Technology

The Secret Story of How Edward Snowden Was Involved in the Mysterious Creation of an Anonymous $2 Billion Cryptocurrency

In the fall of 2016, the cryptocurrency world was buzzing with excitement over the creation of a new type of cryptocurrency, zcash. Unlike bitcoin, which is designed to be completely transparent and traceable, zcash was encrypted to hide all the information about a financial transaction, including not only the amounts involved, but also the public keys.

That meant prying eyes could no longer follow the cryptocurrency as it changed hands. The developers of zcash, at Denver-based Zerocoin Electric Coin Company, used state-of-the-art mathematics that they allowed a person to prove a truth, such as that they owned a number of cryptocurrencies, without even revealing what that truth was. It’s called a zero-knowledge proof. Math would do the job, no humans needed.

zerocoin

zcash

But to start the process, ironically, these tests require humans. In the zcash creation ceremony, six people performed a series of different tasks that resulted in them, hopefully only briefly, possessing a portion of the private creation key, which, if ever joined together, would allow the printing of a Infinite and untraceable cryptocurrency.

The end of the ceremony, which was held at venues around the world in October 2016, was the destruction of these keys. As long as one of those six people destroyed their part of the key, the ceremony was a success.

What was at stake was a world in which individuals could still spend money privately without being controlled and monetized by nation states or big business.

Shortly after the so-called genesis block that created the $2.1 billion blockchain, five of the six participants in the ceremony revealed their identities. They included CoinCenter researcher Peter Van Valkenburgh and bitcoin core developer Peter Todd. But the sixth person, who goes by the pseudonym John Dobbertin, remained unknown until today, when whistleblower Edward Snowden confirmed his role in a short video shared with Forbes.

Snowden_screenshot

Edward Snowden in a still from Zcash Media’s upcoming zcash documentary.

“When we look at cryptocurrencies”, Snowden said in the recording, which was made for a Zcash Media documentary on the coin’s history, “We usually see its cryptographic properties being used to make sure it’s a fair ledger, but it’s not like it’s been used to make sure it’s a private ledger. Bitcoin is pretty famous for being an open ledger. The problem with That is, you can’t have truly free trade unless you have private trade. And you can’t have a free society without free trade.”.

Snowden’s interest in privacy protection technology caught the attention of Zooko Wilcox, co-founder and CEO of Zerocoin Electric Coin Company, now called the Electric Coin Company, when Snowden spoke virtually at a privacy event at Bard College. There he described the role of privacy technology like the TOR Internet browser in obscuring identities, giving ordinary citizens a sense of privacy.

Zooko Wilcox

Zooko Wilcox

Wilcox was looking for people who already adhere to strict privacy practices as part of their daily lives to participate in the zcash creation ceremony. And who better than Snowden, the former NSA contractor who had leaked 9,000 classified and unclassified documents, much of it about US spying on its own citizens, before fleeing in June 2013 and taking refuge in Moscow?

Wilcox contacted Marcia Hofmann, a veteran of the Electronic Frontier Foundation, the influential Internet civil liberties group, who connected them. In the fall of 2016, Wilcox set up a computer at a rental property in Colorado where he could customize privacy features to ensure the conversation was not eavesdropped.

When Snowden first appeared on screen, Wilcox was impressed. “Ed’s revelations really validated the kind of defenses, the kind of secure infrastructure that he had been trying to build for society, and that other people had doubted,” says Wilcox. “His revelations of him showed people that I had been right all along.”

Edward Snowden

Edward Snowden

After Wilcox regained his composure and addressed some of Snowden’s privacy concerns about zcash , the two agreed to work together. Wilcox assigned him the pseudonym, John Dobbertin, as a tribute to Hans Dobbertin, the late German cryptographer best known for tracking down weaknesses in cryptographic algorithms. In addition to the pseudonyms, Wilcox required that the hardware used in the ceremony be “air-gapped”, meaning that it had never been connected to the Internet in any way.

Snowden’s espionage helped with a small but important part of the ceremony. Wilcox says Snowden introduced him to what he describes as the CIA’s concept of “random shopping,” or the spontaneous purchase of hardware from places that even the buyer didn’t know he was going to use until the last minute. Wilcox took the advice to heart, demanding it of every participant. Wilcox says that Snowden used a simple but effective disguise when he bought a new computer for the zcash ceremony in Russia.

Edward Snowden

Edward Snowden

“When you go out on the street in Moscow, if you’re wearing glasses, people recognize you,” says Wilcox. “And if he just takes off his glasses, no one knows who he is. So he took off his glasses to go get his random purchase from the computer store.”

Money appears to be flowing into privacy coins due to the war in Ukraine and following a European Parliament vote that could shut down unregulated exchanges and require identity verification for even the smallest transactions. Since February 24, when Putin invaded Ukraine, Zcash is up 67% to a recent $147, while Bitcoin is up just 9% in the same time frame.

In total, there are 90 different privacy-protecting coins, including Monero, the main competitor to zcash, which has a market capitalization of $4.1 billion. In total, privacy coins now comprise an $11.3 billion market, according to CoinMarketCap.

zerocoin

zcash

Prior to today’s announcement, Snowden had publicly discussed privacy coins on multiple occasions, including a tweet in September 2017 when he called zcash the “most interesting” alternative to bitcoin and other in February 2019 in which he clarified that he had never been paid for his support. from zcash, something Wilcox reiterated.

As recently as this month, Snowden addressed a group at the Nym privacy coin launch in Paris, where he blamed many of today’s privacy problems on decisions made in the 1970s about how our computer networks are structured. global.

“Bitcoin privacy is still an open mess. Everybody knows that,” Snowden said in a different video of the Nym conference, provided exclusively to Forbes . “I’ve tweeted trades with the core developers, they know that. And there are improvement proposals out there. But it’s moving slowly. I have to think at this point there’s basically a fear of moving forward to fix that, and that’s what which makes everyone slow, because this is the core problem with Bitcoin today. There is no problem more important than fixing open book weaknesses.”

Edward Snowden

Edward Snowden

Two years after the original zcash ceremony, Snowden again used the identity of Dobbertin to participate in a much more detailed and secure ceremony involving 88 people. Each participant chose their own security protocols. Snowden, professionally cautious, chose to use a separate USB stick for each step of the process.

“When it came to this concept, that you needed a lot of people in a lot of places, all cooperating in the hope that just one of them wouldn’t be compromised, couldn’t go against the public interest, and that was necessary for the ceremony to have success. , I was happy to say sure, I’ll help,” Snowden said, in the video. “But the best step forward beyond the ceremony is to remove the need altogether.”

zcash

zcash

And that is exactly what has happened. The timing of Snowden’s revelation is no accident. Wilcox is releasing a software update for zcash, called Halo, which, thanks to a mathematical breakthrough by Electric Coin Company engineer Sean Bowe, eliminates the need for these ceremonies altogether. As long as it became clear that he was not paid for services, Snowden thought the time was right. “For the first time,” says Bowe, “users will be able to use zcash without relying on a trusted configuration at all.”

“The first generation of science needed these kinds of preparatory ceremonies, and we needed to make it secure, so North Korean hackers and whoever else couldn’t exploit us in the meantime,” says Wilcox. “Since the launch of the next generation of zcash, we have passed that stage of human evolution.”

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