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Latest Cryptocrime News Stories:
Have US’ authorities “cracked” Bitcoin’s anonymity?
Pontiggia, Céline; Arnold, Luna
Back in December 2012, a computer-science student accidentally found a loophole on the illegal marketplace Silk Road, which enabled him to withdraw twice the amount of his bitcoin (BTC) deposit than he allegedly attended. Knowing this software bug, the student named James Zhong continued to steal approximately $600,000 worth of BTC using several new accounts that received added value of up to $3.36 billion. As a result, it is known to be “the largest cryptocurrency seizure in the history of the U.S.” and “the department’s second largest financial seizure ever.”, according to the U.S. Department of Justice.
After the closing of Silk Road in 2013, the United States federal authorities could not identify the individuals behind blockchain wallet addresses until November 2021, which finally ended the search when Zhong’s hidden digital keys were found. Last Friday, March 14, 2023, James Zhong’s sentence was announced by the US Justice Department and was imprisoned for one year and one day.
In a report called “The U.S. Cracked a $3.4 Billion Crypto Heist - and Bitcoin’s Anonymity”, the Wallstreet Journal stated that the authorities were able to work around Bitcoin’s anonymity. The article received a lot of attention from the crypto community, but Wallstreet Journal’s statement was denied by many members of the community because Bitcoin was never anonymous but pseudonymous.
Bitcoin is pseudonymous, not anonymous
In reality, Bitcoin's anonymity was never cracked because it does not exist in the first place. Contrary to popular belief, Bitcoin is not anonymous but rather pseudonymous, and its anonymity has long been debunked by crypto enthusiasts. While identifying an individual may require some effort, Bitcoin transactions can be traced through digital breadcrumbs. As the market grows and tools and processes become more sophisticated, tracing Bitcoin transactions is becoming increasingly accessible. Although wallet addresses provide pseudonyms to the holder, they can still be marked as suspicious and traced back to an individual's identity. While Bitcoin mixers can be used to obfuscate the trail, the US government has taken steps to shut them down. In summary, Bitcoin offers traceability and pseudonymity but not complete privacy as opposed to privacy coins such as Monero. The mainstream media's misreporting of the crypto world is not new, and the crypto community has been urging them to become more informed about blockchain technology.
What is Ethereum’s Shanghai Upgrade and what does it bring?
Prétat, Grégoire
Facts
The Shapella upgrade, also referred to as Ethereum's Shanghai upgrade, took place on April 12, 2023, and it includes a significant advancement allowing investors to withdraw assets from the Beacon Chain. The consequences are considerable since the staked Ether represents about 16 million coins, a value of $26 billion and a seventh of the total supply of the token. The reasoning for this upgrade is the increase of Ethereum's liquidity since stakers and validators of the ecological consensus mechanism "proof-of-stake" are now free to withdraw their investments whenever they want.
Implications
Since the announcement of the successful Shanghai update, the anticipation of this new Ethereum has caused the price of the ETH token to rise significantly to new heights, it has exceeded $2,000 on April 12. However, it is important to note that several external factors also contributed to this growth, including:
- The growing popularity of NFTs, most of which are based on the Ethereum blockchain
- The increased demand for decentralized finance (DeFi) solutions, which also use the Ethereum blockchain for their operation
- The gradual adoption of cryptocurrencies by financial institutions and businesses, especially in investment and payment
However, it is difficult to predict with certainty whether this upward trend in the ETH price will continue in the long term. Indeed, the crypto-currency market remains highly volatile and subject to various external factors such as government regulations or global economic fluctuations.
But according to many renowned personalities in the sector, such as Ether Capital CEO Brian Mosoff, a research associate at investment firm CoinShares Marc Arjoon or the co-founder of digital asset trust bank Anchorage Digital Diogo Mónica, this upgrade will make investments more liquid, which will attract institutional investors.
Diogo Mónica, the co-founder of digital asset trust bank Anchorage Digital, claims that with the introduction of the upgrade, institutions that previously did not stake their cryptocurrency holdings, but instead held onto ETH as an investment, are now more likely to consider staking their assets on the network. Mr Mónica added that the move will attract big funds focused on having an ESG investment strategy since the switch to Ethereum 2.0 last year, with the environmentally friendly consensus mechanism.
Hedge funds will also show more interest in Ethereum since they will be able to delta-neutral hedge ETH, this investment strategy aims to reduce the risk associated with price movements in the underlying asset, claims Marc Arjoon, a research associate at investment firm CoinShares. Indeed, the hedge funds that are shorting the price of Ethereum will be protected by the rewards they will anyway receive on the staked crypto, explains Mr Arjoon.
MetaMask institutional product manager Johann Bornman stated that they have observed a real shift in interests from institutions into staking, particularly over the last six months. This potential shift in institutional investors’ appetite for Ethereum will undoubtedly have a long-term impact on its price. In the long term, Mosoff believes that the Shapella upgrade will be a bullish event for Ethereum and strengthen its dominance in the blockchain space.
ZeroSync develops zero-knowledge proof for bitcoin
Dang, Nadia; Triet Robin
Facts
ZeroSync, a non-profit organization based in Switzerland, has recently developed a method to improve the privacy and security of Bitcoin transactions. The company uses a mechanism called “zero-knowledge proof” (ZK-proof) which allows transactions to be processed without needing to load the entire blockchain. The invented mechanism is still in the prototype phase, as it currently shows some underperformance regarding security and speed.
In an interview, Robin Linus, the co-founder of ZeroSync, told us that by developing zero-knowledge toolkits for developers and building a community around this new solution, ZeroSync works towards the eventual integration of a zero-knowledge verifier into the main layer of Bitcoin.
A zero-knowledge proof is a cryptographic protocol allowing one party (the prover) to prove that they know about certain information without revealing it. Conversely, there is a verifier who only knows that the prover has this information. The use of the zero-knowledge proof does not require a public key, which is why this method can help secure transactions. With the help of this mechanism, a transaction can be verified without leaking any private information (Sun et al., 2021).
Implications
Robin Linus stated, “The big vision is that you only have to download one megabyte of proofs, which is then as good as if you had loaded 500 gigabytes of data”, meaning that ZeroSync aims to create a way to verify transactions without the need to download and process the entire blockchain. Instead, users would only need to download and process a small amount of proof data, approximately one megabyte in size. This would allow mobile devices with limited capacities to carry out data transactions.
Sources:
https://cryptonews.net/news/bitcoin/20809540/
https://www.wsj.com/articles/bitcoin-blockchain-hacking-arrests-93a4cb29
https://www.surf-finance.com/ethereum-mise-a-jour-shanghai-impact-prix-eth.html
https://decrypt.co/126117/shanghai-ethereum-upgrade-institutional-investors-eth
https://blockworks.co/news/shapella-institutional-interest-blockchain
https://demo.decrypt.co/resources/what-is-ethereums-shanghai-upgrade
https://de.cointelegraph.com/news/zerosync-develops-zk-proofs-for-bitcoin
Sun, X., Yu, F. R., Zhang, P., Sun, Z., Xie, W. & Peng, X. (2021). A Survey on Zero-Knowledge Proof in Blockchain. IEEE Network, 35(4), 198–205. https://doi.org/10.1109/mnet.011.2000473