dnm-ecash-and-privacy-

# DNM, eCash and privacy

1440000bytes | 2024-05-26 13:22:19 UTC | #1

<h1>Problem</h1>

Bitcoin usage has declined on darknet markets and replaced by monero. 

<h1>Research</h1>

Main reason for low usage is privacy and not on-chain fees. A user recently [posted on reddit](https://www.reddit.com/r/darknet/comments/1czo5eh/why_is_btc_not_considered_safe_anymore/) asking if bitcoin is not considered safe anymore and most comments suggest using monero.

Some DNMs are custodial and the biggest market recently did an [exit scam](https://x.com/DarkDotFail/status/1765104459913330820). Owner was [arrested](https://www.justice.gov/opa/pr/incognito-market-owner-arrested-operating-one-largest-illegal-narcotics-marketplaces) by LEA on 20 May 2024. A few of them even use multisig. I have avoided sharing names or links for any DNM however, things can be verified, researched etc. on forums like [dread](http://dreadytofatroptsdj6io7l3xptbet6onoyno2yv7jicoxknyazubrad.onion).

<h1>Solution</h1>

![dnme|690x323](upload://tytj0ii4JZPzwlZiauwOeU37HMo.png)


In last few months I have observed that some developers are trying to find a use case for eCash and experimenting with different things: dollar, dlc, mining payouts, tips/zaps etc. Some even consider it as 'the' scaling solution and I don't agree with it because self custody cannot be scaled by giving up self custody. I think there are some risks involved in running such mints and the **only use case for eCash** that makes sense is DNM.

<h3>Why is eCash perfect for DNMs?</h3>

- Some DNMs are custodial and users are okay with the risks involved
- They do not care about laws and already violating multiple laws when using the markets
- Follow better opsec
- Looking to improve their privacy

<h3>How would this work?</h3>

Mints could be run by anonymous users that already have some repuation in these markets and also active in bitcoin communities. Since most DNM users prefer on-chain we could use [moksha](https://github.com/ngutech21/moksha) for minting and melting. DNM owners can also run mints.

DNM and its vendors will accept eCash as payment for different products and services. This improves privacy and UX for the users with the similar rugpull risks involved. It will benefit bitcoin usage which has declined over the years, replaced by monero and also help other bitcoin privacy projects.

Coinjoin can be used before minting eCash by users and during redeem process by mints. Users can also use payjoin while spending the redeemed UTXO.

---

**Note:** Please stay anonymous if you work on any project related to DNM usage for eCash. Feel free to suggest any improvements in the post or the use case suggested for eCash.

-------------------------

ajtowns | 2024-05-27 03:16:05 UTC | #2

[quote="1440000bytes, post:1, topic:916"]
I think there are some risks involved in running such mints and the **only use case for eCash** that makes sense is [Dark Net Markets].
[/quote]

This seems backwards to me: ecash (in the digicash style) generally requires a centralised mint that's a single point-of-failure for everyone using ecash. If most uses of ecash are dark (illegal/black market), then once law enforcement decides to crack down on them, the mint becomes an easy and attractive target. That's very high risk for the operators of the mint, even if they attempt to protect themselves via a federation or anonymity tools, and it's also high risk for users of the system: if the mint is forced to shut down by a hostile actor, none of the funds stored as ecash are recoverable. If the mint's operators are anonymous to law enforcement, then they're also anonymous to the majority of its users, and that probably elevates the risk of the operators doing a rug pull as well: a rug pull has the benefit of both getting a chunk of funds immediately, and also bounds the risk that law enforcement are going to come after you because you've been enabling crime or terrorism or whatever.

-------------------------

1440000bytes | 2024-05-27 13:03:36 UTC | #3

[quote="ajtowns, post:2, topic:916"]
That’s very high risk for the operators of the mint, even if they attempt to protect themselves via a federation or anonymity tools, and it’s also high risk for users of the system: if the mint is forced to shut down by a hostile actor, none of the funds stored as ecash are recoverable.
[/quote]

These mints will be operated by users who already take the risk of running or using darknet markets. As mentioned in the post, users of custodial darknet markets assume the market could shutdown one day and funds won't be recoverable.

[quote="ajtowns, post:2, topic:916"]
If the mint’s operators are anonymous to law enforcement, then they’re also anonymous to the majority of its users, and that probably elevates the risk of the operators doing a rug pull as well: a rug pull has the benefit of both getting a chunk of funds immediately, and also bounds the risk that law enforcement are going to come after you because you’ve been enabling crime or terrorism or whatever.
[/quote]

All DNM users, vendors etc. are anonymous but everything works based on some reputation, due diligence and calculated risks.

---
[Mint operators](https://bitcoinmints.com/) at present have the same risk of getting shutdown if one of them becomes too big. Doxxed operators and clearnet used for them makes it easier to target. Custodying funds and providing anonymity is illegal in most of the countries irrespective of use case.

This post just tries to find the right use case for eCash mints in which users have the same threat model.

-------------------------

aspargus | 2024-05-30 08:24:12 UTC | #5

To be fair, if you're trying to do illegal things or create a framing for technology to be associated with illegal activities (which obviously seems to be the goal of this post since there is zero technical merit to this post), I think things like [Joinstr](https://joinstr.xyz/) is a much better solution for money laundering, terrorist financing, child trafficking, and drug markets since it's non-custodial and can't be stopped (no central coordinator).

Ecash is just a custodial accounting layer which is rather going to be adopted by regulated banks or private individuals, not dark net markets (the risks are way too high).

-------------------------

1440000bytes | 2024-05-31 09:42:41 UTC | #6

[quote="aspargus, post:5, topic:916"]
I think things like [Joinstr ](https://joinstr.xyz/) is a much better solution for money laundering, terrorist financing, child trafficking, and drug markets since it’s non-custodial and can’t be stopped (no central coordinator).
[/quote]

Coinjoin and custodial mixers are already used since years for different use cases. I have shared how coinjoin can be used with eCash in the post. However, this post is not about coinjoin or a particular implementation.

[quote="aspargus, post:5, topic:916"]
Ecash is just a custodial accounting layer which is rather going to be adopted by regulated banks or private individuals, not dark net markets (the risks are way too high).
[/quote]

eCash can be used by anyone. Risks as already shared above multiple times, remain same for a custodial DNM user.

-------------------------

moonsettler | 2024-08-20 19:56:44 UTC | #7

DNMs need escrow first and foremost. All (pseudo)anonymous seller markets need it as it makes payments reversible in case of fraud by the seller. This means the DNM operator is a de facto potential custodian even if you do the trades on-chain, because they can be on either side of a trade and have 2 keys out of 3. eCash can do escrows via trusted mint.

However the biggest issue is how you get funds in and out of a DNM. And that makes me think they would prefer to operate in a larger anon set. A "gray market" mint would be more ideal for DNM users to hide in and still be able to cash out if that is legally possible. If LN can become private enough for DNM operators to create unsurveilled channels for moving funds in and out, then this idea can actually work. I just don't think LN is there, or likely to be there any time soon.

-------------------------

moonsettler | 2024-08-20 20:33:00 UTC | #9

Well LN can't really do proper escrows. Which is needed despite what you think, for actual anon markets to manage risk of fraudulent sellers; who just take the irreversible payments and run. That's the main value the DNM operator adds.

-------------------------

ProofOfKeags | 2024-08-22 16:56:47 UTC | #10

LN (in principle) can absolutely do proper escrows. The requirement is just that the payment hash preimage is generated by the escrow operator and then released to the payment recipient when the escrow operator has performed the verification that the goods have been released. That said, LND doesn't have such a facility right now, so it is correct to say that LN *as is* does not do proper escrow, but the design of LN can be somewhat easily adapted to serve this purpose.

-------------------------

harding | 2024-08-22 19:46:16 UTC | #11

[quote="ProofOfKeags, post:10, topic:916"]
LN (in principle) can absolutely do proper escrows. The requirement is just that the payment hash preimage is generated by the escrow operator and then released to the payment recipient when the escrow operator has performed the verification that the goods have been released.
[/quote]

I think the problem with LN-based escrow is the same problem with other things like DLCs-over-LN: often the expected length of the contract is measured in days or weeks, whereas most forwarding nodes would prefer HTLCs be resolved in seconds to minutes.

This could be solved through some sort of hold fee, e.g. _x_ sats per minute that an HTLC is left unresolved, but that would likely make such an escrow economically unappealing to whoever pays for it.  E.g., if an $1,000 HTLC is forwarded through 10 hops, kept pending for 1 month, and the time value of capital is 5% per year, the hold fees alone would be about $42.

-------------------------

moonsettler | 2024-08-22 20:42:44 UTC | #12

[quote="ProofOfKeags, post:10, topic:916"]
LN (in principle) can absolutely do proper escrows.
[/quote]

By proper I meant something like a 2-of-3. The other thing is afaik it's not possible to verify hashes without the preimage so it's also not possible to distribute "custody". PTLCs could help with that part, but where are they? Long lived HTLCs are also a problem for LN.

Using predicated ecash escrows is much less technically challenging. You can do something like MAST where you don't reveal all spend conditions to the mint. On the happy path it's a simple pubkey auth with MuSig 2-of-2 (seller and buyer).

The mint can naturally be federated. Arbitration can naturally be federated with FROST on those paths.

-------------------------