Privacy and regulation in the age of cryptocurrency seen from "room N incident"

Original title: "privacy and regulation in the age of cryptocurrency from room N incident"

Source: LongHash

In 2018, high school student god god posed as a police officer on Twitter, used a hacker program to steal the private information of underage girls, then threatened to force women to film various videos of sexual exploitation and step by step to tighten control over his victims. During this period, god god set up a number of chat rooms on Telegram, also known as "rooms", in which god god posted pornographic content, hence the name of room N incident.

By February 2019, god god disappeared, and before it disappeared, it transferred the permission of room N to the user "Watch man". "Watch man" requires that users must upload evidence of their sexual assault before they can enter the room. This encourages the crime of sexual assault. During this period, room N spread like a virus, and the number of people grew rapidly from more than 2,000 to more than 7,000. It also caught the attention of the police. But the police have yet to act, and "Watch man" and room N suddenly disappeared in September 2019.

After the disappearance of "Watch man", a man called "doctor" began to operate the room, which became popular because of the extreme video scale in his room. In addition, "doctor" also divided users into different payment levels, with payment standards of 200,000, 600,000 and 1.5 million Korean COINS (equivalent to 1,149 yuan, 3,448 yuan and 8,620 yuan). Only bitcoin, Monroe and other cryptocurrencies are accepted for payment. According to south Korean media, the doctor owns 513 cryptocurrency wallets, and the amount of cryptocurrency in Telegram's verified personal cryptocurrency wallets, which are used to collect fees, is up to 3.2 billion won.


The anonymity of cryptocurrencies

We can see that "doctor" wanted to avoid the government through good "anonymity" at the very beginning of the operation of "room". He chose Telegram, an end-to-end encryption software, to avoid the government's censorship of his published content to some extent. On the other hand, for the fee part, "doctor" chose the cryptocurrency, hoping to take advantage of the good anonymity of the cryptocurrency to avoid the government from the funds to find him. But it was also because it had no knowledge of cryptocurrency that it chose bitcoin as the payment medium. It was this decision that allowed the police to trace back the transaction history and eventually trace the real identity and other information of the "doctor" and successfully catch the doctor.

Many people's first impression of cryptocurrencies is that they are anonymous, but most of the cryptocurrencies on the market today are not really anonymous.

In the case of bitcoin, the anonymity of bitcoin is actually pseudo-anonymity. In today's payment system, the bank plays the lowest role, and the policy supervision on the bank requires the bank to implement the KYC policy, and only by virtue of the customer's real name certificate can open an account, any third-party payment software is actually based on the banking system for transfer activities. In contrast, bitcoins do not require KYC, and users can generate an unlimited number of bitcoin wallets to receive and send bitcoins. In this way, the address of a bitcoin is actually not connected to a person's identity in the physical world. That is to say, you don't need to bind your personal information to own a bitcoin wallet.

But because bitcoin has good transparency, any transfers are open and transparent on the bitcoin network, and can be traced back through transaction records to all other addresses that sent money to one address. Selling bitcoin for cash creates a connection to the physical world. And the police also through the "pseudo-anonymity" of bitcoin, follow the lead, "doctor" arrested.

The munro is one of the most anonymous cryptocurrencies. Similarly, munro COINS are not tied to a person's identity in the physical world, and they use ring signature technology to encrypt the address and amount of money transferred, making it impossible for anyone but the parties to track transactions on the Internet.

In addition to munro COINS, there are large COINS, COINS, Grin and other cryptocurrencies have good anonymity. For example, big zero USES zero-knowledge to prove its anonymity, and Grin USES MimbleWimble protocol that combines multiple signatures and blind factors to guarantee privacy.

Because of their anonymity, cryptocurrencies are highly prized in the dark web of money laundering, drugs and gun trafficking, and these black industries have cast a shadow over their development and growth. According to reports, bitcoin is still the most popular cryptocurrency on the dark web, followed by Monroe. Silk road, for example, generated 9.5 million bitcoin transactions in the two years from its inception to its destruction, accounting for more than 80 percent of the total bitcoin at the time. Data of nearly 500 million weibo users was recently leaked and placed on the dark web and Telegram for sale.


Transparency or privacy, is that a question?

With the continuous development of the Internet and penetration, the digital world has become a parallel to the physical world to the other world, and the activities of people more and more in the digital world, people's activities in the digital world in the future will occupy the vast majority of people's life, and the payments will be facing people privacy protection in the digital world of one of the core issues.

From the perspective of the payment system in today's world, the bank firmly holds the bottom of the system, and all payment behaviors are built on the banking system. However, the third-party payment apps such as PayPal and Apple Pay used by people today capture users through the convenience of the upper layer of apps. When users use these third-party payment apps, they also surrender their payment privacy to these giant companies. In big data and artificial intelligence under the blessing of the third-party payment companies have mastered the huge amounts of data users of the financial payment, portrays the users of financial payment to detailed portrait, so these institutions launched a lot of financial products, such as products similar to credit card credit consumption, investment, finance, and so on. Just imagine, when most of people's activities in the future are in the digital world, will we have any privacy at all? Will these giant companies use our private data to mine our humanity, offer us insights into our human nature, and recommend products that seem "impossible to refuse", and this constant cycle leads to the giant companies getting bigger and bigger and "holding on to our lives"?

These are questions that many geeks have pondered and fought for. Protecting people's privacy was also one of the reasons bitcoin was born. Just as every coin has two sides, privacy has another.

In the case of "room N," privacy also breeds a dark side to human nature. This is just one incident in the "dark world," and there is more brutal, violent information flooding the dark web. According to relevant data, the dark network information accounted for more than 90% of all network information. As mentioned above, cryptocurrencies also play an important role in the dark web, which is used as a payment medium for money laundering, drugs, pornography and other activities, including bitcoin, Monroe and other cryptocurrencies. Cryptocurrencies are neutral, and we can't stop criminals from using them for criminal purposes. While cryptocurrencies offer a "freer" world away from regulation, the use of cryptocurrencies in the black industry by outlaws has further removed the "freer, better world" that cryptocurrency creators aspire to. To this end, regulators are also rolling out regulatory policies for cryptocurrencies.

In June 2019, the FATF issued new rules that impose stricter and clearer regulatory requirements on anti-money laundering and anti-terrorist financing: virtual currency service providers (vasps), including cryptocurrency exchanges, must pass on information about their customers to law enforcement when it comes to money transfers. After the new rules were issued, some exchanges began removing highly anonymous cryptocurrencies, including munro and big zero.

This "N room incident" profoundly tells people that the world is not as beautiful as everyone imagined when the illegal and criminal activities are not exposed in the sun. People need to start looking and weighing whether they want transparency or privacy.

Original link:https://mp.weixin.qq.com/s/nhjM2AH5wJg3J7RUZ2mcZA

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