Friday, March 3, 2017

PathShuffle – Turning Ripple Into A Fully Anonymous Cryptocurrency

Ripple as a credit settlement network represents one of the most promising coins in the cryptocurrency continuum presently. Ripple’s “I owe you” credit path-based settlement form of transactions sets Ripple apart from bitcoin by promoting fast, low fee settlement transactions. Ripple’s psedonymous characteristics, while still permitting tracing back senders and receivers of transactions, has encouraged many financial institutions across the globe to use Ripple for day-to-day transaction processing. With its public ledger, Ripple is similar to other cryptocurrencies in terms of weak privacy. Recently, successful deanonymization attacks have raised pivotal questions related to privacy concerns of Ripple’s users. Unlike some cryptocurrencies, there are currently no privacy solutions or mixing protocols compatible with Ripple’s network such as Bitcoin’s Coinjoin.

PathSuffle is a recently presented, first path coin mixing protocol which is fully compliant with Ripple’s network. PathJoin is PathShuffle’s main building block which represents an innovative protocol to execute atomic transactions across Ripple’s network. Via combining PathJoin with DiceMix, the peer-to-peer (P2P) mixing protocol, PathShuffle offers a fully decentralized, yet fast solution for completely anonymizing Ripple’s transactions without having to rely on any intermediary third parties.

Credit networks, including Ripple and Stellar, enable users to build trust among themselves via means of “I owe you” (IOU) credit they send to each other. This permits the execution of real world financial transactions between two connected users through appropriate settlement of the IOU credit of the trust path connecting both of them. Practically speaking, this renders credit networks capable of performing same and cross-currency financial settlements among fiat currencies, cryptocurrencies and even other forms of financial assets with considerably low transaction fees at competitively very short time durations.

During the past few years, many financial institutions have adopted Ripple as a transaction backbone. The initiator of a transaction can send a specific amount of IOU in any given currency and the receiver gets the corresponding amount in bitcoins. Accordingly, all merchants accepting bitcoin as a payment method can now accept Ripple payments. Furthermore, Ripple supports user defined currencies e.g. goodwill, which is a currency traded in exchange for various socially valuable services. Presently, Ripple has more than 200,000 wallets, its market capital exceeded $600 million USD and serves more than $1 million USD worth of daily transaction volume

PathShuffle was presented in a recently published paper as the first ever path mixing protocol for Ripple’s path based transactions. The paper introduced “path mixing”, a unique approach to mitigate deanonymization attacks in Ripple and credit networks in general. Path mixing assumes that each user has two wallets; an input wallet and an output wallet. The path mixing protocol will transfer the predetermined amount, let’s say β IOU, from every input wallet to every output wallet so that an attacking adversary, who controls a significant part of the network, cannot determine which pair of input and output wallets belong to whom. This is noted as “successful path mixing”.

Currently, Ripple’s network only supports transactions that involve a single receiver and a single sender. This limitation of Ripple’s network is overcome by PathJoin via an innovative combination of the functionality of Ripple’s blockchain and a decentralized threshold signature scheme that ensures that n users send credit atomically from the input wallets to the output wallets, which solves a fairness problem which emerges from such scenario. On the other hand, PathJoin can be also useful for applications that rely on atomic transactions such as crowdfunding platforms.

PathShuffle is by far the first decentralized path mixing protocol to promote transaction anonymity across credit networks. It can be compared to the most efficient Bitcoin mixing protocols such as CoinJoin. Pathshuffle requires only 8 rounds to execute settlement transactions in an anonymous manner along intersecting paths in a way that is independent of the number of users participating in the coin mixing instance, and 8 + 6f rounds when a number of f disrupting users is present.

PathShuffle is fully compatible with Ripple’s network as proven by the creators’ proof-of-concept implementation, who managed to successfully carry out real-time coin mixing transactions over Ripple’s network. Pathshuffle is fully compatible with other credit networks such as Stellar, yet it hasn’t been tried out yet.