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Crypto has undergone an impressive spate of growth recently. We’ve gone from a few hundred users of non-fungible tokens (NFT), a couple of thousand Ethereum node operators and maybe a multitude more of bitcoin holders to several million investors and users across the industry. It’s wonderful there’s an open online world where anyone can create, build and explore without permission. That value is being created, and freedom preserved. But there’s something being lost in the mix: privacy.

Web 3, the buzzy corner of crypto that spans everything from play-to-earn gaming to collectibles to decentralized finance (DeFi), seems to be repeating the same missteps of Web 2. Although touted as a solution to the perils of internet centralization by letting people own their own data and earn rewards for the value they create, Web 3 is failing on these big promises. And with some of the biggest Web 2 builders entering the Web 3 space, the problems may only get worse.

Tor Bair is the founder of the Secret Foundation, an organization dedicated to building, researching and scaling adoption of open-source, privacy-first technologies . This article is part of CoinDesk’s Privacy Week series.

The Web 2 economy was built on a simple idea: collect a cheap resource at scale, user data, then repackage and monetize access to it as an expensive product. It gave users near unlimited ability to create content and connect globally while giving advertisers a captive audience. Companies including Facebook and Google built trillion-dollar businesses and “walled gardens” around this arbitrage, then changed their names (Meta, Alphabet) to distance themselves from the extractive platforms that allowed for their obscene growth.

Along the way, user privacy was not merely ignored – it was abandoned. It was only after the Cambridge Analytica whistle-blowers came forward that we truly became aware of how our data was being misused and resold, occasionally at the expense of democracy itself. Almost every Web 2 company has dealt with massive privacy failings and data breaches, from Uber to Equifax to LinkedIn to Alibaba.

Despite all the lofty promises of Web 3, it has not solved this core issue. While the blockchain world is indeed far more open than Web 2, it is actually far less private. Blockchains leak all user data by default, and not just to Cambridge Analytica but to anyone who glances at the blockchain. The dominant public-by-default model means users must give up control of their data by default as well.

This failure means Web 3 is not becoming user-centric after all. Public-by-default systems and blockchains recentralize and converge to winner-take-all structures. Whoever has the resources to make best use of all the publicly available data will capture the majority of value. In other words, the rich get richer, and users lose their control.

Web 3 companies like Chainalysis have achieved multi-billion- dollar valuations on this play. Miners, the computers that secure and order blockchains, routinely frontrun users based on their privileged view into publicly available data.

Meanwhile, Web 2 companies like Meta (the former Facebook) are clearly seizing the next multi-trillion dollar opportunity by concentrating their entire focus on the emerging metaverse. The same companies that shattered online privacy in the age of social media are now angling to control our open metaverse, wielding war chests of billions of dollars in hopes of capturing trillions.

These are two bad choices: an open metaverse that leaks all data by design and a metaverse owned and operated by the same companies that routinely exploit user data. We need to actively reject both.

See also: The Metaverse Needs a Constitution | Opinion

As we watch the metaverse emerge and build its foundation, we must be aware of and actively work towards a better model. Web 3 and the open metaverse must embrace privacy by design, protect users by default and allow them to consent to and benefit from the use of their data.

It’s not just a dream: Tens of thousands of users in our community around the world are already building and using private-by-default, decentralized, and self-sustainable applications that are truly empowering. We’ve been working towards this vision since 2015, and with the stakes higher than ever, this is the perfect moment to join our fight.

A metaverse that protects our privacy is the only one worth creating, and the only one worth living in.

Professionals in the luxury goods market have been thinking hard about how to transfer their largely physical business into the new digital era. Non-fungible tokens (NFTs) have proven their worth in guaranteeing the provenance of one-of-a-kind digital assets, but can they also be used to bridge the gap between physical and digital luxury items?

NFTs are a large market: By August of last year, daily sales approached $1.8 billion. It has settled down since then, but it’s no longer unusual for half a billion dollars’ worth of NFTs to trade on a given day. These range from easy-to-mint consumer NFTs such as basketball cards and in-game skins to high-end auctions such as Beeple’s “Everydays: The First 5000 Days” or Pak’s “Merge.”

Creating a luxury NFT is about much more than only creating buzz. Just as in the physical world, it involves vision, craftsmanship, artistry and timing. A recent NFT project created in Malta called “ETH in Mellieha” perfectly exemplifies the level of detail needed to create a luxury NFT. Much more than a digital image, it’s also a physical memento of a real-world experience.

And, unlike many other NFTs, it also incorporates uncontestable legal rights to the physical asset for the owner of the NFT, regardless of the citizenship or current domicile of the holder.

The project

At the core of “ETH in Mellieha” is a prestige license plate issued by Transport Malta. It simply reads “ETH.” The project team hired local artist Debbie Bonello to paint the plate in an invented street scene: a car parked on a narrow street in Mellieha, a small town in the northwest corner of Malta’s main island, with an iconic parish church towering on the horizon. The painting took two months to complete.

Upon completion, the painting was photographed and digitized by the renowned Maltese photographer Matthew Mirabelli and minted as an NFT. A bonfire ceremony was held, where the original painting, its sketches and the flash storage of the JPEG file were burnt and destroyed permanently. Bonello herself placed the painting into the fire. The NFT is now the sole version of the artwork.

A new age in the blockchain-native market for luxuries?

The project has created a new user experience for purchasing a digital asset. While winning an auction is its own unique kind of event, it’s amplified by a documentary as well as social media support via an Instagram page and the @EthMlh Twitter handle. This multimedia approach offers a new way to do visual merchandising in the digital era, analogous to the pop-up showrooms that luxury brands are hosting in the brick-and-mortar space. While the pop-up shop itself is a work of art, the physical goods on sale within were the actual merchandise.

In this way, the art is only one, albeit important, element in the value of the NFT. While Bonello’s work was a one-of-a-kind painting, it’s not what’s being auctioned off. “ETH in Mellieha” is more than a digital art NFT, and it demonstrates how art can be integrated to create a wider, unique experience for the buyer around asset transfers – it’s that experience itself that’s under the gavel.

Ownership of “ETH in Mellieha” conveys not only ownership of Bonello’s image and the only ETH plate on the road in the nation that calls itself “Blockchain Island,” it’s also the story behind it, a story that includes a hilltop bonfire party with artists and dignitaries as the sun sets over the Mediterranean. It’s the first-of-its-kind opportunity for artists to collaborate with the blockchain industry in a way that allows them to create experiences that bridge the gap between the digital and physical worlds.

The auction of the resulting NFT will begin Feb. 2 at 4 p.m. UTC  on OpenSea.

Les secrets non révélés sont les mieux cachés – La blockchain Secret Network a récemment fait parler d’elle à son insu. En effet, c’est en raison d’un conflit entre Miramax et le réalisateur Quentin Tarantino au sujet des NFT et des droits d’auteurs du film « Pulp Fiction » que le public a pu prendre connaissance de ce projet.

400 millions de dollars et un seul objectif : la confidentialité

Secret Network est un réseau décentralisé qui propose un token de confidentialité, lequel permet également de créer des smart contracts. De plus, il possède son propre token, le Secret (SCRT), dont le prix a connu une belle envolée durant les 20 premiers jours du mois de janvier. En effet, dans cet intervalle, le prix du SCRT a doublé avant de retourner au niveau de prix qu’il avait en début d’année.

Dans la foulée, le 19 janvier, la société a annoncé la création de 2 fonds d’investissement auxquels seront alloués 400 millions de dollars. Sur ce montant 225 millions seront dédiés au premier appelé « fonds pour l’écosystème », destiné à soutenir les développeurs d’applications sur Secret Network et d’améliorer les technologies de confidentialité. En outre, les 175 millions de dollars restant sont destinés à une sorte d’incubateur de projets. Ce dernier fonds est déjà soutenu par 25 investisseurs et d’anciens partenaires de Secret Network, comme Arrington Capital, Outlier ou encore BlackTower Capital.

Le fondateur de Secret, Tor Bair, a insisté sur l’importance des questions de confidentialité qui doivent trouver des réponses respectueuses de la vie privée des utilisateurs. Selon lui, cela est un préalable inévitable pour parvenir à une adoption massive du Web 3.0 par les utilisateurs.

« Les technologies de confidentialité sont essentielles pour garantir que le Web 3.0 sera responsabilisant et ouvert, plutôt qu’une simple extension des échecs du Web 2.0. »

Tor Bair

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Secret Network continue de faire sa place dans l’écosystème NFT

D’abord, il convient de rappeler que Secret Network a été choisi par Quentin Tarantino pour l’émission des NFT représentant 7 scènes inédites du film « Pulp Fiction », sorti en 1994.

La vente aux enchères du premier de ces NFT a été ouverte le 17 janvier 2022 et s’est clôturée le 20 janvier. Les enchères ont été nombreuses, ce qui a eu pour conséquences de rapidement faire s’envoler les prix. C’est ainsi que le premier NFT de la série a trouvé preneur à plus d’1 million de dollars.

Par ailleurs, Secret a révélé que de nombreuses sociétés d’investissement de renom, telles qu’Alameda Research et CoinFund, sont devenues parties prenantes au capital de Secret Network.

Enfin, il faut souligner que l’idée de Secret Network de créer une pool dédiée au soutien des projets de jeux blockchains, NFT et métavers, ou de finance décentralisée, tombe à point nommé. En effet, ces secteurs de la crypto qui ont explosé en 2021 semblent bénéficier de plus de conciliation de la part des différents États. Pour s’en convaincre, il suffit de prendre l’exemple de la Chine qui, après avoir interdit à plusieurs reprises les cryptomonnaies, n’est en revanche pas aussi réfractaire aux NFT.

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L’article 400 millions de $ pour un anonymat total – Secret Network (SCRT) veut la jouer discret est apparu en premier sur Journal du Coin.

Malgré un début d’année bien morose pour la cryptosphère, la blockchain Tezos affiche un beau dynamisme. Elle attire en effet de plus en plus de projets de gaming et de NFT. Parmi ceux-ci, le Play-To-Earn Dogami va sans doute s’imposer comme tête d’affiche de cet écosystème. Sa médiatisation est tel qu’il sort du cadre des média sur les cryptomonnaies. Télé, radio, presse écrite plus généraliste l’annonce comme un phénomène à ne pas rater.   La blockchain Tezos Présentation de Dogami La roadmap Les prochains projets sur Tezos Retour sur la blockchain Tezos Le projet Tezos remonte à 2014. Mais il […]

L’article Avec Dogami, le dogaverse arrive sur Tezos est apparu en premier sur Cryptonaute.

La princesse de la culture populaire a offert à tous les spectateurs de l’émission télévisée américaine The Tonight Show un token non fongible (NFT) de sa nouvelle collection à venir, créée en collaboration avec Superplastic. Paris Hilton lance sa première collection NFT L’influenceuse Paris Hilton se plonge plus profondément dans le métaverse, affirmant qu’elle le […]

L’article Paris Hilton : Le métaverse sera « l’avenir des fêtes » est apparu en premier sur Cointribune.

OpenSea multiplie les blockchains – Même si la plateforme OpenSea a récemment été entachée d’une fuite de 332 ethers, elle n’en reste pas moins la plus utilisée des places de marché spécialisées dans les tokens non fongibles (NFT). Si OpenSea a commencé avec l’incontournable réseau Ethereum (ETH), la bourse d’échange s’ouvre à d’autres blockchains, et Solana (SOL) semble être sur la liste.

Une capture d’écran montre Solana prêt à naviguer sur OpenSea

La plateforme OpenSea est sans nul doute celle qui a le plus profité de l’explosion des tokens uniques et numérotés que sont les NFT. Bien que nés sur Ethereum, cette mode a suscité un tel enthousiasme que des tokens non fongibles se retrouvent sur pratiquement tous les réseaux blockchains proposant des contrats intelligents.

Après avoir intégré Polygon (MATIC) au choix de NFT disponibles sur sa plateforme, OpenSea semble en passe d’accepter également ceux présent sur Solana. C’est en tout cas ce qu’indique très clairement une capture d’écran, obtenue par Jane Manchun Wong.

Cette dernière est connue notamment pour avoir dévoilé en avance des futures options de Facebook, Twitter et Instagram avant leur officialisation. Elle nous montre ici une intégration de Solana à OpenSea, ainsi qu’une compatibilité avec le Phantom Wallet de cet blockchain.

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Une fuite involontaire bientôt officialisée ?

Jane Manchun Wong précise dans un échange avec le média Decrypt que les équipes d’OpenSea « ont essayé de le cacher », mais qu’elle a finalement découvert le pot aux rosesen faisant de la rétro-ingénierie sur le site web de la plateforme NFT.

Une autre capture d’écran, ci-dessous, montre également un réseau Solana intégré au filtre de recherche d’OpenSea, au même titre que les 3 autres blockchains actuellement présentes sur la bourse d’échange – à savoir, Ethereum, Polygon et Klaytn (KLAY).

Du côté d’OpenSea, aucun commentaire concret n’est venu commenter ces images. Un porte-parole de la crypto-bourse se serait contenté de déclarer à Decrypt que c’était là une « vieille spéculation ».

Alors, OpenSea va-t-elle se décider à annoncer l’évidence, ou la plateforme de tokens non fongibles va-t-elle continuer à jouer avec nos nerfs ? En tout cas, les célébrités se bousculent au portillon du côté de Solana, avec des personnalités allant de Melania Trump à Mike Tyson dans les amateurs de NFT sur la blockchain SOL.

L’univers des NFT est aussi passionnant qu’en pleine effervescence. Si vous préférez privilégier la tranquillité d’esprit, faites le choix de plateformes crypto plus traditionnelles. Actuellement, profitez de jusqu’à 100€ en cryptomonnaies offerts lors de votre inscription sur la plateforme Swissborg (lien affilié, pour un dépôt minimum de 50€).

L’article Les NFT de Solana prochainement sur OpenSea ? est apparu en premier sur Journal du Coin.

Italian luxury fashion brand Gucci is the latest to edge its way into Web 3 with the upcoming drop of 10 non-fungible tokens (NFT) beginning Feb. 1.

The NFTs have been created in collaboration with the cult toy brand Superplastic and co-designed by Gucci’s head of design, Alessandro Michele. Each NFT will be given away with a ceramic sculpture handmade in Italy and co-designed by Gucci. The NFT drop will be Gucci’s first.

Superplastic is a company that makes artistic vinyl toys for the collectibles market and has issued NFTs through the Winklevoss-owned Nifty Gateway. Superplastic was launched in 2018 by Kidrobot founder Paul Budnitz and has sold millions of dollars in designer toys and apparel based on characters Janky & Guggimon, Dayzee & Staxx, Kranky, ShüDog.

On Friday, Gucci tweeted about the roadmap and launch of a Discord channel as a place to encourage open conversations with the community about what’s next in the metaverse.

Digital fashion momentum

In May, designer fans were left stunned when a virtual Gucci Dionysus bag was sold on the gaming platform Roblox for 350,000 Robux, or roughly $4,115 at the time. The same physical purse cost $3,400.

Reddit co-founder and VC investor Alexis Ohanian was quick to point out in a tweet, “Remember: this Roblox purse is not an NFT and thus has no value/use/transferability outside the Roblox world – yet it’s worth more than the physical one.”

The Superplastic collaboration seems to represent a change of course.

Read more: Prada, Adidas Launch NFT Project on Polygon

Luxury fashion brands are already making millions of dollars from auctioning NFTs. In September, Dolce & Gabbana launched its NFT collection, Collezione Genesi, which fetched approximately $5.65 million in a sale.

With more fashion brands launching NFTs, many are asking if this is a transformational moment for the fashion industry or merely a bout of trendhopping.

Luxury fashion brand Prada and sportswear giant Adidas announced last week the launch of an NFT project built on the Polygon network that allows fans to contribute their own designs.

Morgan Stanley predicts the total NFT market is expected to grow to $300 billion by 2030 with brands such as Gucci and Balenciaga in the best position to profit from digital collaborations in the metaverse.

So far, the Gucci endeavor does not include an activation in popular open metaverses such as The Sandbox and Decentraland.

The global crypto market lost over $1 trillion in value last week as the price of nearly every major token took a precipitous nosedive.

ETH, the native asset of the Ethereum network, is down to around $2,200 for the first time since July. Bitcoin hit a similar six-month low in the $33,000 range. Altcoins SOL, DOT and AVAX are all down around 40% just in the last seven days.

This article is excerpted from The Node, CoinDesk’s daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here.

With a dip in the market comes a wave of “takes” from crypto’s armchair prognosticators. Depending on whom you trust, these are either short-term macro trends (tech stocks like Peloton and Netflix are way down, too) or the first rumblings of a promised “crypto winter,” the kind of thing last seen during the post-crash environment of 2018.

Well, here’s another take – it’s a bad time to be a day trader, but it’s also a bad time for NFT flippers, whose gains and losses are typically priced in ETH. Even as the price has fallen, the average amount of ETH exchanged for non-fungible tokens in top collections has stayed relatively consistent.

The Consumer Price Index (CPI), which tracks an aggregate price of certain consumer goods, is a useful real-world analog here. People like to think of the CPI as a rough gauge for inflation – when the dollar is worth less, you’d expect dollar-denominated prices to go up. It rose 7% in 2021, through December, in the biggest spike since 1982.

That is to say, you’re probably going to be paying a little more for some of the consumer goods you use everyday.

Somehow, this logic doesn’t seem to apply to crypto’s top NFT collections.

A week ago, the “floor prices” (the lowest listed price for a token in a given NFT collection) for CryptoPunks and the Bored Ape Yacht Club, now the two priciest projects in the space, were 60 ETH and 82 ETH, respectively.

They’ve each crept up a little, from 60 ETH to 66, and 82 ETH to 86 – but these minor increases aren’t doing much to offset the massive dip in the price of ETH, which lost 30% of its value over the past seven days.

See also: The History of HODL

The same goes for other top NFT collections. The floor for Meebits, a 3D collection from the developers of CryptoPunks, has actually dropped over the past week, as has the floor for CyberKongz.

Average sale prices for tokens over the past seven days tell a similar story; minor increases and decreases here and there, but nothing that could really offset the dip.

Gm to everyone who just makes ETH natively within the economy and never even needs to buy the dip 👀 https://t.co/PlLd09bU0B

— dame.eth (@damedoteth) September 7, 2021

So, why is everyone accepting less for these valuable NFTs across the board?

My sense is that it has to do with who’s actually buying this stuff. At this point, CryptoPunks and Bored Apes are the domain of hardcore crypto enthusiasts (VCs, full-time investors) and rich celebrities. Your average ETH trader, maybe a little less risk tolerant, probably isn’t focusing on these collections.

Hardcore ETH people tend to think of ETH on its own terms. Spend enough time in crypto and 1 ETH just starts to look like 1 ETH, as opposed to $2,200.

Gm to everyone who just makes ETH natively within the economy and never even needs to buy the dip 👀 https://t.co/PlLd09bU0B

— dame.eth (@damedoteth) September 7, 2021

If you really believe in the thesis behind NFTs (and, by extension, the ETH backing most of the market), you believe in the viability of the tokens themselves. And if ETH is going up and we’re all going to the moon, you may not care about a short-term price correction.

What looks like a loss today could be seen as a bet on the long-term value of ETH. Nothing’s ever real until you sell, right?

For now, JPEGs are on sale, baby.

Cryptocurrencies are starting to stabilize after declining sharply over the past week. Some indicators show investor sentiment at extremely bearish levels, which typically precede periods of buying activity. Other technical measures, however, suggest choppy price action could persist over the short term.

Bitcoin returned to above $35,000 and was up 3% over the past 24 hours, versus a 5% decline in SOL and roughly flat performance in ETH over the same period.

Still, it might be too soon to call a price bottom. « I think the determination of a bull/bear market is not as clear as previous cycles, due to the structure of the market changing drastically with institutions entering the space, » Marcus Sotiriou, an analyst at the U.K.-based digital asset broker GlobalBlock, wrote in an email to CoinDesk.

« Now, it is apparent that bitcoin is in a ranging environment (between $29,000 to $69,000 approximately) rather than a trending environment, » Sotiriou wrote.

« Bitcoin’s recovery is a long shot as investors are more keen on the price being stabilized for now, » Alex Axelrod, founder and CEO of Aximetria, a crypto financial services firm, wrote in an email to CoinDesk. Axelrod is monitoring BTC price levels of between $32,000 and $40,000 for confirmation of a breakdown or breakout.

Latest prices

The chart below shows the recent increase in bitcoin’s spot trading volume. Short-term traders have been active despite the uncertainty regarding future price direction.

Short-term holders underwater

Losses are adding up for most short-term bitcoin holders, according to blockchain data.

The chart below indicates that 18% of short-term bitcoin holder supply is at a loss (BTC trading below its average cost basis), which could point to further selling. A similar scenario occurred during the 2018 bear market and subsequent price corrections.

Still, long-term bitcoin holders appear unfazed by the recent price dip. « The proportion of long-term holder supply has actually returned to a modest uptrend, which indicates a general unwillingness for this cohort to liquidate, » Glassnode, a crypto data firm, wrote in a blog post on Monday.

Crypto funds attract fresh capital

Inflows into digital-asset funds last week – after five straight weeks of outflows – suggest investors were taking advantage of the price dip.

Cryptocurrency funds brought in $14.4 million of new investor money during the seven days through Friday, ending a streak of five straight weeks of outflows, according to a report Monday from the digital-asset manager CoinShares.

Last week’s inflows were led by bitcoin-focused funds, which brought in $13.8 million. Meanwhile, ethereum-focused funds suffered $15.6 million of outflows. Read more here.

Altcoin roundup

Solana Slides 17% to lead losses amid crypto market plunge: Major cryptocurrencies fell as much as 17% in 24 hours as the crypto market followed a broader decline in U.S. stock index futures on Monday. Last Friday, traders complained about network congestion on Solana and doubted its ability to attract real capital with that kind of meltdown. Solana has been attractive to large trading shops partly because it has prioritized scale. Still, when the network gets overcrowded, it has shown that it can stall out. Read more here.Luxor tries to keep Proof-of-Work Mechanism on Ethereum: Crypto software and services company Luxor is launching an Ethereum mining pool even as it is planning to abolish mining from its network. The company is working with large institutional miners, including Hut 8 and several retail miners in North America, to provide a U.S.-based Ethereum mining pool, the company said in a statement on Monday, according to Aoyon Ashraf. Read more here.OpenSea bug allows attackers to get massive discount on popular NFTs: A bug on the non-fungible tokens (NFT) marketplace OpenSea has allowed at least three attackers to secure massive discounts on several NFTs and make a huge profit. The bug, which was discovered as early as Dec. 31, allowed the attackers to buy NFTs at older, lower prices, and sell them for a hefty profit, according to Eliza Gkritsi. Read more here.

Relevant news

Coinbase Taps SEC Counsel Thaya Knight to Manage Public Policy TeamBank of America Says US CBDC Would Preserve Dollar’s Status as World’s Reserve CurrencyChinese Government Rejects Metaverse Trademark Applications: ReportSingapore VC Blockchain Founders Raises $75M for New Fund

Other markets

Most digital assets in the CoinDesk 20 ended the day lower.

Largest gainers:

Asset
Ticker
Returns
Sector
Cosmos
ATOM
+17.5%
Smart Contract Platform
Stellar
XLM
+10.9%
Smart Contract Platform
Litecoin
LTC
+9.8%
Currency

Largest losers:

Asset
Ticker
Returns
Sector
Solana
SOL
−3.0%
Smart Contract Platform
Filecoin
FIL
−1.5%
Computing
Polygon
MATIC
−1.2%
Smart Contract Platform

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

Cryptocurrency mixers and the illicit activity often associated with them regularly make headlines. To the casual observer, the frequency of these attention-grabbing stories can give the impression that crypto mixing is far more prevalent than it is. Data tells us mixer transactions make up a shockingly small fraction of overall crypto activity.

Since Bitcoin’s inception, blockchain technology has been closely associated with the dark web, money laundering, tax evasion and worse. Just last year millions in bitcoin were paid in ransom to the hackers of the Colonial Pipeline, further perpetuating the public’s belief about the underground world of blockchain-based currencies.

In reality, being a distributed, public ledger makes the Bitcoin and Ethereum blockchains overly transparent.

This article is part of CoinDesk’s Privacy Week series.

By just knowing a public wallet address, one can track all past and future transactions of the account. Any association between exchanges, entities or doxxed individuals – private individuals who have had publicly revealing identifying information about them published online, either intentionally or unintentionally – could give insight into who is doing what in each transaction.

In one respect, transparency is quite refreshing as societal and ecosystem norms are often imposed on venture capital firms, project founders and other members of the crypto community. However, the need for privacy exists if crypto is ever to take on a mainstream role in payments, finance and banking.

The Bitcoin and Ethereum communities understood the downside of transparency and have since built infrastructure to allow users to opt-in to further privacy through potential “unregulated or controversial” technology.

Read More: Bitcoin Mixers: How Do They Work and Why Are They Used?

Bitcoin mixers: In the beginning

Early on, Bitcoin privacy was achieved through centralized mixing services that required trust in third parties. A user would send bitcoin to a company that “mixed” or “tumbled” the funds with other depositors’ bitcoin and then sent back an equivalent amount of mixed bitcoin on the other end. Users who wanted privacy were, in effect, exchanging their bitcoins for other bitcoins that couldn’t be associated with their own.

There was a substantial risk in using these mixing services. Users had to entrust their coins to the third-party mixing platform and believe that they’d get their funds back. Bitcoiners especially took issue with that idea since the Bitcoin protocol counts trustlessness as one of its core tenets. Centralized services were also at risk of being shut down due to regulatory action, and many early mixers were shut down.

In 2013, Greg Maxwell proposed CoinJoin, a transaction privacy method that involved no changes to Bitcoin itself. A CoinJoin takes advantage of how Bitcoin transactions are structured with a bitcoin input from a user, a signature that allows that input to be sent, and an output location for that bitcoin to end up. The signatures are unique for each input. Although these inputs usually come from the same user, they are not required to be. This is how CoinJoin works: Many users can contribute multiple inputs to a transaction where they ultimately send bitcoin to themselves on the other side, but the details are obfuscated due to the unknown number of parties who contributed inputs.

CoinJoins have always worked on Bitcoin, but there wasn’t always an easy way for users to collaborate and carry out a CoinJoin to enable privacy. Now, there are bitcoin wallets like Wasabi Wallet and Samourai Wallet that allow users to implement PayJoins, an implementation of CoinJoin, within the wallet, making privacy available to all.

Bitcoin mixer usage

However, even though these privacy options have been around since 2018, the volume data suggests the penetration of CoinJoins has not increased much since the early days. Although more bitcoin has been CoinJoined each year, the highest volume month was just over 65,000 BTC in January 2021 (worth about $2.3 billion, on average), a scant 0.35% of the total bitcoin transacted in that month.

The same phenomenon shows itself when considering “Fresh Bitcoin” – a metric that describes new bitcoins that use a CoinJoin that have never been mixed before.

We can see that these data sets look strikingly similar, but the Fresh Bitcoin metric likely provides a more realistic view for demand growth for CoinJoins, given some users opt to mix the same bitcoins multiple times in order to increase privacy and mathematically guarantee untraceability. The number of Fresh Bitcoins CoinJoined in January 2021 was closer to 45,000, or 0.25% of the total bitcoin transacted in that month.

Part of this overall lack of adoption can be due to exchanges blocking withdrawals to privacy-preserving bitcoin wallets, such as Wasabi, which would naturally suppress demand for CoinJoin as mixing would disrupt the fungibility of the owner’s bitcoin. That is, the bitcoin that went through a mixer would be « tainted » and treated differently by the exchange than other bitcoin.

The future of bitcoin mixers

Taproot was an important upgrade made to the Bitcoin protocol that was implemented late last year. Taproot enabled a handful of potential usability and privacy improvements, with the addition of Schnorr signatures an address type to Bitcoin that makes types of transactions look the same, making blockchain forensic analysis more difficult for multisignature transactions.

As it relates to mixer traffic, however, Taproot in its current state does not improve the privacy of CoinJoins because their inputs are single signature.

That said, Taproot’s activation sets the groundwork in order for cross-input aggregation (CISA) in the future, which would allow for improved privacy and efficiency of CoinJoin transactions. Digital signatures are the critical piece that allows CoinJoins to work. If CISA makes it into the Bitcoin protocol, the many signatures needed in a CoinJoin transaction could be combined and aggregated into one, which could boost scalability and make the process cheaper.

Tornado Cash: A mixer for Ethereum

The most popular mixer on Ethereum takes a different approach than CoinJoin because it is built and deployed on the application layer. Tornado Cash allows ETH holders to deposit a sum of their token balance into a non-upgradable smart contract that gives them an encrypted note. Using the encrypted note, the user can withdraw the funds from another Ethereum address in a single or multiple transactions.

One step further, Tornado Cash allows third parties called “relayers” to send that encrypted note verifying the withdrawal transaction to application users. In return for passing the note, relayers receive a small fee. The relayer system allows users to have their funds trustlessly withdrawn into a new wallet, without needing ETH in the new wallet to pay for the claim transaction because the relayers also take care of covering that cost on their behalf.

It is important to note that relayers are not able to access any transaction data beyond paying the transaction fee, stopping them from altering the destination of the claimed funds.

At the end of the process, the user who deposited their assets into Tornado Cash now has them in a fresh wallet, leaving behind a very difficult trail to follow. In turn, the relayer takes a small fraction of the deposit to pay for the claim transaction and reward them for their service.

Tornado Cash usage

Tornado Cash version 1 has been live since the end of 2019 and has processed 2.4 million ETH and $5.1 billion U.S. dollar-pegged stablecoins at the time of writing, according to data from Dune Analytics and Etherscan. Most often used was the fixed deposit of 10 ETH, with the contract seeing 13,819 transactions since December 2019.

November of last year was the largest month for Tornado in terms of volume, processing over $200 million ETH and stablecoin withdrawals in the last week of the month. However, during December the application released a new product dubbed Nova. The upgrade allows users to deposit arbitrary amounts of assets instead of the outdated, tiered and fixed deposit limits. Nova has seen some adoption with 673 wallets depositing 633 ETH in the new platform in less than a month.

While Ethereum’s most popular mixer is often publicized for its use after decentralized finance (DeFi) exploits or nefarious activities, the application appears to be growing in popularity among everyday users concerned with operational security (opsec) and privacy. Recent compliance integrations even allow the application to generate a report on whether an address’s use of Tornado Cash was in relation to any known exploits or laundering, so law-abiding users can access the technology without drawing unnecessary suspicion.

Read More: Crypto.com’s Stolen Ether Being Laundered via Tornado Cash

The double-edged sword of crypto mixers

The adoption of DeFi, non-fungible tokens (NFTs) and bitcoin have gone parabolic over the past year, making illicit activities a smaller percentage of overall crypto transactions than ever. A recent Chainalysis report revealed that even as the notional value of illegal activity hit $14 billion, illicit transactions only made up 0.15% of all cryptocurrency volume during 2021.

Mixers will continue to support those with ill intentions – but that is the double-edged sword of privacy and decentralization. Not only is anyone allowed to access and use blockchain wallets, developers are allowed to build and deploy any product they deem fit on top of smart contract platforms like Ethereum.

As it stands now, regular bank accounts provide us a high level of personal privacy from our friends and family. It is exceedingly difficult to find out how much money someone has in their bank account even if you know a lot of identifying information about that person.

With cryptocurrencies, on the other hand, if your wallet address becomes known, your balance and all your crypto activities can become known. Bitcoin and Ethereum should be able to provide that privacy at a minimum, and the use of privacy-focused technologies like mixers provides that option to everyday crypto users.

However promising mixers are for privacy, the data shows that users are still not taking advantage of what they have to offer. Meanwhile, the mainstream narrative points to mixers enabling illicit activity rather than the potential benefits they may provide to individuals.

More education on the topic, and less stigmatization of mixers themselves, could go a long way toward improving personal financial privacy.