Decred Privacy: Taking The Long Road
“Intelligent design.” It’s invariably my response when people ask why Decred is different or better than Bitcoin or other cryptocurrencies. Decred is constructed in a way that simply and elegantly aligns interests to make it more secure, adaptable, and sustainable. This carefully thought-through design is why it will be funded for decades and outlast so many flawed iterations of digital currency to become a superior store of value. It often takes significant time for the implications of the design to become internalized, but when it does, people become true believers and often join the project as contributors or contractors.
Incremental Privacy and Security — Privacy and security are priorities and shall be balanced with the complexity of their implementations. Additional privacy and security technology shall be implemented on a continuing and incremental basis, both proactively and on-demand in response to attacks.
Privacy: A Basic Human Right
The Decred community views privacy as a basic human right, one that has been eroded by technology over time. When Silicon Valley start-ups helped usher in the internet age, getting big fast overrode any need for a revenue model. In the end, free content meant personal data became the product, and many talented scientists have spent the last two decades figuring out how to track, influence and monetize your actions. Decred believes this is not only a societal misallocation of human capital, it’s unethical. This data, which includes demographic, psychographic, location, and more, can be extremely dangerous in the wrong hands, particularly in the case of digital bearer instruments. Decred believes in every individual’s right to opt out of surveillance.
Many initially thought cryptocurrency meant a higher degree of privacy for users. But time has made everyone aware that pseudonymity does not mean anonymity, particularly in a world where governments attempt to superimpose legacy banking functions such as AML/KYC on exchanges that serve as on-ramps to crypto. In this world, blockchain analysis can link user activity to actual, real-life identities. Decred believes that users should be allowed to transact anonymously, as they would if they were using cash.
Surveying the Privacy Landscape
The Decred team surveyed many privacy implementations in use across the landscape, with the goal of providing incremental privacy, while minimizing complexity. Ultimately Decred decided to use none of the common systems in use. Each implementation has its own strengths and weaknesses, but Decred brings its own idiosyncrasies with its on-chain governance system. Decred’s governance system works via tickets, which can be purchased by time-locking your DCR in exchange for formal voting rights on consensus changes, project management, and for validating the work of the miners in each block.
These tickets are, on average, purchased one every minute. As such, approximately 1,440 are purchased on a daily basis, and at the current price of 132 dcr per ticket, that totals 190,000 dcr per day of transactions on-chain. These transactions represent the kind of churn that coin mixing techniques need to work most effectively, a creative opportunity for Decred to supercharge a tried and tested approach. Additionally novel, much of the privacy work occurs off-chain, avoiding bloat found in other solutions.
Decred recently released its privacy details and code, and all the hallmarks are present. Once again, Decred is balancing complexities to find a simple and elegant solution to user privacy that creatively leverages its intelligent design.
Privacy for the Long Run
The most critical aspect of Decred Privacy is that it’s being built in a sustainable manner. Decred is secure, adaptable, and sustainable in order to be a long term store of value. As such, Decred Privacy is designed for a long horizon, which is why it had to be prunable. A blockchain cannot serve as a long-term store of value if its data size is too large to be stored and verified by its decentralized community. Multiple projects have selected complex implementations that deliver high levels of privacy, but at the cost of the ability to prune the blockchain. So while some chains push problems down the road, Decred builds in solutions from the start.
Additionally, a critical differentiator from other privacy implementations, on-chain transactions can be audited, ensuring there is no silent inflation. Decred is based upon a deterministic issuance schedule with maximum 21 million DCR, and that social contract is vital to Decred’s ability to serve as a long-term store of value. Further, Decred’s governance system could be gamed in that scenario, which is why implementations that could compromise this contract were simply not considered.
Keeping it Simple
Decred’s approach is striking in its simplicity. Cryptography is quite complex, but the math, code, and concepts involved in Decred Privacy are well-understood and tested. This is not bleeding-edge, cross-your-fingers, hope this works code. It’s built from a solid foundation with durable materials in a minimalist way. Decred Privacy’s core logic required only hundreds of lines of code, compared to thousands or tens of thousands of lines of code for the core logic of other, more complex privacy implementations. Less code means less to break. If people rely on a system to act as money, it needs to be secure, reliable, and it cannot break.
Privacy is Incremental
As per the constitution, Privacy will always be added on an incremental basis and in response to any attacks. So while other projects move quickly and break things, Decred maintains its focus on the long term, building and continuously releasing software that works and serves the interests of its holders.
Decred sets its focus on low hanging fruit seeking to iterate and evolve in prudent fashion. Immediate next steps include the addition of a GUI and changes to enable Voting Service Provider (VSP) users to participate, which will enable those who are less tech savvy to opt-in and choose their level of anonymity.
Beyond expanding the user base of Decred Privacy, the next major iteration is likely the addition of Confidential Transactions in the form of bulletproofs. This work will anonymize transaction amounts, which will make Decred Privacy even stronger. This work requires changes to the consensus rules, which involves the normal governance process of a Politeia Proposal, voting, code submission, and adoption. With these next steps, Decred will enhance its position as a long-term store of value while offering true fungibility and retaining its immutability.
One major benefit of Decred Privacy is that it can be made post-quantum secure. While we don’t know when computing will enable certain types of attacks, we know it is an inevitability. We also know that warnings are unlikely, because the technology will be kept secret by state governments on account of national security concerns. As a secure store of value, Decred plans to be ready for these threats — others may not be.
How it Works Today
Decred’s initial implementation seeks to break the link between sender and receiver to create user anonymity. As per usual, Decred has veered from the trodden paths and identified a simple and creative method based on CoinShuffle ++. It uses a simple client-server architecture in a non-custodial process to create a Coinjoin of transaction outputs that are anonymized via a mixnet. The process leverages the high volume of daily ticket transactions from Decred’s governance system to help fill the mixer. For a more detailed and technical explanation of the system, refer to Iterating Privacy by Decred Project Lead, Jake Yocom-Piatt.
A Cairn on the Path
Decred Privacy is an exciting microcosm of Decred. It’s intelligently designed for the long term. It uses simple code and proven cryptography, creatively leverages Decred’s governance system, and will iterate over time. It balances complexities while retaining the ability to be audited and pruned to ensure Decred is a superior long term store of value. Just a few hundred lines of elegant, core code have delivered plausible deniability for users. The initial path has been revealed, with many more exciting points along the way visible across the horizon. Best of all, the future is in the hands of the stakeholders in the sovereign digital state of Decred.