Dark Wallet May Make Bitcoin Even Harder to Trace

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Upcoming Bitcoin app Dark Wallet privatizes bitcoin transactions, and was partly created to help money launderers and other criminals.

Credit: Defense Distributed/YouTube

(Image credit: Defense Distributed/YouTube)

The digital cryptocurrency Bitcoin already has a lot of built-in security and privacy features. But thanks to a Bitcoin storage app called Dark Wallet scheduled to be released tomorrow (May 1), Bitcoin may become even more difficult to trace. Dark Wallet's creators have said they created the software to help criminals disguise their activities online.

Dark Wallet is developed by a group called unSystem whose members include Cody Wilson, creator of the world's first 3D-printed gun, the Liberator. Both projects share similar political goals: to thwart any and all government regulations.

MORE: FAQ: What is Bitcoin?

Bitcoin is not inherently illegal or malicious, though it's often the currency of choice for criminals because it operates independently of any government and is difficult to trace. But Dark Wallet's creators say their app was created with criminals in mind.

"It's just money-laundering software," Wilson said at a debate at the New York Museum of Modern Art.

The Dark Wallet app, which will be available as a browser extension for Google Chrome or Mozilla Firefox, appears as if it will be free to use. The project was partially crowdfunded on Indiegogo last fall, where it raised a little more than its goal of $50,000.

In March, the U.S. Commodity Futures Trading Commission announced it was considering whether to regulate Bitcoin and other electronic currencies. The New York State Department of Financial Services has stated it intends to regulate Bitcoin and to work with established Bitcoin exchanges to do so.

The members of unSystem see this trend toward Bitcoin regulation as a threat. In a decidedly libertarian YouTube video advertising its (now closed) IndieGoGo campaign, the group compared government regulation to a straitjacket.

Created in 2009, Bitcoin is a decentralized, digital-only currency that uses a peer-to-peer computer network to maintain transactions and generate, or "mine," new bitcoins via a complicated mathematical algorithm. Bitcoins are sent and received via a Bitcoin address, a long string of numbers that resembles alphanumeric gibberish. Individuals can register and use multiple Bitcoin addresses.

Each address also comes with encrypted "public" and "private" keys. A public key is needed to send bitcoins to the corresponding address, and a private key is needed to access the bitcoins belonging to that address. Private keys are stored in an application called a wallet.

As it currently exists, Bitcoin transactions are very anonymous, but not at all private. All bitcoin payments are publicly recorded in an official log called the blockchain and identified by their Bitcoin address. 

Dark Wallet makes bitcoin transactions private as well as anonymous. It does this using a technique called CoinJoin, which automatically combines every transaction with that of another randomly chosen transaction.

Every time this happens, the transaction becomes twice as hard to trace, according to unSystem member Amir Taaki, as reported by Wired.

Email jscharr@techmedianetwork.com or follow her @JillScharr and Google+.  Follow us @TomsGuide, on Facebook and on Google+.

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Jill Scharr

Jill Scharr is a creative writer and narrative designer in the videogame industry. She's currently Project Lead Writer at the games studio Harebrained Schemes, and has also worked at Bungie. Prior to that she worked as a Staff Writer for Tom's Guide, covering video games, online security, 3D printing and tech innovation among many subjects. 

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5 Comments Comment from the forums
  • icraft
    wat
    Reply
  • stridervm
    As long as you can lose every bitcoin you just because your flash drive malfunctioned it will never catch on. Besides, it's more worth it to kill the "stores" (Such as silkroad) that accept bitcoin that to stop the users from using Bitcoin itself.
    Reply
  • dro2
    As long as you can lose every bitcoin you just because your flash drive malfunctioned it will never catch on. Besides, it's more worth it to kill the "stores" (Such as silkroad) that accept bitcoin that to stop the users from using Bitcoin itself.

    You have no clue what you're talking about...
    Reply
  • Sklug
    f
    As long as you can lose every bitcoin you just because your flash drive malfunctioned it will never catch on. Besides, it's more worth it to kill the "stores" (Such as silkroad) that accept bitcoin that to stop the users from using Bitcoin itself.

    Really? You don't understand digital currencies then. The point of them is that they are supposed to be like cash. If you lost your wallet with cash in it, sorry, that cash is gone forever. That is what makes them so useful. What you CAN do with digital currency is make a few backups in case your computer crashes, or as you say, you lose your flashdrive. When you actually want to spend some, you just transfer the amount you want to spend. Kind of like a real wallet, where you don't withdraw and walk around with all the cash of your entire bank account, but maybe a couple hundred bucks for a night out.

    The best thing of it all is it is really really really easy to do, nearly instant, and no middle man fees.

    I think the disconnect with digital currency now is people are so used to trusting banks to hold their money, which is FDIC insured. Digital currencies do not have that same type of security. But they also don't have to deal with banks. Furthermore, digital currencies are there largely to exist free of governments and regulations, relying purely on the natural market of supply and demand. It is a philosophy that might not be all that crazy. Remember when Greece this past year was about to collapse? Guess what happened when the people there tried to go to a bank to get their money... the Greek government said "Nope!" and shut all the banks down... At the end of the day, countries like Germany, richer countries bailed them out.

    What will happen if a day comes where America's debt problems get the best of us? There is no one to bail America out. A lot of people don't think it's possible, but it's possible.

    Even if none of that ever happened though, digital currencies are amazing, and they are not going anywhere and will only get easier to use. Look at the recent successes of Dogecoin... my mother, probably the most computer illiterate person that I know asked me the other day about how to get coins. Seriously... It might take 2 years, it make take 10, but it's gonna happen...
    Reply
  • tomrippity02
    Really? You don't understand digital currencies then. The point of them is that they are supposed to be like cash. If you lost your wallet with cash in it, sorry, that cash is gone forever.

    But people don't like to carry cash anymore, so the idea of it being like cash isn't really a positive and realistically, once you have a checking account setup and direct deposit for pay checks, you don't really deal with the banks much. I have an app that I can use to transfer funds, check my balance, pay bills, etc...

    You would need all of the same tools with bitcoins, except at the end of the day, no one is really responsible for your bitcoin except you. Banks are held responsible if they lose my money and since it is insured I will get it back. Also, my wallet may have 30 bucks inside of it, not thousands of dollars worth of bitcoin like a flash drive might have.
    Reply