Crypto’s next secret border – POLITICO

With help from Derek Robertson

Even when the cryptocurrency markets have cratered, the underlying technology continues to evolve at a rapid pace – often in ways that governments do well to pay attention to.

An important shift right now is that the crypto world is becoming more, well, cryptic.

Increasingly, new crypto projects are using mathematical techniques called zero-knowledge evidence, which allow users to confirm that certain information is true – but without revealing the underlying information itself. As blockchain experiments spread and become more complex, the evidence is used by all types of players – governments, anarchists, entrepreneurs – to build an extra layer of secrecy in new projects.

Adjusting the balance between “public” and “private” information has been a major part of crypto development since its inception. With Bitcoin, the ancestor of all cryptocurrencies, users can access the network without revealing their identity – but the balances and transaction histories of all the addresses on the network are in full public view on the blockchain. (This has created a cottage industry of “analysis on the chain”Providers that offer insight into the state of crypto markets)

To create a new layer of privacy around transactions, some newer blockchain networks encrypt the information recorded in their distributed databases so that no external observers can read their blockchains. Then they use zero-knowledge evidence to confirm that a transaction is valid.

Similar to the cryptographic techniques behind Bitcoin, zero proof of existence existed in mathematics literature for decades before being used in blockchains.

And as with previous crypto breakthroughs, many of the early users were criminals. But law-abiding people also like privacy, so more established actors follow:

-Last month, a report by the Atlantic Council on the central bank’s digital currencies recommended use of zero proof of knowledge to create systems that protect users’ privacy while allowing limited government oversight. For example, authorities can verify that a transaction was less than $ 10,000 – a threshold that comes with increased reporting requirements – without revealing anything else about the transaction.

–The Red Cross is working on a project in Somalia who would use zero-knowledge evidence to allow people to demonstrate that they are eligible to receive specific medical treatment without disclosing their names or other identifying information.

“It’s about protection,” he says Adam Bornstein, who leads economic innovation for the Danish Red Cross. “They do not have to reveal who they are. The other party just needs to know that they are approved for this, and that is enough. “

– Then there’s DarkFi. Despite their potential uses for central banks’ digital currencies, zero-knowledge evidence tends to shift the balance of power away from governments by making it easier for people to interact online in a way that prevents surveillance. A group of anarchist developers build on the work of early users of ZK evidence – such as Monero, a cryptocurrency preferred by criminalsand Zcash, which bills itself as a privacy-focused crypto – to create an entire ecosystem of decentralized apps built around secrecy.

In a manifest quoting former FBI Director James Comey on the “Going Dark” problem that cryptography creates for law enforcement, the group describes its DarkFi project as a means of “liberating the democratic nation.” In a podcast interview published earlier this month, Rachel-Rose O’Learya DarkFi developer from Ireland, said the project has reached an early private testing phase.

DarkFi is just one of the new projects seeking to use these new techniques to circumvent government surveillance. As O’Leary explained, the advent of the blockchain has triggered a “Cambrian explosion” in zero-knowledge experimentation.

If these projects succeed, law enforcement’s “going dark” problem will only get worse. But governments have another reason to pay attention to zero-knowledge evidence: to make use of it.

Michael Mosier, the former acting director of the Treasury’s Financial Crimes Enforcement Network, now working at Web3 startup Espresso Systems, said decision makers would do well to take advantage of these techniques for CBDCs and other digital management system upgrades. “We should build in this kind of progress instead of just recreating the horseless chariot,” he said.

In general, regulators prefer to have access to as much information as possible. But at a time when mutual mistrust is growing between the parties, Mosier said that zero-knowledge assurance has become an easier sale to political nominees who are worried that information will fall into the wrong hands.

“Saying to Democrats ‘This could be Donald Trump again'” or telling Trump nominees “Hey folks, this could be Barack Obama” has made regulators more willing to entertain privacy functions, he said.

People are simply expecting more from their worldwide mega-companies these days, leading companies as various like Ford and Kellogg to begin publication of annual human rights reports in recent years. So it may come as a surprise to Meta, whose human rights history has been the subject of some quite intense scrutinyjust issued its first on Thursday.

The report contains the results of surveys of Facebook’s use for everything from election campaigns to human trafficking, and describes the company’s risk-reducing efforts as cracking down on election content in Myanmar and false information about Covid-19 pandemic. (The report also contains the results of a study the company conducted in India, whose conclusions have been strongly criticized of activists and groups such as Amnesty International.)

A topic that is relatively small in the report is ironically the company’s new namesake: metaversen. The company’s human rights director, Miranda Sissons, told Reuters that these assessments will largely take place this year and will be discussed in future reports, but this issue includes a short section evaluating the company’s “Ray-Ban Stories” augmented reality glasses. which has a built-in camera – something privacy activists see as one serious human rights risk in its own right. – Derek Robertson

As the EU’s major AI legislation begins to take shape, The country that is currently running the process is making some major changes.

POLITICOs Clothilde Goujard reports today for Pros that the Czech Republic, which currently heads the EU Council, has made some draft amendments to the law on artificial intelligence that will reduce the extent to which algorithms focused on insurance and pollution control are regulated, among other things.

Taking the aforementioned algorithms out of the “high-risk” category would exempt them from EU-imposed assessments, and would protect their developers from potentially massive fines. (The changes will also limit the definition of “high risk”, and are likely to exempt more companies.) If accepted, the changes are likely to set the Council up for a conflict with the European Parliament, which favors stricter rules.

Meanwhile, across the channel, the UK is developing its own, more compliant approach to AI regulation, as Clothilde reports in Europe’s morning technology newsletter today (for European subscribers only). Emphasizing its “flexible approach”, the UK says it largely plans to delegate its AI policy to industry-wide regulators instead of adopting EU law.

And if you’re waiting for similar news on the home front, do not hold your breath: The White House said last fall that it is develop a “Bill of Rights for an Automated Society,” but have not said much about it since then. Founder of the Center for AI and Digital Policy Marc Rotenberg said Sunday that his group has submitted a FOIA request to the White House for more information. – Derek Robertson

• Mozilla’s annual “Internet health report”Focuses this year on the risk and potential of AI.
• A congressional inquiry revealed that the largest Bitcoin miners have the capacity to use about as much energy as the city of Houston.
• The Ukrainian military has brilliant reviews for the Starlink satellites that help keep it online.
• Virgin plans to try to fly taxi in the UK.
• NIST’s post-quantum encryption competition is reveal the different approaches to a deeply complex mathematical problem.

Stay in touch with the entire team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Konstantin Kakaes ([email protected]); and Heidi Vogt ([email protected]). Follow us on Twitter @DigitalFuture.

Ben Schreckinger covers technology, finance and politics for POLITICO; he is an investor in cryptocurrency.

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