Darkcoin has seen its price go up dramatically over recent weeks, as its advertised anonymity has helped it attract many new users. Darkcoin is different from Bitcoin in several ways, but the biggest innovation is called Darksend. This is Darkcoin’s payment system, which makes user transactions anonymous.
In Bitcoin and other alternative cryptocurrencies, wallet addresses are anonymous. Transactions between addresses are recorded in a block, which are subsequently added to the blockchain once validated. The blockchain is a public ledger of all transactions, and can be looked up through any blockchain explorer. This allows everyone who knows your wallet address to track your transactions.
Darksend was developed to tackle the lack of real anonymity, as it scrambles transactions by default. The process is described as below:
“A user’s payment is automatically split into smaller demoninations and pooled with the split-up payments of other users. Receivers of payments draw these demoninations automatically from the pools until they have received the correct amount. Anyone viewing the blockchain will see payments being made but they won’t be able to see who paid who.”
The previous makes Darkcoin an ideal cryptocurrency for the dark side of society. For example, blockchain analysis could be used to expose the ongoing fraud in Auroracoin. This analysis consisted of tracking the premined amount until it split into an amount of 31.8 coins (the amount Icelandic citizens could claim). The number of claims per address could then be easily counted. With Darksend this would not have possible. It would also be a lot harder to publicly audit certain charities and crowdfunding projects. These are just some reasons why it is likely to assume that true anonymity will also promote scams.
Apart from the previous, governments already feared Bitcoin’s popularity with criminals. With Darkcoin, this will be a lot more justified. The cryptocurrency is currently hardly accepted outside of the deeb web. It could very well be the case this what drives Darkcoin’s recent growth. The developer, Evan Duffield, has already dismissed this stating: “I don’t see much chatter about using it for illegal things. It’s a neat technology and people want to invest in it because it’s useful.” But anonymity does not allow for a serious assessment of potential criminal use either. Ultimately, Darkcoin’s success will depend on the regulators, and they are not likely to be very happy with this digital currency.