How to Protect Your Financial Data Like a Spy

In any movie that involves an intelligence agent on the run from the government, the first things she discards are her phone and credit cards. The reasoning behind the first is quite obvious — since any phone can be tracked, but the same is true about credit cards.

We live in a society that is becoming increasingly cashless. In the West, people are relying on credit cards and in the East, especially china, people are relying on phone wallets like AliPay. As we walk down the path of the extinction of physical cash, spy movies might start displaying agents bartering for their meals since cash won’t be an alternative to credit cards. Even though the chance of me some day becoming a secret spy are bleak at best, I recognize the importance of privacy. I don’t recognize its importance because I am a fan of privacy; I’m one of the millennials willing to give up every inch of privacy for convenience. I’m recognizing the importance of privacy because I know that not everyone is like me.

Many people do genuinely care about their privacy and there’s a good chance every single transaction they make would soon be stored as data across servers all over the world. Marketing companies crunching the purchase data to learn what ads to show, governments analyzing the purchase detect patterns of deviance from what is deemed normal by society, or may be just stalker exes trying to track purchases to figure where to “bump” into their prey. Ok, I might be getting a bit carried away, but still privacy over expenses and finances is becoming difficult and the problem is only exacerbating.

Surprise! Blockchain is Useful

A lot of pundits giddily claim that blockchain technology serves no real utility. Here’s some apples for these guys: blockchain technology can deliver private transactions, truly private transactions.

Blockchain to the rescue!

A lot of research has been done in cryptography to ensure security of messages. Some of this research stemmed a bit deeper in order to make transmissions completely invisible. The product of this research is the Zerocoin Protocol, which allows the creation of permanently untraceable transactions. When a zerocoin transaction is made, zerocoins are withdrawn from a collective escrow. At the point of withdrawal, the coins’ transaction histories are permanently erased. Once a transaction is made with the zerocoins, a strong of algorithms create a zero knowledge proof of the transaction. This proof only ascertains that a transaction of a certain amount was made without needing to disclose any other information. Due to the zero knowledge proofs, zerocoins can be spent without ever leaving a trace of their source wallet prior to the spend.

Credit cards and mobile payment means are easily traceable since our identities are binded to them. However, zerocoins maintain absolute anonymity without relying on any third party tool. Transactions with zerocoins give people the power to protect their financial data from the government, nosy marketers, and even dangerous exes.

More than just a Theory

Unlike many mathematical solutions, the Zerocoin Protocol isn’t jut a theory because existing cryptocurrencies are using. Zcoin, PIVX, and VEIl are three prominent examples of cryptocurrencies that use the Zerocoin Protocol. Zcoin was the first of these.

Zerocoin Protocol was founded in Johns Hopkins University. Professor Matthew Green and a number of graduate students were attempting to solve an important problem in public networks. All transaction data on a public network is visible. Given that governments and large marketing firms have virtually infinite resources, they can potentially use machine learning on a public wallet address’s transactions to locate a person. Professor Green and his graduate students managed to solve this problem by creating the Zerocoin Protocol in 2013. Just a year after that, another one of Green’s students decided to apply the Protocol into a real cryptocurrency, and so Zcoin was created.

Professor Matthew D. Green

Zcoin is the first privacy coin but it certainly isn’t the last. Lots of privacy coins have emerged over the years, each trying to claim the title of the best privacy coin. However, not all privacy coins use the Zerocoin Protocol since new researches in the field of cryptography have led to new ways of anonymizing transactions. Slowly, the Zerocoin Protocol is fading as newer technologies replace it, but there’s a team of developers who are intent on not letting that happen.

The developers behind PIVX, an anonymization cryptocurrency launched in 2015, are now creating a new coin to dethrone PIVX. After being involved with privacy coins for the several past years, PIVX’s team has learned the problems with their privacy coin and also other privacy coins. These developers are now working on Veil Project. The Veil Project is a new work that uses the Zerocoin Protocol, along with other technologies, to create a privacy coin. As was mentioned earlier, when a zerocoin is spent, zero knowledge proofs provide verification for the transaction without needing to disclose any other information. The problem is that the Zerocoin Protocol can allow people to spend another type of network coin called basecoin.

Basecoins and zerocoins both can be used to spend the money in a wallet. The difference is that zerocoin payments will be untraceable but basecoins payments will be visible on a public chain. This is a problem Particl and Monero have already solved through RingCT signatures. VEIL cryptocurrency has multiple technologies at work to make sure transactions are anonymous when spent as zerocoins and also when spent as basecoins.

Blockchain for Anonymity

For those of you who are not like me and actually care about your privacy, you have an opportunity to protect your financial data. Cryptographic solutions are being used in different blockchains to make your payments permanently untraceable.

This is one of the greatest use cases of blockchain technology and the best part is that unlike advanced supply chain solutions or data value protocols, privacy coins are already here. The option is yours on which you want to use.

How to Protect Your Financial Data Like a Spy was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.