Why privacy currencies matter and some exciting updates on Firo
Since we listed Zcoin back in 2020, a lot of things have happened. Among others, the privacy-focused cryptocurrency isn’t called Zcoin anymore but re-branded to firo.
In this post, we’ll give an overview of the most important upgrades and developments at firo in the last few months.
Yet, first things first, why do privacy currencies matter? While cryptocurrencies are now more than ten years old, the myth persists that all crypto transactions would be anonymous. Most major marketcap cryptocurrencies record all transactions in a public ledger. While the wallet address you use might at first glance not reveal much about you, Chain analysis companies have become increasingly good at identifying the individuals behind wallets. What might be great to prosecute crime is less ideal for someone who wants to maintain their financial privacy.
“Arguing that you don’t care about the right to privacy because you have nothing to hide is no different than saying you don’t care about free speech because you have nothing to say. “ Edward Snowden
Privacy cryptocurrencies are working on providing ways for individuals to transact in a confidential, anonymous manner without sacrificing security. Many privacy cryptocurrencies rely on a concept known as zero-knowledge proof, enabling one party to prove they have a piece of specific information without revealing that information. For more on zero-knowledge proofs, you can find an introduction here.
However, the lack of anonymity in mainstream cryptocurrencies isn't the only raison d’etre for privacy currencies.
Cash isn’t king anymore.
Accelerated by the Covid-19 pandemic, governments worldwide have pushed to increase cash-less payments. What looks convenient at first is the perfect surveillance tool when you think of it. Assuming you use one bank card for all your costs, your bank can gain quite a clear picture of where you’ve been and what you’ve been doing.
Is it far-fetched to assume that one day this data could be used to make decisions on your credit score or the premium you might have to pay for insurance? Maybe, but maybe not. As we currently witness the emergence of a social credit score in China that considers the payment data of citizens, it’s not hard to imagine how other governments might not be able to resist the temptation of monitoring their citizen's payments.
One tool that would help central banks in doing so is CBDCs or Central Bank Digital Currencies. These currencies represent the official currency of a country but in a digital format, often on a transparent blockchain. While often celebrated by blockchain advocates as an important step towards further adoption, they are a privacy advocates nightmare. As CBDCs run on an immutable ledger, they’re the perfect tool for tracking all transactions. Coincidence that China is pressing ahead with this technology? Anyone’s guess.
Financial choices are limited.
Some countries also have unclear policies surrounding transactional freedom. While they often claim that bans on privacy currencies are set in place to prevent crime, they still limit individual’s choices and increase the control these countries have about financial information. In some cases, such as donating money to protesters in Hong Kong, a privacy currency might be the only viable option to support a cause without jeopardizing one’s safety.
All these are important reasons to use a private cryptocurrency like firo. firo has undergone a lot of development over the years to make it easier to use, more secure, and more importantly, ever-increasingly private.
What is firo?
In 2014, Poramin Insam, a graduate of the John Hopkins University, first thought about implementing a privacy protocol into a cryptocurrency. In 2016 the idea then became a reality in the form of “Zcoin,” the first cryptocurrency that implemented the Zerocoin protocol — since the name has changed to firo.
Despite experiencing a hack shortly after inception, the community behind firo (formerly Zcoin) stayed strong and loyal while the developers continued fixing further flaws. One event that might have contributed to the high standing of firo with their community is how they handled exposing another flaw they found later during 2017. Instead of hiding it, they openly addressed it with the caveat that an attack would be economically nonsensical.
Without getting too deep into the workings of firo, transactions are kept private by the process of burning coins and then retrieving others. This is aided by implementing zero-knowledge proofs that can verify transactions without revealing any details on the sender and receiver end. You can find a more detailed description of this process here.
Other notable features of firo include the Dandelion protocol introducing the possibility of hiding IP addresses without using VPNs or TOR. Another one is the focus on GPU mining, making it easier for average users to start mining while also benefitting mining farms.
firo also made a splash using their blockchain in real life when they facilitated the elections of the Democratic Party in Thailand, which used blockchain to process vote counting and verification.
As already mentioned, firo went through a rebrand in October 2020. One big reason for that was that people would constantly confuse Zcoin with Zcash. While both started out using the Zerocoin protocol, firo has since moved on using their own technology. Introducing Firo as a brand emphasizes the proprietary technologies the team is using while also making it a lot easier to mention as units of currencies: 2 firos.
Lelantus is a new protocol that the firo team recently implemented to address certain challenges the cryptocurrency was still facing. The most important change that came with the new Lelantus protocol is that it allowed users to burn any denomination improving the anonymity set.
Previously, when users wanted to send a transaction, they could only burn coins in pre-specified denominations such as 1, 25, 50. They also had to redeem all the coins they burned, so if they burnt 10, they had to redeem 10, which greatly limited the usability and anonymity. When transferring 1 coin, the anonymity set was based on how many other 1 coin mints happened.
With the introduction of Lelantus, users can burn and redeem any amount they like, as they can keep a rest burnt. This makes firo a lot easier to use. At the same time, Lelantus also increased the privacy of the protocol as no separate sets of mints for each denomination are required anymore. All denominations are so made equally private.
Lastly, Lelantus has improved the performance as proofs now just take 200ms to verify per proof significantly faster than before.
The blockchain underlying firo relies on Proof-of-Work as a consensus mechanism. Like all Proof-of-Work chains, this makes the currency vulnerable to so-called 51% attacks. During a 51% attack, an attacker gains 51% of the whole computing power of the network, allowing them to exploit the network. Another risk with Proof-of-Work algorithms is the lack o finality. Theoretically, any PoW chain could be rolled back if someone had sufficient hash power. In the case of a network as big as Ethereum or Bitcoin, it’s less likely to happen, but especially for smaller currencies, it’s an immediate threat.
To address these risks, the team implemented Chainlocks. Chainlocks prevent 51% attacks and solve the lack of finality by using quorums of masternodes that sign and checkpoint blocks. Each quorum consists of 400 masternodes, and several quorums exist at any given point in time. Members of the quorum will sign the first valid block, and as soon as 60 % or more of a quorum has signed, the block is final and can’t be reorganized anymore. With ChainLocks enabled, a 51% attack is rendered impossible. To run one master node, a user has to put up 1000 Firo in collateral, while to be a threat to the whole network, an attacker would need at least 2,000,000 FIRO. As Firo is trading at $6,67, that would be a sum higher than 12 Million. You can find more calculations here.
Increased Research efforts
Anyone following the Zcoin/firo journey will inevitably notice the amount of research going into creating this privacy currency. Recently, the firo team has announced that Dr. Aaron Feickert joined their team to help drive quality research regarding blockchain privacy forward. Dr. Feickert has a track record of working in the blockchain space for years and developed expertise, particularly in the field of privacy currencies, as he’s also served as a Monero Research Lab Researcher.
How the firo team describes firo to someone who isn’t familiar with crypto.
Firo advocates for true financial privacy and allows you to transact with other individuals without fear of being traced, whereas cryptos like Bitcoin broadcast transactions in public ledgers.
Our users value their privacy and want their everyday purchases to remain private to them. We sometimes like to compare ourselves to paying for items with cash since there’s no data exchange behind cash transactions but in crypto form.
Overall, this privacy currency has steadily innovated and developed its tech to have an edge against others. A few things to point out here are that with the implementation of Lelantus, they’ve increased the anonymity set by including everyone in the anonymity pool. Furthermore, privacy when transacting with firo is by default, with the option to opt-out to facilitate, for example, exchange integration.
Unlike other privacy currencies, firo utilizes a trustless setup and the Bitcoin code-base, which facilitates implementing other services and products. While many currencies conceived in the 2010s didn’t survive until today, firo continues pushing forward and advocating for much-needed privacy in an increasingly transparent world.
What’s more, the team is currently working on releasing Elysium, a tokenization layer that will enable developers to issue entirely private tokens — something that’s not been possible yet. Firo is definitely one to keep an eye on.