Dark Wallet: What It Was, Concerns, and Future

What Was Dark Wallet?

Dark Wallet was a Bitcoin wallet designed as an extension that loaded into the Chrome browser. It was an early attempt to improve the anonymity of Bitcoin transactions. According to the project's GitHub repository, the last update to Dark Wallet's code was in 2016.

Dark Wallet was an underground site that needed software to be installed in either the Chrome or Firefox browser. Once the steps for installation were complete, a new digital wallet was created with a wallet seed or key—a password needed to access the wallet. The wallet came equipped with three pockets—spending, business, and savings—and with no limit to the number of user-created pockets. Each pocket had its own stealth address from which transactions using bitcoin could be made.

History of Dark Wallet

Dark Wallet was created by Cody Wilson and Amir Taakit. It was a digital wallet that enhanced data anonymization by obscuring Bitcoin transactions. The first alpha version of Dark Wallet was released in May 2014, and the platform went through several updates before an eighth alpha version came out in January 2015.

There have been no further updates since 2016, and although it was never really completed, Dark Wallet inspired many other anonymity projects. Samouri Wallet, now non-operable and seized by law enforcement agencies, was inspired by Dark Wallet.

Some cryptocurrencies have been designed with anonymity and the same techniques in mind. Monero has a few of the Dark Wallet features built in, and ZCash takes a different approach but is also considered an excellent choice for anonymity.

Concerns About Dark Wallet

Critics were worried that Dark Wallet would open the door to many illegal activities, including terrorist funding, money laundering, drug trafficking, and child pornography. However, legitimate businesses wary of surveillance and data hacks welcomed Dark Wallet as a tool for dealing with growing issues surrounding data privacy and anonymity.

Dark Wallet offered anonymity and privacy to its users in two ways, stealth addresses and coin mixing, both of which are now techniques that are highly monitored by regulators or possibly illegal in some jurisdictions:

Stealth Addresses

A user receiving payment from a transaction using the Dark Wallet application had a new address generated for the funds to be deposited. By encrypting the transaction, not even the payer was able to pull up or track the payee's address. Most importantly, the payment was hidden from unsolicited parties trying to look into both users' transaction histories.

Coin Mixing (or CoinJoin)

This feature reduced traceability by mixing or combining a user's transactions with those of random users who happened to be making transactions at the same time. If the coins were joined with enough Bitcoin users in the system, tracing transactions from the ledger would be more challenging. Consider the following transactions made at the same time. A purchases an item from B, C purchases an item from D, and E purchases an item from F. The general blockchain ledger, in all its transparency, would record one transaction for each address.

However, Dark Wallet only recorded one transaction by joining them together. The ledger would show that bitcoins were paid from the addresses of A, C, and E to those of B, D, and F. By masking the deals made by all parties, a tracker could not determine with certainty who sent bitcoins to whom. Coin mixing was also done when a user transferred coins from one pocket to another.

The Bottom Line

Dark Wallet was one of the first privacy wallets designed to enhance the pseudonymity the Bitcoin blockchain provides. The project appears to have been abandoned in 2016.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info.