Crypto’s next frontier of secrecy – POLITICO

With the help of Derek Robertson

Even though the cryptocurrency markets have collapsed, the underlying technology continues to evolve at a rapid pace. often in a way that governments would do well to pay attention to.

One important change right now is that the world of crypto is getting more mysterious.

Increasingly, new crypto projects are using mathematical methods called zero-knowledge proofs, which allow users to verify the validity of a particular piece of information without revealing the underlying information itself. As blockchain experiments proliferate and become more complex, evidence is used all kinds of players governments, anarchists, entrepreneurs – to bake an extra layer of secrecy into new projects.

Adjusting the balance between “public” and “private” information has been an important part of the evolution of cryptography from the very beginning. With Bitcoin, the progenitor of all cryptocurrencies, users can access the network without revealing their identity, but the balances and transaction histories of all addresses on the network are publicly available on the blockchain. (This created the cottage industry”on-chain analysisProviders that offer information about the state of the cryptocurrency markets)

To create another layer of privacy around transactions, some new blockchain networks encrypt the information recorded in their distributed databases so that no outside observers can read their blockchains. They then use zero-knowledge proofs to make sure the transaction is valid.

Similar to the cryptographic techniques that underlie Bitcoin, zero-knowledge proofs have existed in mathematical literature for decades before they were used on blockchains.

And, as with earlier crypto breakthroughs, many of the early adopters were criminals. But law-abiding people also like privacy, so more established actors follow their example:

-Last month, report The Atlantic Council on Central Bank Digital Currencies recommends using zero knowledge proof to create systems that protect user privacy while allowing limited government oversight. For example, governments can confirm that a transaction was less than $10,000 — a threshold that comes with increased reporting requirements — without disclosing any other information about the transaction.

The Red Cross is working on a project in Somalia which will use zero-knowledge evidence to allow people to show that they are eligible for specific health care without revealing their names or other identifying information.

“It’s about protection,” he says. Adam Bornsteinleading financial innovation at the Danish Red Cross. “They don’t need to reveal who they are. The counterparty just needs to know that they are approved for this, and that is enough.”

Then there’s DarkFi. Despite their potential use for central bank digital currencies, zero-knowledge proofs tend to tip the balance of power away from governments, making it easier for people to interact online in a way that blocks surveillance. A group of anarchist developers builds on the work of early adopters of ZK proofs such as Monero, a cryptocurrency. preferred by criminalsand Zcash, which positions itself as a privacy-focused cryptocurrency to create an entire ecosystem of decentralized applications based on privacy.

AT manifesto quoting former FBI Director James Comey about the “going into the dark” problem that cryptography creates for law enforcement, the group describes their DarkFi project as a means to “liberate the democratic nation.” AT podcast interview published earlier this month, Rachel Rose O’LearyIreland-based developer DarkFi said the project has reached the early stages of private testing.

DarkFi is just one of the new projects trying to use these new methods to bypass government surveillance. As O’Leary explained, the advent of blockchain caused a “Cambrian explosion” in zero-knowledge experiments.

If these projects succeed, the law enforcement problem will only get worse. But governments have another reason to pay attention to zero-knowledge proofs: to use them.

Michael Mosier, a former acting director of the Treasury Department’s Financial Crime Enforcement Network who now works for Web3 startup Espresso Systems, said policymakers would be wise to use these methods for CBDCs and other digital governance upgrades. “We need to develop such achievements, and not just copy a horseless cart,” he said.

Generally, regulators prefer to have access to as much information as possible. But at a time when mutual distrust between the parties is growing, Mosier said zero-knowledge guarantees have become easier to sell to political appointees worried that information could fall into the wrong hands.

“Telling Democrats, ‘It could be Donald Trump again'” or telling Trump appointees, “Hey guys, that could be Barack Obama,” prompted regulators to be more willing to use privacy features, he said.

These days, people just expect more from their global mega-corporations, leading companies as scattered like ford as well as Kellogg to start the release of annual reports on human rights in recent years. So it may come as a surprise that the Meta, whose human rights work has been the subject of some pretty close attentionsimply released his first on Thursday.

The report presents the results of investigations into Facebook’s use for purposes ranging from election campaigning to human trafficking, and describes the company’s risk-mitigation efforts, such as crackdowns on content of elections in Myanmar and false information about COVID-19 pandemic. (The report also presents the results of a study conducted by the company in India, the findings of which has been heavily criticized activists and groups such as Amnesty International.)

Ironically, one topic that is relatively few in the report is the company’s new name: the metaverse. The company’s human rights director, Miranda Sissons, told Reuters that these assessments will mostly take place this year and will be featured in future reports, but this issue has a brief section on the assessment of the company’s Ray-Ban Stories, augmented reality glasses. with a built-in camera – what privacy advocates think serious risk to human rights according to your right. – Derek Robertson

As the big European Union AI legislation starts to take shape, the country administering the process is currently making some major changes.

Clotilde Goujar from POLITICO reports today for Pros that the Czech Republic, which currently chairs the Council of the EU, has made some changes to the Law on Artificial Intelligence that will reduce the degree of regulation, in particular, algorithms focused on insurance and pollution control.

Removing these algorithms from the “high risk” category would exempt them from mandatory EU assessments and protect their developers from potentially large fines. (The changes also narrow the definition of “high risk,” likely to exclude more companies.) If passed, the changes are likely to put the Council in conflict with the European Parliament, which is pushing for stricter rules.

Meanwhile, across the Channel, the UK is developing its own, more lenient approach to regulating AI, as Clotilde reports in Europa morning technology newsletter today (only for subscribers in Europe). Emphasizing its “flexibility”, the UK says it plans to largely delegate its AI policy to industry regulators instead of EU-style common law.

And if you’re waiting for this kind of news on the home front, don’t hold your breath: last fall, the White House said it was development of the “Bill of Rights of an Automated Society”, but since then little has been said about it. Founder of the Center for Artificial Intelligence and Digital Policy Mark Rotenberg Sunday said that his group has filed a Freedom of Information Request with the White House for more information. – Derek Robertson

Stay in touch with the entire team: Ben Schrekinger ([email protected]); Derek Robertson[email protected]); Konstantin Kakaes (ur.[email protected]); and Heidi Vogt ([email protected]). Follow us on Twitter @DigitalFuture.

Ben Schrekinger writes for POLITICO on technology, finance and politics; he is a cryptocurrency investor.

If you have received this newsletter, you may sign here. And read our mission statement is here.