Spectre (not be confused with a separate project called SPECTRE), created two crypto tokens – the aptly named spectre token and the xspec token – in 2016, but hasn’t received much notice from the crypto community so far. Sure enough, its tokens rank in the 500s according to data provider CoinMarketCap, with a total market capitalization of $5.7 million – paltry by many crypto standards.
But that might soon change, as the project is taking a growing interest in a technology called staking.
A number of alternative proof-of-stake systems have launched recently (EOS, Tezos, Neo, Tron), with varying degrees of success, though all of which have commanded large market caps buoyed by big investors.
These systems assign the task of verifying blockchain transactions to a certain number of delegates, representatives of sorts which are voted in by the token holders. While token holders don’t necessarily identify themselves, according to Spectre’s pseudonymous founder, Mandica, there’s a huge privacy problem within these systems.
“All the UTXOs [unspent transaction outputs] spent to generate staking transactions are traceable on the blockchain and all the staking transactions can be linked and your balances are visible to anyone who knows how to analyze the blockchain,” Mandica told CoinDesk.
But the Spectre team, which has been tinkering away on various privacy tools for blockchains for the past couple years, thinks it’s found a way to make staking stealthy as well.
While the technology isn’t ready yet, the team hasn’t been reserved about its ambitions.
“From a user point of view you will be able to keep your entire balance of anonymous coins safe from any observer and you will just need to stake your wallet to receive further anonymous coins that nobody can attribute to you,” Mandica said, continuing:
“This is a unique proposition, and no other cryptocurrency, as far as I know, has a system to stake anonymous coins and generate fresh anonymous coins.”
Entropy in open wallets
While the full picture of how this all works isn’t clear yet (the group hasn’t put out a white paper, though, on social channels, it’s promising one soon), the basic premise is borrowed from another privacy-oriented coin: monero, specifically its ring signature technology.
Ring signatures allow anyone in a particular group to sign a transaction, making it impossible to determine exactly which participants’ keys signed the transaction.
But that still leaves the nodes, which aren’t invisible, able to see the transactions. As such, the Spectre team went to work designing a fix.
“The ‘anonymous’ coins are created using stealth address technology and one-time key pairs, and [they] reside on the blockchain as un-linkable UTXOs that can only be spent by proving ownership through the use of ring signatures and key-images based on the Cryptonote protocol,” Mandica said.
While that’s a bit challenging to parse – and the Spectre team was cautious about explaining in too much detail – there are some clues as to what the system entails.
For instance, users that contribute to the network by leaving their wallets connected to the internet can earn a minimum of a 5 percent annual income on their tokens. Although the fewer people that have their wallets open and online, the higher this yield goes (providing an incentive to others to do it).
Mandica declined to explain in detail what these wallets are doing, but he did say that the “proof-of-stealth” algorithm the team is employing is designed to take advantage of the creation of new tokens with no prior history to increase entropy used to mask the true transactions.
He told CoinDesk:
“Entropy is key in a system using ring signatures to create a large pool of mixins or ‘dummy’ coins that can be used in the ring signature protected anonymous transactions.”
Based on other descriptions of ring signature schemes, protocols need a steady stream of unspent transactions to mask the real transactions. And this may be what those open wallets are doing.
Anonymous to the core
According to the team, in its next major release, the new proof-of-stealth staking mechanism for anonymous coins – the spectre coin is the anonymous one – will complement the proof-of-stake version 3 (PoSv3) algorithm the blockchain already uses.
But this work is just the latest privacy-centric tooling the Spectre team has come up with.
Even those without an unusually high privacy consciousness will be familiar with Tor, an acronym for “The Onion Router,” a scheme for masking internet users’ activity online and even accessing sites intentionally invisible to search engines like Google. Spectre has already built Tor into its systems and even went further, implementing Tor product, “OBSF4,” which allows users to skirt national firewalls, such as those in China and Iran…