Matthew Green, assistant research professor at the Johns Hopkins Information Security Institute, is making waves for leading the team in the computer science department that created Zerocoin, a digital currency meant as an extension of Bitcoin. He presented the product at the 2013 Institute of Electrical and Electronics Engineers (IEEE) Symposium on Security and Privacy in Oakland, Calif.
Green, Zerocoin’s primary creator, could not be reached for comment.
The Zerocoin website includes a description of how the digital currency is kept private.
“The key to this process is to ensure that the bitcoins received at the end of this process are completely unlinked to the bitcoins that were used in the beginning. This is accomplished using a variety of cryptographic components, including digital commitments and zero-knowledge proofs. The end result is that it is mathematically infeasible to link the particular bitcoins used at the beginning and end of this process, other than through educated guesswork,” the website states.
Zerocoin has been hailed for its provision of anonymity. It allows for virtual money transfers without the aid of a bank in a secure and private setting. The popular product Bitcoin serves the same purpose but does not provide the same level of security.
John Driscoll, adjunct professor in the economics department, affirmed that virtual currencies have several advantages.
“Electronic currencies are the latest in a long series of innovations on how to make transactions or store value. They have the potential advantage of convenience over paper currency transactions. They also share paper currency’s advantage of allowing for anonymous transactions, with some qualifications,” Driscoll wrote in an email to The News-Letter.
Some are wary that Zerocoin’s available anonymity might make illegal transactions even easier. Bitcoin, the less anonymous program, has already been the vehicle for numerous illegal hacks and exchanges. Driscoll agreed that there are problems with the concept of virtual currencies.
“First, as with paper currencies, there is the possibility they can be counterfeited. Second, even with an electronic currency that’s determined to be genuine, there’s a possibility that the currency can be stolen — as apparently happened with Mt. Gox,” Driscoll wrote.
Since its introduction in 2009, Bitcoin has been used in black markets, Ponzi schemes, thefts and money laundering. Most recently, a court order was issued to freeze the assets of Mark Karpeles, the CEO of Mt. Gox, the world’s largest Bitcoin exchange. The Tokyo-based company fell under attack by hackers and has filed for Bankruptcy.
“Although transactions with such currency are anonymous — which might be desirable for people who want more privacy about their purchases than is afforded by a credit card or bank transfer — there’s the possibility that some clever hacker will figure out a way to trace the transactions,” Driscoll wrote.
This fear of hacking or lack of security has deterred some Hopkins students from using Bitcoin.
“I looked into Bitcoin, but it seemed complicated. The reason I heard about it was through a class I was taking on the deep web. I learned it’s been used in large drug trades, and it just seemed really sketchy,” freshman Jenny Wagner said.
Freshman Charlie Green expressed hesitation for other reasons.
“I might use Bitcoin or Zerocoin, but the dangers are a little scary. I think the convenience of using virtual currency and not having to carry around a wallet is really cool, though. I haven’t heard of a lot of places that accept it, but I’m excited to watch it grow,” Green said.
Driscoll emphasized that indeed, a currency is only convenient if its use is widespread.
“As with any money, to be most useful, electronic currency will have to have a large network of people willing to accept it for transactions,” Driscoll wrote.
As for the currency’s future, its website announced that Zerocoin will soon be undergoing changes.
“We will be updating this site soon to include details of our new version described by Matt Green at Real World Crypto 2014,” the website states.
“It will be interesting to see whether or how these challenges are overcome; it’s too soon to tell yet how successfully electronic currencies will be,” Driscoll wrote.
