Viewing the privacy of the cryptocurrency era from the "room N incident": most cryptocurrencies in the market are not truly anonymous

Source: LongHash

Editor's Note: The original title was "Privacy and Regulation in the Era of Cryptocurrency from the" House N Incident ""

Room N events

In 2018, high school student god god hacked personal information of underage girls through hacking programs by impersonating police officers, and then threatened to force women to shoot various sexual exploitation videos and step by step to increase control over victims. During this period, god god opened multiple chat rooms on Telegram. The chat rooms are also called "rooms". God god publishes pornographic content in these rooms. The room N incident is named after this.

Until February 2019, god god disappeared. Before disappearing, he transferred the authority of room N to the user "Watch man". "Watch man" required that users must upload evidence of their sexual assault before entering the room. This promotes sexual assault. During this period, room N spread like a virus, and its number rapidly grew from over 2,000 to over 7,000. This also attracted the attention of the police. But the police have not yet taken action, and the "Watch man" and Room N suddenly disappeared in September 2019.

After the "Watch man" disappeared, a man named "Doctor" started operating the room, and the video scale in his room was extremely sought after. In addition, "Doctor" also divided users into different payment levels. The payment standards are 200,000, 600,000 and 1.5 million won (equivalent to 1,149 yuan, 3448 yuan, and 8,620 yuan). Only Bitcoin and Monroe are accepted And other cryptocurrencies. According to Korean media reports, "Ph.D." owns a total of 513 cryptocurrency wallets, and the amount of cryptocurrency in verified personal cryptocurrency wallets used to collect fees in Telegram amounts to 3.2 billion won.

Anonymity of cryptocurrencies

We can see that "Doctor" wanted to evade the government through good "anonymity" at the beginning of operating the "room". He chose Telegram, an end-to-end encryption software, which can prevent the government from publishing about Content review; on the other hand, for the fee part, "Doctor" chose cryptocurrency, hoping to use the good anonymity of cryptocurrency to avoid the government from checking him from the fund end. But also because he didn't know about cryptocurrencies, he chose Bitcoin as a payment medium. It was this decision that allowed the police to trace back the transaction history, and finally traced the real identity of the "Doctor" and successfully captured the blog.

Many people's first impression of cryptocurrencies is that they have good anonymity, but in fact, most cryptocurrencies in the existing market do not have true anonymity.

For Bitcoin, the anonymity of Bitcoin is actually "pseudo-anonymity". In today's payment system, the bank plays the lowest role, and the regulation of the bank's policies requires that the bank must implement the KYC policy, and can only open an account with the customer's real-name certificate. Any third-party payment software is actually based on the banking system. Fund transfers are performed on a basis. In contrast, Bitcoin does not require KYC, and users can arbitrarily generate numerous Bitcoin wallets for receiving and sending Bitcoin. From this point of view, the address of Bitcoin is actually not related to the personal identity in the physical world, which means that you do not need to bind your personal information to own a Bitcoin wallet, and users only need to have Bitcoin and Wallet address, you can perform payment activities.

However, due to the good transparency of Bitcoin, any transfer behavior is open and transparent on the Bitcoin network, and all other addresses that transfer to an address can be found by backtracking the transaction records. If Bitcoin is to be sold in exchange for cash, then a connection to the physical world is created. The police also used the "pseudo-anonymity" of Bitcoin to follow the lead and arrested the "Doctor".

Monero is one of the cryptocurrencies with a very high level of anonymity. Similarly, Monero is not tied to the personal identity of the physical world, and it uses ring signature technology to encrypt the payment address and the payment amount of the transfer. No one except the two parties to the transaction can track the network. Trading activity on the Internet.

In addition to Monero, cryptocurrencies such as Big Zero, Dash, and Grin also have relatively good anonymity. For example, Big Zero uses zero-knowledge proof to achieve anonymity, and Grin uses the MimbleWimble protocol that combines multiple signatures and blind factors to ensure privacy.

Due to the anonymity of cryptocurrencies, they are highly regarded in the dark web where money laundering, drugs, and gun transactions are flooded. These black industries have also cast a shadow on the development and growth of cryptocurrencies. According to related reports, Bitcoin is still the most selected cryptocurrency in the dark web, followed by Monero. Take the "Silk Road" as an example. In the two years from its establishment to its destruction, it generated 9.5 million bitcoin transactions, accounting for more than 80% of the total bitcoin at that time. Not long ago, Weibo user data was leaked, and the data of nearly 500 million users were put on the dark web and Telegram for sale.

Is it a question of transparency or privacy?

With the continuous development and penetration of the Internet, the digital world has become another world parallel to the physical world, and more and more people's activities occur in the digital world. In the future, people's activities in the digital world will occupy people's lives Payment, and payment behavior will become one of the core issues that people face in protecting privacy in the digital world.

From the perspective of the payment system in the world today, banks firmly grasp the bottom of the system, and all payment behaviors are built on the banking system. Third-party payment applications such as PayPal and Apple Pay that people use today capture users through the convenience of upper-level applications. Users use these third-party payment applications while giving up their payment privacy to these giants. the company. With the blessings of big data and artificial intelligence, these third-party payment giants have mastered a large number of users' financial payment behavior data and can describe the user's financial payment portrait in detail, so these institutions have launched a lot of financial products. For example, credit consumer products similar to credit cards, investment and wealth management, and so on. Imagine when the majority of people's activities in the future are in the digital world, do we still have privacy at all? Will these giant companies use our private data to mine, gain insight into human nature, and recommend products that seem to be "unable to refuse", and this continuous cycle has led to giant companies getting bigger and bigger, and "holding our life"?

Many geeks have thought about these issues and are constantly striving for people's right to privacy. Protecting people's privacy is also one of the reasons for the birth of Bitcoin. Just like every coin has two sides, privacy protection has its other side.

Judging from this "room N incident", privacy has also given birth to the dark side of human nature. And this is just a small event in the "dark world", and there are more cruel, violent and unknown information flooding the dark web. According to relevant data, dark web information accounts for more than 90% of all network information. As mentioned before, cryptocurrencies also play an important role on the dark web. They are used as payment media for money laundering, drugs, pornography and other activities, including cryptocurrencies such as Bitcoin and Monero. Cryptocurrency is neutral, and we cannot prevent criminals from using cryptocurrency to engage in illegal and criminal activities. Although cryptocurrencies bring a "more free" world out of regulation, the use of cryptocurrencies in the black industry by criminals has also made the "freer world, a better world" that cryptocurrency creators aspire to. We are farther. To this end, regulators are also continuously introducing regulatory policies for cryptocurrencies.

In June 2019, the FATF issued new regulations that impose stricter and clearer regulatory requirements on anti-money laundering and anti-terrorist financing: virtual currency service providers (VASP), including cryptocurrency exchanges, must involve Information about customers is passed to law enforcement. After the new regulations were issued, some exchanges began to remove highly anonymous cryptocurrencies, including Monero, Big Zero, etc.

This "House N incident" profoundly tells people that the world is not as beautiful as everyone thinks when illegal and criminal activities are not exposed to the sun. People need to start to re-examine and re-balance. Do they choose transparent supervision or privacy protection?

LongHash , read the blockchain with data.