You've probably heard that bitcoin is an "anonymous" currency, that no one can "identify" you... So, at the risk of disappointing you (or reassuring you), it's not. 😅
Even though Bitcoin was invented by online privacy advocates (the so-called "cypherpunks"), the protocol does not act as an invisibility cloak. And for good reason, the blockchain allows all transactions to be observed. 🔍
There are certainly some solutions to make yourself discreet:
👉 multiply the wallets
👉 limit the transactions between them
👉 use decentralized applications (Uniswap, Paraswap, etc.) to avoid having to fill in your identity
But NOTHING guarantees real anonymity 👤.
Some data such as your IP address, and in general all the metadata (a metadata is a piece of data used to define or describe another piece of data) of electronic communications will always be available.
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Take the case of the IP address: the IP address is the identification number assigned to all devices connected to the Internet (mostly the router).
Every time you make an online transaction, you leave a fingerprint and a telecom operator is able to trace it back to you if they wish.
This system works with an email, a purchase on Amazon, a message sent via WhatsApp and Telegram, or a transaction in... bitcoin! By reconciling the date of the transaction with the metadata, one can easily identify the owner of a wallet.
This allows companies like Orange, T-Mobile, O2 or Vodafone to know that you have a wallet and use cryptos, without you even declaring it (you are not required to). 📡
In an attempt to get around this problem, several partners created Nym in 2018. Based in Neuchâtel, Switzerland, the company has developed a blockchain infrastructure that can mask all of your metadata.
"If you want a communication to be truly private, you have to hide its content with cryptography and, above all, mask its existence," explains Alexis Roussel, director of operations at Nym Technologies.
"In the case of cryptos, my phone provider doesn't have to know that I have a bitcoin wallet. There is no requirement for him to have that information," the Swiss entrepreneur continued.
Alexis Roussel is a historical figure in the bitcoin community. Close to the libertarian current, he notably co-founded in 2014 the crypto broker Bity, one of the very first European exchange platforms (find his interview conducted as part of our report).
Electronic noise" to confuse the issue
Nym's operation is based on a concept defined by the cryptographer David Chaum in the 1980s: the mixnet (for "mix network").
In this system, all electronic communications (crypto transactions, emails, photos or videos) are chopped up and sent over the network as packets (blocks of data) of identical size so that they all look the same and cannot be identified. 📦
Whether it's an email or a video, all packets look the same. Most importantly, each one will take a different path through the network, which distinguishes Nym from a network like Tor... On Tor, which has been considered the most effective tool for using the Internet anonymously until now, the path of a communication is the same for five minutes!
To further complicate monitoring, each packet is more or less randomly slowed down. This allows to hide the location of the users on the network.
Finally, 20 to 30% of the traffic is made up of empty packets sent on the network.
Put together, all of these elements constitute "electronic noise" that prevents any entity from monitoring the network. ❌
We asked Renaud Lifchitz, a computer security expert who has had the opportunity to manage a Nym node (independently) in recent months, what he thought of Nym :
"Nym has the advantage of VPNs, which is that it allows the user to hide their IP address, without the disadvantages of a centralized protocol," he explains. VPN providers can indeed know the real IP addresses of their users and communicate them to the authorities if they were to request them...
"Since Nym injects superfluous packets to defeat attempts at statistical traffic analysis, it seems more robust than Tor."
What concrete use cases for Nym ?
The first use of Nym is to hide the possession and use of a crypto wallet from telecom operators (and therefore de facto from the authorities). But it is also useful to hide communications made via instant messengers (WhatsApp, Telegram, etc.).
From a network perspective, someone using Nym only gives the information that they are connected to the infrastructure. Then it's a black hole 🕳️.
According to the Nym team, even Apple or Google, who develop the operating systems for iOS and Android smartphones, would be "blind".
"The whole digital economy is based on metadata, not on the content of discussions. It is important that citizens are able to protect them at a time when the means of surveillance are becoming more and more numerous and powerful," insists Alexis Roussel. 🖥
Activist Chelsea Manning, a former US Army analyst famous for leaking numerous confidential documents about the war in Iraq, is involved in Nym.
How to use Nym today ?
For the moment, only the Electrum bitcoin wallet (available on computer) can connect to Nym. But others should be compatible soon. The biggest challenge will be to make Nym directly integrated with the wallets to make the experience more fluid.
Regarding instant messaging, it has been possible since 2022 to use Nym with Telegram and Keybase (still on computer only). Nym Technologies should propose its own mobile application during 2023 in order to facilitate the connection to most messengers.
Moreover, since Nym is open, any project can be developed on it and new services are starting to appear. This is the case of Pastenym, which is inspired by Pastebin, and which allows to send a message in a totally anonymous and undecipherable way to an interlocutor who would hold the decryption key. This tool is developed by No Trust Verify, a small team based in Neuchâtel.
"When using a site like Pastebin, it's possible for someone to detect actions taken by users, such as retrieving or sharing a text," points out co-founder kov0x, a member of The Big Whale community. "Pastenym solves this problem through the mixnet."
What is the purpose of the blockchain in Nym?
The mixnet is not based on a blockchain. It's a fairly standard network infrastructure.
On the other hand, a blockchain (developed on Cosmos) intervenes to establish the position of the entities that participate (because they must register on it). It also allows to remunerate the nodes that ensure the mixing.
The latter receive the transaction fees paid in NYM tokens by users. The capitalization of NYM is currently $100 million.
Its existence is fundamental because it ensures the protection of the network. As with Ethereum, an attacker must gather a large quantity of tokens to take control of 80% of the nodes (currently 250). Currently, the theoretical cost of an attack is estimated at about 40 million euros. The more Nym is used, the more the cost of the attack will increase.
It should be noted, however, that this approach is only theoretical since Nym's business model has never been put to the test.
"These economic mechanisms allow the mixnet to be truly resilient," says Alexis Roussel.
In addition to this system, Nym was inspired by the bitcoin protocol to "ensure that each malicious participant (who would "tint" a packet so that it could be identified, for example) would be excluded by the network," says Alexis Roussel. This is called "proof-of-mixing".
Another token, the NYX, acts as a governance token. It should be publicly available soon.
Prestigious investors... and full coffers
The project has raised $50 million in 2022, making it one of the best funded in Europe. Most importantly: the venture capital funds that participated in the deal have committed to adding another $300 million to develop the ecosystem. Among them are the Americans Andreessen Horowitz and Polychain.
The European Union has also issued several grants as part of its Next Generation Internet initiative to promote a "people-centered Internet."
What is interesting is that telecom operators have also invested in Nym. This is the case of Swisscom and other German telecom companies, especially to use the protocol.
"Internet services collect countless data about their customers. Many don't know what to do with it. Some resell it in the form of targeted advertising, but others are faced with managing it, which has a significant cost, especially since the European RGPD regulation," says Alexis Roussel.
"The idea is that if they use Nym in the relationship with their customers, they will be able to limit themselves strictly to the information they need to provide the service. They won't have to deal with the rest," he continues.
Can Nym find its market?
The project is still very new and the number of transactions is still modest (currently about 500,000 8-kilobit packets are deployed daily on the network). For comparison, a single e-mail weighs between 20 and 60 kilobits.
We asked Stanislas Bathélémi, crypto expert for KPMG to find out what he thought.
"The goal of developing a privacy layer is necessary and useful, but the overriding issue is the adoption of this type of solution so that it doesn't remain a niche topic," he says. "Nym needs to move forward on this part to demonstrate at scale that this is a better solution than VPNs or Tor. We need to move beyond the promise stage," says the expert.
For the computer security specialist Renaud Lifchitz, "the Nym project proposes a very interesting system, but it still needs to prove itself, especially concerning its economic model which is not yet validated, its software which lacks stability and the small variety of services available".