What Was Dark Wallet?
Dark Wallet was an early attempt to improve the anonymity of Bitcoin transactions. As of March 2020, it appeared that the Dark Wallet site could no longer be reached via standard search engines or the dark web. Cody Wilson and Amir Taaki created Dark Wallet. It was a digital wallet that enhanced data anonymization by obfuscating Bitcoin transactions. Dark Wallet was also sometimes referred to as DarkWallet or Darkwallet.
Although it was never really completed, Dark Wallet inspired many later anonymity projects. In March 2020, Samourai Wallet and Electrum on Tails offered many of the anonymity benefits for Bitcoin users that Dark Wallet once promised. However, other cryptocurrencies have since surpassed Bitcoin for anonymity. Monero has many of the features of Dark Wallet built into the cryptocurrency. ZCash takes a different approach, but it is also considered an excellent choice for anonymity.
How Dark Wallet Worked
Dark Wallet was an underground site that needed software to be installed in either the Chrome or Firefox browser. Once the steps for installation were complete, a new digital wallet was created with a wallet seed or key—a password needed to access the wallet. The wallet came equipped with three pockets—spending, business, and savings—and with no limit to the number of user-created pockets. Each pocket had its own stealth address from which bitcoin transactions could be made.
Dark Wallet offered anonymity and privacy to its users in two ways: stealth addresses and coin mixing.
Stealth Addresses: A user receiving payment from a transaction using the Dark Wallet application had a new address generated for the funds to be deposited. By encrypting the transaction, not even the payer was able to pull up or track the payee’s address. Most importantly, the payment was hidden from unsolicited parties trying to look into both users’ transaction histories.
Coin Mixing (or CoinJoin): This feature reduced traceability by mixing or combining a user’s transaction with those of random users who happened to be making transactions at the same time. If the coins were joined with enough Bitcoin users in the system, tracing transactions from the ledger would prove to be challenging. Consider the following transactions made at the same time. A purchases an item from B, C purchases an item from D, and E purchases an item from F.
The general blockchain ledger, in all its transparency, would record three transactions for each address.
Dark Wallet, however, only recorded one single transaction by joining them together. The ledger would show that bitcoins were paid from the addresses of A, C, and E to those of B, D, and F. By masking the deals made by all parties, a tracker cannot determine with certainty who sent bitcoins to whom.
Coin mixing is also done when a user is transferring coins from one of his pockets to another. Wilson and Taaki expressed interest in increasing the number of users whose transactions could join one of these pools. Expansion of coin mixing was seen as one of the clearest paths to increased anonymity in cryptocurrency trading. Monero ultimately pursued this strategy.
Concerns About Dark Wallet
Critics were worried that Dark Wallet would open the door to many illegal activities, including terrorist funding, money laundering, drug trafficking, and child pornography. However, legitimate businesses wary of surveillance and data hacks welcomed Dark Wallet as a tool for dealing with growing issues surrounding data privacy and anonymity.
Future of Dark Wallet
The first alpha version of Dark Wallet was released in May 2014, and the platform went through several updates before an eighth alpha version came out in January 2015. There have been no further updates, and the project doesn’t seem to be under development anymore. However, many similar privacy-focused wallets and cryptocurrencies emerged in the following years.
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