against which they and non-stakeholders can mix regular transactions. Here is a high level summary of Decred’s mixnet:

  • It is based on the CoinShuffle++ protocol from “P2P Mixing and Unlinkable Bitcoin Transactions” by Ruffing, Moreno-Sanchez and Kate.
  • The mixing process is integrated with the ticket buying process, so stakeholders running ticket buying wallets can purchase tickets anonymously.
  • In addition to having a denomination based on the current ticket price, smaller fixed denominations are used for mixing change and regular transactions.
  • Change from the mixing process requires special handling to avoid linking unspent transaction outputs (“UTXOs”).
  • There is an approximately 12x increase in on-chain transaction storage when using privacy.
  • The initial release is command line interface (“CLI”) only and will only support solo stakers and non-stake transactions.

In the rest of this article, I will cover the motivation behind the decisions that were made to arrive at this system, how the system works in more detail, and what the next steps are after this initial release.

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Surveying the Privacy Landscape

Surveying the Privacy Landscape

In this article I will discuss my views on the existing privacy technology in use in the cryptocurrency space. Since several projects have a primary focus on privacy, I will explain the various privacy technologies, which will help in understanding the route Decred has taken and I will advocate we take. A second article will follow that goes into more detail on how Decred plans to approach privacy. The projects I will cover here are:

  • Monero
  • Zcash
  • Grin/Beam
  • Bitcoin
  • Dash

Note that I will only be discussing the on-chain privacy technologies used in each of these cases, not the entire project. At the end of the article, I have assembled a table comparing the various projects and technologies they use.

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Politeia in Production

Politeia in Production

Today, Decred’s proposal system, Politeia, goes into production on mainnet. This corresponds with the development organization ceding control over the accumulated project subsidy, which is roughly DCR 570,000, currently valued at approximately USD 23 million, to the Decred stakeholders. We have been working towards this milestone for roughly 18 months, so we are very excited to put Politeia into production. That said, it is important to understand that Politeia is a very powerful tool: it can enable all manner of positive developments for Decred, but if used unwisely, it can lead to a wide variety of problems. Politeia allows Decred users and stakeholders to propose, discuss, collaborate on, and fund new projects, initiatives, and consensus changes. If stakeholders exercise bad judgment, it can have serious negative consequences, so I am sharing my experiences and observations as the custodian of the Treasury to date, in an attempt to inform our stakeholders about the potential hazards of this role. Since the launch of Decred in February 2016, the development organization has been very conservative with spending, having spent a total of USD 2.8 million, roughly DCR 130,000, in that period. In the remainder of this entry, I will discuss a variety of topics related to managing the Treasury.

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A New Kind of DEX

A New Kind of DEX

Decentralized exchange (“DEX”) is a concept that has received increasing attention in the cryptocurrency domain as a result of exchanges being hacked, used as exit scams or subjected to regulatory actions. Several cryptocurrency projects exist with the intention of replacing typical centralized virtual-only cryptocurrency exchanges with a token or a blockchain. We propose an alternative to existing decentralized exchanges with the following properties:

  • It facilitates exchange between only cryptocurrencies, not fiat currencies.
  • It is architected as a simple client and server, without a corresponding token or a blockchain.
  • Server operators never take custody of client funds.
  • It uses on-chain transactions for order fulfillment and rule enforcement.
  • Server operators collect no fee for matching orders.
  • Adding support for coins is a straightforward matter of adding the corresponding atomic swap support.
  • Orders placed on the exchange can be internally regulated via rules enforced by the clients and the server.
  • Malicious clients are managed using a reputation system based on Politeia.
  • There is an upfront fee to create a client account on a server, to discourage malicious behavior.
  • Order matching occurs pseudorandomly within epochs.
  • Order sizes on both the buy and sell side of a trading pair have standardized lot sizes.
  • Limit orders and cancels are broadcast by clients via the server, but market orders are routed from client-to-client.
  • Near-instant exchange for smaller orders can be achieved through a related off-chain LN-based network which uses atomic swaps.
  • Servers can connect via a mesh network to allow cross-server order matching.
  • External services, e.g. wallets, can access a simple client API on the server that provides a data feed, ability to place orders, and other services.

I believe this infrastructure has the ability to substantially improve the resiliency of the cryptocurrency ecosystem as a whole, and Decred markets more specifically. In what follows, I will explain the various considerations that have led us to propose the architecture summarized above.

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2018 Decred Roadmap

2018 Decred Roadmap

It is finally time for the 2018 Decred roadmap to be released. 2017 has been quite an eventful year for both Decred and the entire cryptocurrency domain, with exchange rates surging and a substantial increase in interest from the conventional finance sector. Decred has continued with its approach of generating deliverables before hyping them, despite many other projects in the space continuing to relentlessly hype their work far in advance of generating deliverables or focusing on exchange listings in lieu of doing any substantive work. We have substantially improved our marketing in the past several months and expect a strong uptrend to continue on this front throughout 2018. Here is a summary of what we have planned for the rest of 2018 and early 2019:

  • SPV Wallet Support - Instead of taking the typical wallet service approach where wallets connect to a centralized server, we have added support for a proper SPV mechanism that uses compact filters and works over the P2P network.
  • Politeia Voting - Our proposal system is nearing completion and will allow users and stakeholders to make proposals, dictate what does and does not get funded, and participate in project-level decision-making.
  • Lightning Network - The bulk of the work to port Lightning Labs’ lnd to Decred has been completed and it will be released soon.
  • Initial Privacy Release - Privacy work has begun in earnest and we will make an incremental privacy release where we release working code and give further information about our plans and approach.
  • Decentralized Control of Funds - While Politeia voting will be used to control the flow of dev org funds in the meantime, we will be creating a smart contract that will fully decentralize control of the dev org funds.
  • Decentralized Autonomous Entities - Using a similar method as that used to decentralize control of the dev org funds, we will allow for the creation of DAEs on the Decred chain.
  • Scalability Optimizations - A variety of changes, some of which are consensus changes, are required to improve the scaling properties of Decred, e.g. a new signature algorithm, multipeer sync support, and header commitments.
  • Decrediton Integrations - The Decrediton GUI will be adding new integrations to support SPV, mobile, Politeia voting and Lightning Network.
  • Decentralized Exchange - We will draft a proposal for a cryptocurrency-only decentralized exchange and share it publicly.
  • Marketing Growth - Decred has lined up a presence at many of the premier cryptocurrency trade shows for the rest of 2018 and will continue dialing up its marketing efforts.

These roadmap items are discussed in greater detail below.

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