CEO of Nethemba - Slovak IT security company founded in 2007, primarily focused on web application security and various penetration tests.
How governments push forward the security of cryptomarkets
Let me introduce myself
- Cryptoanarchist & voluntaryist focused on technology and society hacking
Organizer of the international cryptoanarchist conference Hacker's Congress Parallel Polis (www.hpp.cz)
- Founder of IT security hacking companies (Nethemba, Hacktrophy)
- Co-founder of Bratislava's and Prague's hackerspaces
- Member of Czech contemporary anti-government artistic group Ztohoven
Security of cryptomarkets
- It is a very sensitive topic - you cannot provide legal IT security consultations to crypto-markets
- Bad security of cryptomarkets may lead to imprisonment or death of hundreds / thousand people, massive theft
- I did not find any serious IT security paper related to cryptomarkets (or they are paid)
- Some dark markets have better user security than gmail or popular social networks
Silk Road v1.0
- The first popular cryptomarkets ($1.2 billion in revenue and $79.8 millions in commission)
Not very secure:
- A single server with no decentralization
- Potentially vulnerable PHP application
- No 2FA
- No multisig
- No true anonymous cryptocurrency support
- Despite this fact it took more than 2 years for FBI to track down and identity this server and its administrators who definitely underestimated protection of their digital privacy
Sometimes operational security can save you a life
- You do not need to have PCI DSS to enforce you to implement 2FA :-)
- 2FA is implemented in all modern crypto markets, for many of them it's mandatory
- 2FA is usually implemented as PGP private key owner verification - you need to decrypt some information encrypted by your public key
- Synchronous OTP (like Google Authenticator) is (still?) not used (probably cryptomarkets do not believe in smartphone security, dependancy on 3rd parties)
- Using 2FA it is possible to set up "One-Time Passwords"
Two Factor Authentication
- Mnemonic phrase - generated when the first login
- you have to remember 8 English words to be able to retrieve your forgotten password
- Sending "Password reset email" is considered not to be a "good" security practice
- DDoS attacks are critical for Tor hidden services (very specific flooding attacks to RPs)
- If the attacker has access to multiple Tor nodes, using DDoSing he can perform statistical measures and compromise Tor Security
- Many cryptomarkets implement a special anti-DDOS protection (using CAPTCHA, of course, it can be cracked)
- Double Tor security (encapsulation of Tor in Tor) - public Tor and private Tor gateways (available to trusted cryptomarket users only - anonymity risk)
- Multisignature addresses are addresses controlled by more than one person. They are created with a set of requirements, that dictate how the funds in the address can be moved.
- 2-of-3 signature addresses are jointly controlled by 3 people, say the site operator, the buyer, and the seller, but funds can only be moved if two people authorize and sign a transaction.
- Both the buyer and the seller must have set their public Multisig key in their profile.
- The buyer deposits (e.g. 4%) of the item value in his AlphaBay wallet to cover market fees.
- The buyer purchases the item, then a multisig Bitcoin address is generated using the buyer’s key, seller’s key, and a market-generated public key (2/3).
- The buyer sends money to this address, and the seller ships the goods. If the buyer is happy, he finalizes, and the seller received the market private key.
- In case of dispute or refund, the buyer receives the private key.
- Whoever got the private key will use it, along with his own private key, to claim the coins
- With a 2/2 multisig, the vendor cannot get the funds without having the information we have and that is passed to the buyer.
BitBlender is a simple Bitcoin blender that uses a randomized fee and offers automatic withdrawing to your clean addresses. They have shown reliability over time and are in for the long run.
Grams Helix is a tumbler and Darknet content indexer. They are the Google of the Darknet and have a tumbling service. The admins have shown extreme care for their users and their support is prompt to help.
Mixing service through BitMessage (Outlaw cryptomarket)
Often integrated for 1% fee
Bitcoin-> Monero -> Bitcoin (with the nice service xmr.to, shapeshift.io, evercoin.com)
Tumble your bitcoins
The most modern market support Monero (XMR)
PRIVATE - Monero uses a cryptographically sound system that allows you to send and receive funds without your transactions being publicly visible on the blockchain (the distributed ledger of transactions). This ensures that your purchases, receipts, and other transfers remain private by default
LOW TRACEBILITY - By taking advantage of ring signatures, a special property of certain types of cryptography, Monero enables untraceable transactions. This means it's ambiguous which funds have been spent, and thus extremely unlikely that a transaction could be linked to particular user.
True Anonymous currencies - Monero
- Because all crypto markets have access to your public PGP key, your storage (cryptomarket mailbox) can be fully encrypted - "Automatic Message Encryption"
- It is even possible to have integrated PGP webmail client, but you need to provide your PGP private key to the browser, e.g. HTML5 storage (which is definitely not a good idea)
Inline PGP encryption, PGP webmail client
- Anonymous VPN (paid by BTC or XMR) + Tor is highly recommended
- Use Tails privacy and anonymity OS
- Sometimes it is possible to use Bitmessage (Outlaw market) for secure communication including mixing service
- Finding "secure" wireless network is quite easy (see Router Keygen YoloSec Android app)
- Use random MAC addresses
- All servers (and all clients) should always use full disk encryption (ideally with hidden volumes)
- Usually servers are virtualized in multiple server housing centers paid by bitcoins in a completely anonymous way
- There is no association between the servers and cryptomarkets admins - they always use Tor to access their virtual anonymous servers
- Some cryptomarkets use double-tor-security system for extra stealth (exposes the connections to evil exit nodes)
- Public onion (slower, provides more anonymity) vs private onion gateways (faster, just for specific users, immune against DDoS attacks)
- Any Bitcoins/Moneros are stored on the completely different server, ideally use cold wallets
- Still under development with small community
- Particl.io project (Umbra projects)
- OpenBazaar v2 with IPFS over Tor (it is supported now)
- Theoretically I2P protocol is more secure than Tor
- But practically there are too few nodes to matter
- There are also some I2P implementations issues
- And probably I2P is less interesting for governments
- Making DDoS is more complicated for I2P
- I2P addresses are longer than Tor ones and I2P client sucks
Tor vs. I2P
- Use of multisig, 2FA and PGP, sometimes 2FA is always enforced
- Some cryptomarkets disallow FE (Finalize Early) unless you get explicit permission later
- Prefer Monero over Bitcoin (there are also alternatives ZCash, ZCoin, Dash, Particl.io coins, ..)
Cryptomarkets best practices
OUTLAW offers currency-accounts. These accounts are hedged: they do not change their value when the Bitcoin becomes cheaper or more expensive. You can fund your currency-accounts through the account-page. Please be aware that there is a 5% fee for hedged accounts.
- Advertised as "full anonymity - no delivery-address: The buyer does not need to transmit any 'delivery address' and can stay fully anonymous to the vendor"
- The dropman is the anonymous delivery boy. The dropman places the item into a deaddrop he searches for and finds himself, creates a short video-clip showing exactly where the item is placed, in detail, and panorama-view. He adds the geo-co-ordinates and uploads the data to our upload-server.
- The buyer of the placed item does not need to enter any personal data, but immediately after payment receives the data uploaded by the dropman. He uses the geo-co-ordinates to find the place and then watches the video-clip to exactly find the item.
- Question of time: DeadDrops delivery by drones!
Deep Dot Web cryptomarket comparison
- Security of cryptomarkets has been significantly improved over last few years
- Dream Market, Outlaw Market, Valhalla, .. and many others are being online for many years without shutdown by government agencies
- The war on drugs cannot be won
- Technologically, cryptomarkets are one step ahead to the governments
- Any government's intervention makes cryptomarkets more resilient
- Despite this fact DEA, FBI and many other government agencies spend millions of tax payer's money for meaningless War on drugs
Welcome in Parallel Polis & Institute of Cryptoanarchy
Cryptoanarchists are real!
Parallel Polis in Prague / Central Europe
- Freedom think tank in the heart of Europe
- 3-floors building with more than 1000m2
- The first world's Bitcoin only coffee (no fiat!)
- Institute of Cryptoanarchy responsible for all cryptoanarchist events
Thanks a lot for your attention!
How governments push forward the security of cryptomarkets
By Pavol Luptak