Intro to the Dark Web: Cryptocurrency
Cryptocurrency's genesis can be traced back to a white paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" by the mysterious Satoshi Nakamoto. This paper laid the foundation for cryptocurrency, introducing concepts like digital signatures, trustless verification, and decentralization. Many cryptocurrencies that followed are either forks of Bitcoin or share its core technology. In this post, we'll delve deeper into the top cryptocurrencies used in this shadowy realm, shedding light on Bitcoin, Ethereum, Litecoin, and Monero. We will also explore the origins of cryptocurrency and its significance on the dark web.
Key Cryptocurrency Concepts
Before continuing, we recommend familiarizing yourself with these core concepts:
Cryptocurrency: Cryptocurrency is a digital asset that operates without the need for a central authority. It is characterized by decentralization, trustlessness, and pseudonymity.
Blockchain: The blockchain is a distributed digital ledger that stores transaction data for cryptocurrencies, making it immutable and transparent.
Mining: Mining involves verifying transactions on the blockchain using powerful hardware and specialized software. Miners are rewarded with cryptocurrency for their efforts, with Bitcoin's reward halving every four years.
The Leading Cryptocurrencies on the Dark Web
There are four cryptocurrencies that dominate the dark web:
Bitcoin: The most widely recognized cryptocurrency, Bitcoin is an open-source and peer-to-peer crypto that dominates the dark web. However, its popularity extends beyond the shadowy corners of the internet, and its decentralized, trustless, and pseudonymous nature makes it a prime choice for illicit transactions. It has a capped supply of 21 million coins, making it a store of value.
Ethereum: After Bitcoin transaction fees skyrocketed, Ethereum gained prominence as a preferred cryptocurrency due to its lower fees and ease of acquisition. It differs from Bitcoin in that it serves as a utility token rather than a store of value. Smart contracts and decentralized applications (dApps) have transformed its use cases, and Ethereum transitioned to a proof-of-stake model in 2022.
Litecoin: Litecoin found its place on the dark web due to faster transaction times and lower fees. It became a convenient means to acquire Monero, which offers enhanced privacy.
Monero: Monero's rapid ascent can be attributed to its true privacy features, including ring signatures, stealth addresses, and Ring Confidential Transactions (RingCT). Its features make it incredibly difficult to trace transactions back to their source. Monero’s gaining ground as the preferred cryptocurrency for anonymous transactions.
Cryptocurrency's Role in the Dark Web
Cryptocurrency on the dark web is a complex and mysterious world, with Bitcoin, Ethereum, Litecoin, and Monero as its leading stars. The allure of anonymity and privacy drives the adoption of these cryptocurrencies in these shadowy realms. While cryptocurrency transactions aren't entirely anonymous due to public ledgers, services like tumbling and mixing aim to obscure the origin of funds. These methods are often likened to money laundering. As we continue to explore the realm of cryptocurrency, it's essential to understand the underlying technology, privacy features, and risks associated with using these digital currencies on the dark web.
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Transcript
Hello, and welcome to our short video on Introduction to Cryptocurrency on the Dark Web.
The top cryptocurrencies that are used on the dark web are Bitcoin, Ethereum, LiteCoin, and Monero. We'll go over each one of these in our presentation
Bitcoin is currently the most popular cryptocurrency in use, and not just on the dark web. Ethereum became more popular after Bitcoin fees massively increased. Ethereum had lower fees and was just as easy to obtain. LiteCoin became commonly used as it was easily purchased and converted into Minero as it has faster transaction times and lower fees. Monero is rapidly rising as the predominant crypto currency in use on most dark net marketplaces, as Monero is a truly private coin.
Cryptocurrency can trace its roots back to a white paper titled Bitcoin, a peer-to-peer electronic cash system. That is still available on bitcoin.org. The paper was published by an individual or individuals named Satoshi Nakamoto. The name is a pseudonym, and the true identity is currently unknown. The paper provided the basis for cryptocurrency, including the use of digital signatures for transactions, trustless verification, and de-centralization. Some cryptocurrencies created after Bitcoin are a fork of Bitcoin or use the same technology.
One of the reasons for the rise of cryptocurrency use on the dark web is that the Bitcoin paper stated that public keys are kept anonymous while transactions are public, and there is no personal identifiable information (PII) on the blockchain. This concept led some users to believe that using Bitcoin is anonymous, which resulted in the rise of crypto use on the dark web.
Here are some definitions that one needs to be familiar with regarding cryptocurrency.
Cryptocurrency is an amalgamation of two terms: cryptography and currency. It's a digital asset that can circulate without the need for a central monetary authority, such as a government or bank. Three primary characteristics of cryptocurrency are that it's decentralized, trustless, and pseudonymous.
The blockchain is a distributed digital ledger that stores data of any kind for cryptocurrencies. It's a digital ledger of transactions that is duplicated and distributed across a network.
Mining refers to the process of verifying transactions that exist on the blockchain using powerful hardware and cryptocurrency-proprietary software. Blocks within a blockchain or groups of transactions are verified by miners. The miner receives a reward upon verifying the block in the form of cryptocurrency, which can make mining a lucrative process. The initial reward was 50 bitcoins, and this reward is halved every four years.
The basics of Bitcoin are that it's open-source and peer-to-peer. It's also a decentralized network that exists without the need central monetary authority. It's trustless, as the blockchain is verified by multiple individuals and then duplicated on the network. Therefore, it is extremely hard for one individual to falsify or change transactions on the blockchain after they occur. And then, finally, pseudonymity. The owner is represented by a unique address, not by their name or organization, so a user does not have to share any personal identifiable information if they would like to send or receive bitcoin.
Ethereum is different in that it's not a token of value like Bitcoin, but it's a utility token. Bitcoin has value due to its scarcity, as there can only be 21 million bitcoins in existence. But with Ethereum, as it is a utility token, the supply is technically infinite. Smart contracts were instituted on the blockchain, and they're a type of Ethereum account. They can have a balance, and it can be the target of transactions. A smart contract can replace an intermediary, such as when a transaction takes place for a unique service or good. There are also decentralized applications, as developers and engineers can create applications that are hosted on the blockchain.
In September 2022, Ethereum transitioned to a proof-of-stake model over a proof-of-work model. Proof-of-stake refers to the fact that individuals can pay higher fees in order to verify the transaction faster. This fee Ethereum uses is called gas. Bitcoin uses primarily proof of work, where miners verify each transaction on a blockchain whenever the miner is available or whenever the miner has time, which can take up more processing power.
Monero is a privacy coin that is a fork of bytecoin and was previously called BitMonero. The name change was a result of this dispute on the Bitcointalk.org forum that prompted the name change to just Monero. Three primary characteristics that make Monero impossible or almost impossible to track are ring signatures, stealth addresses, and Ring Confidential Transactions (RingCT). Ring signatures occur when the Monero client arbitrarily selects other public keys and breaks the total amount into different amounts with multiple other public keys that exist on the blockchain as a part of the transaction. Therefore, it is highly improbable through blockchain analysis to determine the real originating address.
Another characteristic are stealth addresses that are generated from the receiver's private key. The stealth address is not the receiver's true address hosted on the blockchain. However, the blockchain can confirm the stealth addresses through the use of the receiver's public and private keys. Ring confidential transactions address the ability of a third-party to view the transaction amount, as the sent amount and change amount are broken up on the blockchain.
Some websites and services offer tumbling and mixing to anonymize transactions. There's a misconception that using cryptocurrency completely anonymizes a user. However, because every transaction is available on a public ledger, all transactions can be tracked in each of those wallets or addresses, and those can be used to uniquely identify an individual or organization. The tumbling and mixing process can seem like money laundering in that transactions are put into a legitimate cash flow. Therefore, if inspected, it seems that the money came from non-criminal enterprises. Mixing and tumbling cryptocurrency attempts to obfuscate the original source of the income.