Human technology

Crypto’s Next Secret Frontier – POLITICO

With help from Derek Robertson

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

A big change right now is that the crypto world is getting more and more cryptic.

Increasingly, new crypto projects are adopting mathematical techniques called zero-knowledge proofs, which allow users to verify that certain information is true, but without revealing the underlying information itself. As blockchain experiments proliferate and become more complex, evidence is used by all kinds of players governments, anarchists, entrepreneurs – to add an extra layer of secrecy in new projects.

Adjusting the balance between “public” and “private” information has been a big part of the evolution of crypto from the beginning. With Bitcoin, the ancestor of all cryptocurrencies, users can access the network without revealing their identity, but the balances and transaction histories of all network addresses are fully visible on the blockchain. (This created a cottage industry of “on-chain analysis“providers that offer insight into the state of the crypto markets)

To create another layer of privacy around transactions, some newer blockchain networks encrypt the information stored in their distributed databases, so that no outside observer can read their blockchains. Then they use zero-knowledge proofs to verify that a transaction is valid.

Like the cryptographic techniques behind Bitcoin, zero-knowledge evidence existed in the mathematical literature for decades before being used in blockchains.

And as with previous crypto breakthroughs, many of the early adopters were criminals. But law-abiding folks also love privacy, so more established players are following suit:

-Last month, a report by the Atlantic Council on Central Bank Digital Currencies recommended the use of evidence without knowledge to create systems that protect user privacy while allowing limited government surveillance. Governments could, for example, verify that a transaction was under $10,000 — a threshold that comes with increased reporting requirements — without revealing anything else about the transaction.

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

“It’s a matter of protection,” says Adam Bornstein, who leads financial innovation for 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 is DarkFi. Despite their potential applications for central bank digital currencies, zero-knowledge proofs tend to shift the checks and balances away from governments by making it easier for people to interact online in ways that thwart surveillance. A group of anarchist developers builds on the work of early ZK proof users — like cryptocurrency Monero favorite of criminalsand Zcash, which markets itself as a privacy-focused crypto – to create an entire ecosystem of decentralized apps built around secrecy.

In a manifest quoting former FBI Director James Comey on the “Going Dark” problem crypto is creating for law enforcement, the group describes its DarkFi project as a way to “liberate the democratic nation.” In a podcast interview published earlier this month, Rachel Rose O’Learyan Irish developer from DarkFi, said the project had reached an early phase of private testing.

DarkFi is just one of the emerging projects looking to use these new techniques to circumvent government surveillance. As O’Leary explained, the advent of blockchain sparked a “Cambrian explosion” in unconscious experimentation.

If these plans are successful, the problem of law enforcement “obscurity” will only get worse. But governments have another reason to pay attention to zero-knowledge proofs: to use them.

Michael Mosier, the former acting director of the Treasury Department’s Financial Crimes Enforcement Network, who now works for Web3 startup Espresso Systems, said policymakers would be wise to leverage these techniques for CBDCs and other upgrades. governance systems. “We should incorporate these kinds of advances instead of just replicating the horseless carriage,” he said.

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

“Telling Democrats ‘It could be Donald Trump again,’ or telling Trump appointees, ‘Hey guys, it could be Barack Obama,’ made regulators more willing to accept privacy features, he said. -he declares.

People simply expect more from their global mega-corporations these days, leading companies as disparate like Ford and Kellogg to start annual human rights reports in recent years. It might therefore come as a surprise that Meta, whose human rights record has been the subject of some quite intense examinationjust released its first Thursday.

The report presents findings from investigations into Facebook’s use for everything from campaigning to human trafficking, outlining the company’s risk mitigation efforts, such as cracking down 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 conclusions of which were strongly criticized by activists and groups like Amnesty International.)

One topic that’s relatively rare in the report is, ironically, the company’s new namesake: the metaverse. The company’s human rights director, Miranda Sissons, told Reuters that these assessments are largely taking place this year and will be featured in future reports, but this edition includes a brief section assessing the “Ray-Ban Stories” from the company, augmented reality glasses. which feature a built-in camera – something privacy campaigners consider a serious risk to human rights in his right. — Derek Robertson

As major European Union legislation on AI begins to take shape, the country leading the process right now is making major changes.

Clothilde Goujard of POLITICO reports today for the pros that the Czech Republic, which currently leads the Council of the EU, has made some draft changes to the Artificial Intelligence Act that would reduce the extent to which algorithms focused on insurance and control of pollution are regulated, among others.

Removing said algorithms from the “high risk” category would exempt them from EU-mandated assessments and protect their developers from potentially massive fines. (The changes would also reduce the definition of “high risk”, likely exempting more companies.) If accepted, the changes will likely bring the council into conflict with the European Parliament, which favors stricter rules.

Meanwhile, across the Channel, the UK is developing its own more permissive approach to AI regulation, as Clothilde reports in Europe’s Morning Tech newsletter today (for European subscribers only). Highlighting its “flexible approach”, the UK says it plans to largely delegate its AI policy to regulators by industry sector instead of adopting a general European-style law.

And if you’re expecting similar news on the home front, don’t hold your breath: the White House said last fall that it was the development of a “bill of rights for an automated society”, but since then he hasn’t said much about it. Marc Rotenberg, founder of the Center for AI and Digital Policy said sunday that his group submitted a FOIA request to the White House for more information. — Derek Robertson

Keep in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Constantin Kakaes ([email protected]); and Heidi Vogt ([email protected]). Follow us on twitter @DigitalFuture.

Ben Schreckinger covers technology, finance and politics for POLITICO; he is a cryptocurrency investor.

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