January 2019

Welcome to 2019 and a happy new year to everyone! This is the first Spectrecoin newsletter of the year and we have something rather special to share. Stealth-Staking is now a reality and we will cover this in some detail below. There is also a section on the state of the finances going into 2019 and the ongoing process to register a UK not-for-profit company to manage Spectrecoin development and the development fund. We are confident that 2019 will be a great year for Spectrecoin so stay with us on this exciting journey.

The concept of ‘Stealth Staking‘ has been bandied around for a while and there has been much speculation on how it might work. Well, our lead developer @Tek has done it. He has designed and implemented a unique anonymous staking protocol based on the well known PoSv3.

It can be argued that a privacy focused pure Proof-of-Stake cryptocurrency is not complete without a way to stake anonymously. There must be a way to maintain anonymity for the network participants throughout the staking process. As with any typical Proof-of-Stake cryptocurrency the staking transactions are UTXO based and are traceable and linkable on the blockchain. Your public address is linked to the UTXOs used in the staking transactions. Furthermore, all the staking transactions completed by the same user can normally be linked and users balances can be estimated, hence the ‘rich list’ feature of many block explorers.

Spectrecoin has therefore developed what we call ‘Proof-of-Stealth’ or to illustrate the difference with standard ‘Proof-of-Stake‘, this is technically ‘Proof-of-Anonymous-Stake’ which is a brand new and novel staking protocol utilising only anonymous SPECTRE in the staking transactions.

Spectrecoin v3 running on testnet.

In the screenshot above you can see a Spectrecoin V3 wallet running on the testnet staking with both XSPEC and SPECTRE and generating both XSPEC and SPECTRE respectively. The ‘Development Contribution Blocks‘ are still generated as before regardless of how the block was created. If you are technically minded you can have a look at the testnet block explorer to see this in action.

https://chainz.cryptoid.info/xspec-test/

If you are new to Spectrecoin, it is probably a good idea to go back and have a look at the current white paper (page 6 onwards in particular) that will explain the nature of the ‘dual coin‘ system of Spectrecoin. A new and updated white paper will be released covering ‘Proof-of-Stealth‘.

https://spectreproject.io/White_Paper.pdf

What does all this mean to the users of Spectrecoin? It’s simple really, it means that if you transfer your holdings to SPECTRE, our anonymous coin, nobody will be able to know your balance, nobody will know how much you stake and if you keep transactions SPECTRE <> SPECTRE you remain anonymous at all times. Looking for a slightly more technical explanation? Please see below.

How does ‘Proof-of-Stealth‘ work?

In a standard staking transactions (PoSv3) a value known as the ‘kernel hash‘ is calculated from several inputs including values taken from the last valid block, called a ‘StakeModifier‘ and the value of the user’s UTXO. A valid ‘kernel hash‘ needs to be below a certain threshold that is determined by a separate calculation. The user (the wallet) who is able to generate a valid ‘kernel hash‘ will be granted the right to add the next block to the block-chain. The newly added block includes the generated stake reward (XSPEC) and any transactions currently in the memory pool + any fees. The UTXO used to calculate the valid ‘kernel hash‘ will be spent and the generated stake reward + the value of the spent UTXO will be included in a newly generated UTXO associated with the same public address. In this way every stake that has been generated as a result of UTXOs associated with a certain public address will forever be linked to that address and it’s plain for all to see. Below is an example of standard staking transaction:

A standard staking transaction as explained above. The public address are visible.

In Spectrecoin’s ‘Proof-of-Stealth‘ the basic structure of the staking transactions and the rules remain mainly in tact. But, instead of using the UTXO value as an input in the ‘kernel hash‘ calculation and the difficulty calculations, the so called ‘keyimage‘ associated with an ATXO is used instead as an input to calculate the ‘kernel hash‘ and difficulty. An ATXO is an ‘Unspent Anonymous Transaction Output‘ and associated with a discreet SPECTRE value. SPECTRE takes on discreet values, like 100, 50, 40, 10, 1, 0.5 and so on. Each ATXO has a unique cryptographically determined ‘keyimage‘ associated with it. This ‘keyimage‘ can be used to prevent double spend and once an ATXO is spent the ‘keyimage‘ is stored on the blockchain. The ATXO is totally dissociated from any user and as each and every ATXO is a unique ‘data-entity‘, ATXOs cannot be linked to each other. Only the user holds the ‘secret‘ key needed to prove ownership and no information is written to the block-chain that can in any way identify the owner of an ATXO. So, in order to spend an ATXO a user need to provide a valid ring-signature with a ring size of 10. The staking transaction therefore uses an ATXO as an input and new ATXOs are generated to the value of the stake reward in discreet units. See below for an illustration:

A ‘proof-of-stealth’ staking transaction with an input of 300 and an output of 300+0.01+0.001

Hence, in Spectrecoin’s ‘Proof-of-Stealth‘ both the initial calculations to find the ‘kernel hash‘ and the subsequent staking transaction uses ATXOs only and neither the input nor the outputs can be linked to any user. Due to splitting and consolidation algorithms that we will explore in the upcoming white paper the ‘transactional entropy‘ on the blockchain increases for every block. Basically, the privacy potential increases with every block and it will become increasingly difficult to analyse the blockchain over time as new anonymous SPECTRE gets spent and created.

In the interest of transparency since we are collecting funds from the network, and also to raise awareness I have collated a summary of expenses / costs and income for Spectrecoin in 2018. The sum of all expenses in 2018 for developing and ‘running‘ Spectrecoin was in excess of £40,000,- / $51,000,- and that includes fees for contractors, consultants, legal fees, server costs, website, listing fees and other smaller costs such as running block explorers. The total amount raised through the development fund in 2018 was around £18,000,- / $23,000,-. There are also some significant costs going into 2019.

We realised that in the current crypto scene it would be impossible to compete and develop this kind of software based only on good wishes and hopes of contributions. As a result we introduced the ‘DCB’ (Development Contribution Blocks) scheme and based on the fact that this was introduced I invested a lot of my own money to get things going. Maybe we got off to a bit of a rocky start back in March 2018 but I believe that over the last few months of 2018 we have shown that we are a now a serious and focused team. With the release of Spectrecoin v.2.2, the excellent automated build system and the forthcoming release of Spectrecoin v3 with Stealth-Staking, the Spectrecoin Core Team has delivered. None of this would have been possible without contributions. Having a system for funding do not compromise on the core mission to create a true anonymous cryptocurrency.

It is worth noting that the core team currently works for free and that the development fund just about covers the costs of running the project in terms of expenses. The current team members have invested a lot of time, money and effort in this project because we believe that we have a unique cryptocurrency that we can take into the crypto mainstream. If you want to see this project succeed I would encourage anyone that can to also contribute additional stakes, at least for the time being to set their voluntary contributions at more than zero.

We achieved great things last year and managed to get a really professional development team together and we should not take it for granted that this high level of sustained development can continue without funding. We can be idealists around the mission of anonymity online, but we can not afford to neglect the realities of the world in which we operate.

We have decided to form ‘The Spectrecoin Foundation‘ and register what is known as a ‘Community Interest Company‘ in the UK and so be bound by UK law. In the UK you need to fulfil certain criteria for using the word ‘Foundation’ as set out by the government.

https://www.gov.uk/government/publications/incorporation-and-names/annex-a-sensitive-words-and-expressions-or-words-that-could-imply-a-connection-with-government#Foundation

The Spectrecoin Foundation will therefore be a not-for-profit organisation with the sole purpose of developing and promoting Spectrecoin. We have started to complete the paperwork and I would expect this to be completed in the next 4-6 weeks. This secures that the development fund and any other contributions are used for its designated purpose only. More to follow on this.