Bitcoin, despite its reputation as anonymous internet cash, was never designed for perfectly private payments. For the promise of fully untraceable money, cryptocurrency fans have been waiting for Zerocoin—a technology designed to have default uncrackable anonymity. After years of development, that incognito cryptocash is finally showing signs of a life, now in the form of a stealthy startup.
Late last week, a company calling itself the Zerocoin Electric Coin Company published a post on AngelList, a website startups use to raise funds from private investors. Zerocoin’s new CEO and co-founder, cryptographer Zooko Wilcox-O’Hearn, confirms in an email to WIRED that the company will put into practice the Zerocoin (alternatively known as Zerocash) design initially created by a team of encryption researchers at Johns Hopkins in 2013, with the goal of creating a bitcoin-like currency with the greatest privacy and anonymity protections that modern mathematics can offer.
“Bitcoin is HTTP for money. We are HTTPS,” reads Zerocoin’s AngelList description, an analogy to the layer of privacy enabled on encrypted web pages versus the surveillance perils of visiting an unencrypted site.
In fact, Zerocoin’s privacy advantages over bitcoin could be even more substantial than that HTTPS comparison implies: Bitcoin transactions are published on the blockchain, the public record of all bitcoin payments that serves as the backbone of the bitcoin economy. Any slip-up that identifies a user’s bitcoin addresses also makes it possible for anyone to trace all of his or her payments from and to those addresses. Zerocoin’s blockchain, on the other hand, uses a cryptographic trick known as a “zero-knowledge proof” to guarantee that transactions in the Zerocoin economy aren’t fraudulent or forged. But that zero-knowledge feature means that in contrast to bitcoin, Zerocoin’s blockchain doesn’t reveal anything about the payment’s origin, destination, or even the transaction’s amount. (Read the full paper Zerocoin’s creators presented at the 2014 IEEE Security and Privacy conference here.)