The Rise of Darkcoin

4 minute read

Posted by: Cipher </span> May 20, 2014

Edit: Due to some error on the site i reposted this article again, losing all its social stats. sorry.

The appeal of Darkcoin (DRK) to users of darknet or deepweb marketplaces is fairly obvious. It’s a currency designed with strict anonymity in mind and it may finally be the first alternative cryptocurrency to have cracked how to accomplish that. For this reason it has been climbing up in price for the past few days as traders come to realize the hype is not simply another round of ‘pump and dump’ (where forks of Bitcoin are talked up to inflate the price beyond any reasonable additional feature beyond design/name/logo).

If Darkcoin is the Litecoin killer it is precisely this because it acts as Bitcoin’s hand-to-hand double. If the mantra is that Litecoin is the silver to Bitcoin’s gold then we can say Darkcoin may well become the anonymous cash to Bitcoin’s recording system (the blockchain when one has not taken sufficient action to anonymise a transaction).

Bitcoin remains tricky for deep web marketplaces because its recording of transactions means it remains open to public analysis. Not many users can be identified through an IP address in the days of VPNs – unless DNS leaks come into – or Tor (or I2P). As a transparent network by nature Bitcoin further allows for wallet analysis whereby one can piece together connected accounts through good old fashioned research. It’s a lot of work for the casual marketplace user to keep on top of all this and everyone knows people sometimes get sloppy.

What Darkcoin offers is an in-built process of obfuscation wherein coin-mixing is not a service provided by outlets such as Bitcoin Fog, but a feature known as Darksend considered essential to the Darkcoin project as such. Coins will be jumbled in master nodes and further pooled together to ensure anonymity. Darksend comes with a small price in this regard. The process will ensure transactions are slower, but that’s likely a price most people will be willing to pay. This will all be powered To entice users to run these masternodes 10% of all blocks that are mined are funnelled back to those running the service (currently one needs 1000 Darkcoin in order to be able to run one).

Given the current cost of Darkcoin this further displaces the risk of someone buying up all the masternodes and as time passes that will become very difficult indeed. This is a stroke of brilliance since it guarantees, in as much as this is possible, that masternodes remain decentralised.

In light of this some may say there are other solutions. For one Dark Wallet, like Bitcoin Fog (Tumbling Service), requires a mediator and this, as always in such cases, trust in a service in a world where we have seen, time and time again, how cryptocurrency services fail their users (in one way or another). In such instances one undermines the entire ideal of an anonymous one on one transaction by introducing a third eye to proceedings. This reverts the entire back to centralisation. Smaller alt coins do promise similar services, but thus far have been considered either too complex for normal users (Bytecoin) or simply lack the take-up and popularity of Darkcoin (thus failing to offer value for transactions to occur at all).

As Darkcoin increases in popularity we will find more and more masternodes with which each transaction canrandomly be run through. If the market reached a level akin to Bitcoin then its applicability to dark web marketplaces would be close to revolutionary since more transactions means more ‘fog of war’ (each purchase contributing to the impossibility of the task of tracing the actors involved).

What stands in the way of Darkcoin? For one we’ll need to see whether it can survive the pump and dump cycles of other alt coins. This it has been doing remarkably well and its reputation is broadly related to its having an actual identifiable ‘difference’ from Bitcoin (as opposed to its many blunt copies). The desire to own a masternode also seems to be driving sales and thus the long-term prospects of the coin seem assured. However, will normal users wish to use it when they have Bitcoin? It’s possible many will given that many drawn to Bitcoin are also drawn to privacy issues by disposition.

But many will make the conversation based on price alone. The man on the street may be scared off by the associations with ‘dark’ and, well, the dark web! From the perspective of the deep web marketplaces getting behind Darkcoin in some fashion, even in small ways, seems wise since the coin suits the needs of that community. Buying in at the current price is perhaps a sensible enough option for long-term thinkers, but not quickprofit traders.

Mining is certainly an option for those with the hardware. Either way it’s highly likely the marketplace community cannot avoid the rise of Darkcoin for much longer nor should we want to. An absolutely decentralised currency may be just the thing we’ve been waiting for.

Updated: 2014-05-20