[Disclaimer: I am deeply interested in Bitcoin and crypto-currencies; I own bitcoins and darkcoins. I am a technologist, not an economist. Take everything I say with a grain of salt.]

[discuss on Hacker News]

I fell in love with Darkcoin

Why? Because it’s one of these projects that aims to solve a specific problem in a fundamentally unique way.

But what is Darkcoin? How does it work?

In short, Darkcoin provides anonymous transactions with a decentralized implementation of DarkSend.

What’s Darksend?

DarkSend uses a pool of transactions to anonymize your intent to send money to a specific address. The documentation is still incomplete, but this diagram can explain a lot:

How Darksend transactions work (source)

How can I use it?

Simple: you can take your bitcoins, exchange them into darkcoins, and enjoy a truly anonymous payment platform.

It should be noted, however, that Darkcoin is not yet complete, and it’s also considered beta software. Use it at your own risk.

Who’s behind it?

I had the opportunity to talk with Evan Duffield, the main developer behind it. Here’s my interview.

1) Evan, tell me about you, and your team. Where do you live, what's your background?

I live in Phoenix, Arizona and I’ve been programming for 17 years now. I started when I was 15 years old, making bots to crawl the internet. I got interested in machine learning and artificial intelligence early on when I saw patterns in the stock market and wondered if I could describe them with code. I found that I was pretty good at it and started selling the signals as newsletter service called StockHawk.net.

Soon after that the 2008 crisis started and I had money in the markets. I became really interested in economics and ended up getting my series 65 license and starting a financial firm to sell my trading signals and manage money.

In mid 2010 I heard about Bitcoin and I was instantly obsessed with it. It was the mixture of economics and technology that caught my attention, I knew that it was going to be a big deal.

Today our team is not huge, but includes some very smart people.

An example?

S.P. has a background in high performance computing, software development and bioinformatics, and software development projects in corporate and research environments.

S.P. was initially attracted to crypto-currencies by the challenges of secure distributed computing, and the revolutionary economic and socio-political implications.

He is particularly interested in the possibility of emergence of complex behaviours in distributed currencies, similar to how complex behaviour emerges in biological systems.

(note: S.P. is no longer involved in the Darkcoin project)

2) What convinced you to start Darkcoin?

I believe the central problem with Bitcoin is that the public ledger, although a remarkable accomplishment, also allows a gross invasion of personal privacy by permanently listing all transactions the users have ever done publicly. I would imagine many groups are working to tie the addresses used to real identities and then following the money around to see what is happening with it.

There was also a lot of talk recently about tainting coins to check and see if they’re “clean” (note: he means colored coins). I believe that all coins should be considered equal and you shouldn’t mess with the fungibility of the coins themselves.

3) In specific, are you trying to solve a specific problem (true anonymity)? If so, why this approach is the right one?

Eventually it will be important and useful to have a real anonymous currency for web based business. Bitcoin is a huge leap in the right direction, but it’s still not perfect. Recently some projects have popped up here and there, but none of them meet all of the criteria of a true solution to this problem.

Most of the proposed solutions to this problem are centralized and that requires a measure of trust that the central server is playing by the rules and also not compromised and recording the traffic it is dealing with.

Another solution proposed by some graduate students is called Zerocoin, it seemed like an interesting idea but it uses untested cutting-edge cryptography which could prove to be insecure with a centralized server that functions as an accumulator.

There is a definite need for an implementation that solves the anonymity problem with a decentralized approach and proven technology.

[note: and now things start to get really interesting]

In order to solve this problem, Darkcoin uses an extension built on top of the standard bitcoin protocol, to create merged anonymous transactions. When a user wants to send money to someone he simply will leave the “Use DarkSend” checkbox checked, then the client will broadcast that it would like to add an input to the pool. These messages are broadcasted throughout the network and once there are enough inputs in that pool, the nodes know it’s time to send “outputs” (where you want to send your money to). After those are gathered together, all users sign the transaction, then it is merged and broadcasted.

4) Electrum, Dark Wallet: what's your view on these, and how do they relate to Darkcoin?

Electrum is a great wallet, but it’s not anonymous and your money can still be tracked.

Dark Wallet is great project, but it’s not a completely decentralized approach.

5) How do you plan to make Darkcoin successful? What are your next steps?)

Currently I’m just working on getting the implementation of DarkSend complete and user friendly, then we’ll move on to marketing the coin.

[note: I think this means that the value of Darkcoin is still very low, compared to where it could be. At the same time, I hate speculators, and I’m not suggesting you to become one.]

6) How can people contribute? Volunteers? Developers? Investors?

Currently I’m the main software engineer and we have a group of volunteers such as a systems administrator, a project manager, web developer and writers.

If you want to contribute, visit our Darkcoin website and tell us how you’d like to help.

7) Open Transactions: any overlap between Darkcoin and them?

That's so funny, I listen to Let's Talk Bitcoin and this was rolled into one of them. That's right before I got the idea about how to organize Darkcoin too. I'll have to look into it further, I don't believe it does what I'm doing.

8) Do you have plans to do business around it, or you are treating it like an open source project?

I'm choosing to do this as an open source project. I figure I will put a couple years of full time work into the project and my Darkcoins will be worth quite a bit by the end of it. There's really very few coins with an active development.

9) Is anonymity going to be an issue? I’m sure some people will not like the idea…

While we have read that there are some that are accepting Darkcoin for services on the darknet/tor, our intentions were to give the common users privacy in their transactions.

We have not, and will not be, involved in developing any of the sites or the darknet and do not support it in any way.

What DarkSend offers is just a more private blockchain, which is useful for all legitimate business also. We can't really control what is done with the technology though, it's money and money can be used for good and bad things.

[note: normal currency, such as US dollars, are already used both for good and bad things. I don’t think that Darkcoin is making anything worse than what it is now]

10) What’s the risk for the user?

I don't think there's a risk for users. They would just increase their privacy from the features of the currency.

Non legit uses? We're going to include a "I will not use this technology for illegal purposes" agreement when you first boot up the client or when you download the binaries off of the website.

Beyond that though, there's not much we can do besides being outspokenly against using the technology in nefarious ways.

Thanks, Evan, and good luck!

What to do next?

You can check the Darkcoin website here, or on Reddit, and also this excellent article by Aaron.

You can also start trading with Darkcoin on the following exchanges:

Cryptsy (my favorite)

C-Cex - Crypto-Currency EXchange

Poloniex - Crypto-Currency EXchange

Crypt-OTC - OTC Exchange

MintPal - MintPal Exchange

CoinedUp - CoinedUp Exchange

Bittrex - Bittrex Exchange

Remember one thing: if you trade cryptocurrencies, it is like trading money, and the usual rule applies: if you don’t know what you’re doing, prepare to be screwed.

Having said that, I am very optimistic about Darkcoin’s future, and I will hold my darkcoins for at least a few months.

You can follow me (the author of the article) on Twitter, @simon.

Update (March 18th): a new whitepaper on Darkcoin is now available.

Update (May 15th): Darkcoin’s value has skyrocketed since I wrote this article, growing about 1000%.

If you liked the article, feel free to donate 0.5 Darkcoins (approx 2.6$, or a nice coffee) to this address: XmbzS2n7wViFXY39g1CXX5Yc2eWVy25Qfh