Data Sheet—Saturday, October 29, 2016
On Friday a new cryptocurrency premiered.
The first Zerocash, or Zcash, electronic coins were minted yesterday. While the debuts of most new digital monies are suspect events, the introduction of Zcash was hotly anticipated among insiders for its use of cutting edge cryptography. The team behind the payment system derived its code from the original cryptocurrency Bitcoin, layering on features that are absent in the predecessor. (For more on alternative cryptocurrencies, read my recent feature on Vitalik Buterin, founder of another decentralized financial network called Ethereum, in the October issue of Fortune magazine.)
Zcash permits, as its creators have billed, unparalleled privacy and anonymity for its users. Whereas Bitcoin enables pseudonymity—a canonical disguise—Zcash offers a protean shroud. On the Bitcoin blockchain, the public ledger of all transactions, a person is represented by an address, or random alphanumeric string. All details about Bitcoin transfers are open to the public: which address sent how much Bitcoin to whom. On the Zcash blockchain, on the other hand, even a person’s pseudonymous identity can remain private. Encryption jumbles the data, obscuring the origin address, the sum transferred, and the destination, whenever a person chooses to do so. The only aspect that isn’t kept secret is the timestamp.
Zcash accomplishes this feat by employing a nifty cryptographic breakthrough called “zero knowledge proofs.” I won’t get into the nitty-gritty details of “zk-SNARKs,” as their known, for fear of burdening this essay with confusing formulae. Suffice it to say that the math allows network operators to quickly verify Zcash transactions as legitimate while learning no private details about any particular transactions.
Critics might say that Zcash is a money launderer’s best friend. Yet there are legitimate reasons for people to praise its bolstered privacy measures. Above all, fungibility: the system is designed to ensure that any Zcash token is as good as any other. In the Bitcoin universe, one can imagine a hypothetical world wherein network operators block certain transactions based on their provenance. Zcash prevents anyone from discriminating, in theory, by letting people keep that information secret—assuming its coders got the math right.
Anyway, enjoy your Halloween festivities this weekend, dear readers. I’ll be masquerading as Chief Jim Hopper from the Netflix series Stranger Things, reveling in a night of cloaked identity. I hope you’ve got a disguise lined up, too.
Welcome to the Cyber Saturday edition of Data Sheet, Fortune’s daily tech newsletter. Fortune reporter Robert Hackett here. You may reach me via Twitter, Cryptocat, Jabber (see OTR fingerprint on my about.me), PGP encrypted email (see public key on my Keybase.io), Wickr, Signal, or however you (securely) prefer. Feedback welcome.
Internet of Things that attack you. What shall we do with all the poorly secured devices on the Internet that contributed to last week's widespread Internet outage? Chinese webcam-maker Hangzhou Xiongmai Technology Co said it would recall up to 10,000 of its easily hackable surveillance cameras. Another Chinese firm, Dahua Technology, said it would offer firmware updates on its website and discounts for customers to swap out their hardware. Legal experts tell Fortune the circumstances could be grounds for lawsuits against manufacturers. (Fortune, Fortune, Fortune)
Social media's dark side. Advertisers can set the criteria of microtargeted ads on Facebook to exclude people on the basis of race. Similarly, Twitter's "firehose," the microblogging service's comprehensive data chute, can be abused by nation states, law enforcement, and others to allow for the surveillance of users based on keywords indicating their race or religion. (Pro Publica, Bloomberg Businessweek)
Guilty as charged. A Florida man tied to a J.P. Morgan Chase hacking scheme plead guilty to charges in a Manhattan court on Thursday. He agreed to forfeit $1.35 million of ill-gotten gains, plus a Ferrari and a Cadillac, and will be sentenced in January. In another case, a judge sentenced a Pennsylvania man to 18 months in federal prison for accessing the private photos of various celebrities, in what became known as the "Celebgate" affair, after tricking them into revealing their login credentials. (Fortune, Fortune, Fortune)
AT&T's watching you. Meet Project Hemisphere: the telecom giant's secret tracking program that scours its vast collection of call records and cellular data for information (who, when, where) on a target. Previously revealed by the New York Times in 2013, the Daily Beast exposed more details about the database dredging tool, which law enforcement agencies use to help their investigations. (Daily Beast)
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Here's Fortune's Laura Cohn profile of Birgitta Jónsdóttir, a hacker taking on the Icelandic government.
Birgitta Jónsdóttir likes to describe herself as a “poetician”—part poet, part politician. But that moniker doesn’t touch on what she’s best known for: founding Iceland’s radical Pirate Party, the collection of anarchists, libertarians, and techies that could gain control of the Nordic island’s parliament in an election Saturday.
The Pirates are expected to gain as many as 20 seats in the weekend vote, which would give them a leading position to form a government. If that happens, the group’s extraordinary rise to power will have taken just a heartbeat in politics—less than four years. Read more on Fortune.com
Top U.S. Intelligence Chief Says Non-State Actors Behind Massive Web Hack, by Jonathan Vanian
Why You Should Update Your iPhone Right Now, by Lisa Eadicicco
Visa's Blockchain Bet Opens to Developers, by Robert Hackett
Why Businesses Need to Secure Connected Devices to Win Consumer Trust, by Jeff John Roberts
ONE MORE THING
Google bots self-encrypt. Researchers at Google Brain, the search giant's deep learning team, set three neural networks—nicknamed Alice (the sender), Bob (the decoder), and Eve (the eavesdropper)—to work developing an autonomously computer-generated encryption scheme. Through an artificially intelligent process of trial and error, the machines created a rudimentary code, readable to Alice and Bob, but not Eve, all on their own. (New Scientist)