Darkcoin 2.0 Open Source – Interview With Darkcoin’s Duffield

darkcoinlogoHow many one-hit wonders do you remember? Van McCoy did “The Hustle” to the top in 1975. Tony Basil and “Mickey” were all the rage in 1982. Sir Mix-A-Lot made “Baby Got Back” a part of pop culture in 1992.  Many seemed to have the world on a string, at least for 15 minutes of fame. Did complacency, greed, or personal demons destroy them? Usually, it is some, or all three, that turn talented acts into falling stars. In the digital currency community, Darkcoin may indeed be the first to fall into this paradigm.

Darkcoin seems so five years ago. Well, the Darkcoin team is back with an updated Darkcoin 2.0, and I thought I’d reach out to Core Developer Evan Duffield to see if they can end 2014 on the same trajectory with which they started it.

Darkcoin 2.0. Can Darkcoin get it’s mojo back?

DarkcoinIf you don’t already know, Darkcoin was released in the first quarter of 2014, and it’s unique selling proposition as a digital currency was it’s enhanced privacy and security structure relative to the almighty Bitcoin. A minor-league detective can figure out the transaction origins made on Bitcoin’s Blockchain, and mine your privacy, in effect. Darkcoin aims to take your financial dealings into total darkness, with a security-centric design language.

The main advantage of using Darkcoin is their proprietary form of funds transfer called Darksend. How Darksend works is if you want to send funds to someone anonymously, your transaction is merged with another similar transaction, like shuffling a deck of cards. The recipient gets the amount of Darkcoins promised, but the nature of the actual transfer prevents tracking of the funds from Point A to Point B.

Picture a game of 3-card Monty, but with eight “Master nodes” instead, and you’ll have a basic idea. Multiple transactions are used for “mixing” the transactions to protect the information from prying eyes. You can also adjust the setting to not be so private. The premise behind Darkcoin is why not have any financial transaction online be as secure as possible, and why have a Blockchain full of eyes on any transaction you make if you do not wish? You can have maximum security and ease of use, according to Darkcoin’s Duffield.

Sounds awesome, in theory, and is a goal not just shared by Duffield and his team, but many digital currency users worldwide. Darkcoin’s initial demand, price, and market capitalization were unprecedented in their growth. Darkcoin hit a live nerve in the marketplace, and the crypto-currency community ate it up. It’s price shot up to over $15, which is obviously affordable, yet shows tremendous market interest & growth potential. It took Bitcoin almost four years to reach that price level!  It had already passed most of the established players to become the #3 digital currency overall by May 2014. It peaked with a total market cap value of over $62 million on June 1st, after just four months on the market. Given the incredible price growth shown by Bitcoin just six months earlier, Darkcoin was in the right place at the right time, and the market was all ablaze for an even more secure Bitcoin.  And Darkcoin’s glass slipper fit perfectly…

Then, it happened…

The Darksend technology was introduced in May, and issues came about almost immediately. As sometimes happens during coin updates, the “Master Node hard fork” caused some new issues. Some Master Nodes were not processing transactions correctly, and spontaneous forks began cropping up within the network, causing panic among Darkcoin owners. Due to these issues, exchanges had to halt trading at times for several hours. Investors then began panic-selling their holdings, which caused the Darkcoin price to plummet. Darkcoin not only lost it’s momentum, but couldn’t stop its downward spiral throughout the summer. The descent bottomed out in August, with a new 90-day low price of $1.54 on August 18th, an almost 90% loss in value.

Is that the end of Darkcoin’s tale? Yes, the first version of Darkcoin, anyway. Now Duffield’s team has released Darkcoin 2.0 at the start of the fourth quarter, and it has a host of revisions meant to get it back to it’s once prominent position as Bitcoin’s darker, more clever cousin in the marketplace.  So here are five questions and answers with Evan Duffield, the core developer of Darkcoin. He explains where DRK has been, where it is right now, and what Darkcoin may bring to the future of digital currency.

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What happened in the Spring that cause Darkcoin to go from the hottest coin on the market to a cautionary tale? Darkcoin must take some responsibility for the precipitous drop in value, losing tens of millions in cap value as quickly as it was gained.

Crypto-currencies, in general, suffer from high volatility, prices fluctuate a lot depending on market sentiment and speculation, this is for the most part outside of the control of any development team. If you take Bitcoin, for example, it peaked at around 1200.00 USD towards the end of last year and is now trading below 400.00 USD. At the same time, Bitcoin has seen amazing progress in the adoption and general market awareness. This is true for Darkcoin too, the project has matured tremendously, and we must separate the quality, future potential and added value proposition of the coin from its short-term price fluctuations.

Back in May, Darkcoin was a very young coin, only five months old, and the market was quick to recognize its potential. This leads to tremendous growth in a very short period, and when this happens, it can often be followed by a consolidation phase. Traders take a profit, and this had a lot to do with the subsequent price decline.

We also went through some difficult moments as we brought new technology to production, back then; we were using hard forks for updates that required fundamental changes to the coin. A hard fork is a very delicate process and back in May we had to revert two hard forks to ensure stability of the network and the market didn’t like that. In the end, these challenges had a very positive outcome, as the development team came up with a new way to bring new features to production.

We don’t need to use hard forks anymore, which is what caused the issues. We now use a phased approach we call the “spork”, by which updated code is released to the network, but not immediately made active (or “enforced”) which is a way safer method of implementing new features. With this approach, those who update their clients run the new code, but in the event of errors occurring with that new code, the client’s blocks are not rejected by the network and unintended forks are avoided.

Once the development team is satisfied with the new code’s stability in the mainnet environment, and once acceptable network consensus is attained, enforcement of the updated code can be activated remotely. Should problems arise, the code can be deactivated in the same manner, without the need for a network-wide rollback or client update. This puts Darkcoin in a position where we can innovate with confidence and without worries of ever running into such problems again.

How do “Darksend” and “The Master Nodes” work to help user security. Why should a new user trust them?

The Darksend technology is designed to protect its users privacy. It stores pre-mixed, denominated Darkcoins in the user’s wallet, to be used instantly at any time the user desires. The mixing and denomination process is seamless, automatic, and requires no intervention on the part of the user. Master nodes are nodes that help coordinate the Darksend process and are compensated by the network for their service. They are run independently by users to create a decentralized architecture; anybody can run a master node, we currently have around 900 master nodes running all around the world.

The system works by breaking Darkcoins up into smaller pools of funds – called “denominations” – and by making ownership of those denominations ambiguous. Users may indicate their desired level of privacy, by selecting between 2 and 8 “rounds” of mixing, a randomly selected masternode is used to coordinate each round.

In each round, three or more Darksend peers will create a common transaction, each feeding their input funds into the transaction and receiving output denominations out of it. That cannot be clearly attributed to either user. Funds are broken down into common, denominated amounts so that the greatest number of users can mix funds with each other in this fashion. The sameness of denominations is what provides the ambiguity of ownership. You can think about it this way: Imagine you’re flying in a helicopter trying to track a red car on the highway, and it passes under a bridge. If two red cars emerge on the other side of the bridge, it’s ambiguous which one you want to follow. If a blue car and a red car emerge, then it’s not ambiguous at all, and the chase ensues. By going through the Darksend process multiple rounds, users can achieve a very high level of privacy.

As to why users should trust Darkcoin works as intended, you must know Darksend has already passed code reviews by external auditors. The code is now fully open source so that anyone can verify it or assist in improving the technology.

Darkcoin Darksend Technology Diagram

Darksend technology makes securing your Darkcoin into an elaborate game of  digital slight of hand. User security has been vastly improved.

When will this new technology be available, and who is your target market for it?

Darkcoin’s privacy technology is already working in production and was completely open sourced on Monday.

Darkcoin is a currency, and as such is appropriate to be used as a means of exchange for products and services in every market segment. Darkcoin is digital cash. We are adding value in areas where there was room for improvement, like privacy or transaction speed. These are attractive features for users and should be available to people in the same situations where they use traditional money or other crypto-currencies.

What is your long-term goal for Darkcoin? Will it be accepted in stores? What is the long-term strategy?

The long-term goal for Darkcoin is to help crypto-currency technology evolve and realize its full potential by bringing innovation and value to the market.

We see Darkcoin being accepted in stores and businesses, it is adding value to users in some key areas that should facilitate its adoption in the future. Contrary to popular belief, Bitcoin transactions are not private and they remain openly accessible on the Internet for anyone to see. Although this is great for many things, it creates an opportunity to offer an alternative for businesses or individuals that want to adopt crypto-currencies, but don’t wish this information to be publicly available.

Darkcoin comes to complement Bitcoin as you can easily work with both while using Darkcoin to keep the sensitive part of your finances private. This can be great for merchants in competitive situations, as tools to mine data from the Bitcoin blockchain become more prevalent we must also create options that protect the businesses privacy.

Is this a Darkcoin redesign, and what is coming in the future?

The version of Darksend that was finally open sourced on Monday, is an improved redesign of the original technology we used in our first beta releases. Previous versions gave the development team some amazing experience that was used to develop Darksend, so it comes to market as a very mature system.

We are now working on new features to further improve the coin, including the instant transaction confirmation speed. Traditionally, crypto currencies take a long time to confirm a transaction fully, making them less useful for certain applications. The Darkcoin development team has come up with a design that may allow Darkcoin to compete with traditional payment systems like credit cards in point-of-sale situations by reducing the confirmation time to as little as twenty seconds.

We have some other secret projects we are not ready to reveal yet but we have created a very solid foundation to continue to innovate at a very accelerated pace.

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Special thanks to Daniel Diaz of Darkcoin Business Development for making this interview possible.

Images from Darkcoin and Shutterstock.

Additional source:  CoinMarketCap.com