PoSA Rough Draft (NON-OFFICIAL) Explanation 2.1

This is Bob. Bob has a Cloak wallet filled with 50 cloak.

Let’s say Bob wants to send 50 Cloak to Alice, but wants to send it anonymously.

The way the current Bitcoin system works, this is not possible. Every time funds are transferred, there’s a “paper trail” of where the funds came from all the way back to the origination of those funds.

Let’s imagine it this way:

Every one of Bob’s CLOAK is essentially “stamped” with his mark.

When Bob sends those CLOAK to Alice, she can see Bob’s mark and see that the CLOAK undoubtedly came from Bob.

This does not allow Bob any anonymity.

However, Cloakcoin is a kind and considerate cryptocurrency and feels Bob’s pain.

Cloakcoin tells Bob about a new feature it has, the Proof of Stake Anonymous (PoSA) system.

Here’s an example of how it works:

Instead of Bob directly sending CLOAK to Alice, Bob can arrange to have an intermediary, Richard, send CLOAK to Alice, in return for Bob sending CLOAK to Richard (plus a small fee for his trouble).

This is important because Richard’s CLOAK being sent to Alice has no trail leading back to Bob. It is completely different money, with a completely different history, and has Richard’s stamp on it instead.

When Alice sees Richard’s CLOAK , she cannot connect it to Bob because his stamp was never on it and he was never in the transaction history.

So, on the promise that Bob will give Richard 50 CLOAK (plus a fee), Richard sends his own 50 CLOAK to Alice.

Only when Richard has actually sent 50 CLOAK to Alice does he get his 50 CLOAK (plus fee) from Bob.

This provides a high degree of anonymity for Bob, however there are a few other concerns that still need to be addressed:

It is important to take note that Bob has only promised to send 50 CLOAK (plus fee) if Richard actually sends 50 CLOAK to Alice. Richard needs to send the CLOAK first. Also, Bob needs Richard to send this CLOAK to Alice within 10 minutes (10 BLOCKS on the Cloakcoin Network), or he will find someone else.

How can Richard make sure Bob won’t rip him off?

Richard is protected by the BLOCK ESCROW process. The BLOCK ESCROW process utilizes the power of the Cloakcoin Network to ensure Richard will not get “burned” in this transaction.

To understand this better, let’s take this example:

Imagine Bob, Richard and Alice are in a crowd of people. Bob says out loud that he will promise to give Richard 50 CLOAK (and fee) if Richard sends 50 CLOAK to Alice within 10 minutes. The entire crowd hears what Bob promises and now can hold him to his promise if Richard delivers his end of the bargain.

If Richard fails to send 50 CLOAK to Alice within 10 minutes, Bob is no longer held to his promise, and does not have to send any of his CLOAK to Richard, as no “deal” was successfully made.

However, if Richard DID send 50 CLOAK to Alice within his 10 minute time limit, the crowd will see this and force Bob to keep his promise to pay Richard.

In this way, Richard is protected from being ripped off by Bob.

This process is known as BLOCK ESCROW (which is a special type of transaction on the block chain in PoSA), and it is how you (and Bob and Richard) are protected.

The second issue that needs to be addressed is although Bob is fairly anonymous by sending CLOAK via this method, he still can potentially be traced, although it’s not as straightforward as one might think.

Let’s say Bob successfully sent CLOAK anonymously to Alice with the help of Richard, and the transaction ended flawlessly. Everyone is happy.

Bob thinks at this point he is in the clear. However, Bob was not aware of the fact that every transaction is scrutinized by the Record Keeper, whose job is to keep a paper trail of ALL transactions.

The Record Keeper looks over the last block’s transactions and finds that Alice received 50 CLOAK from Richard, and Richard received 50 CLOAK from Bob. The Record Keeper could make a very strong case that Alice’s money came from Bob.

This is even more apparent if the amount Bob sends is unique.

Let’s say Bob sent Alice 50.1234 CLOAK anonymously.

Even if there was a large delay in time, the Record Keeper could still make a correlation that Alice’s CLOAK traced back to Bob, since in the last several blocks Bob was the only one who sent 50.1234 CLOAK to Richard, who in turn sent 50.1234 CLOAK to Alice.

Bob is still potentially vulnerable to discovery, and he is not happy.

However, PoSA has come to the rescue and has a solution for Bob:

Bob needs a way to build up CLOAK coins that have absolutely no ties to his main wallet. These coins for all intents and purposes are “cloaked” for Bob.

Bob will be able to store these “cloaked” coins in temporary PoSA wallet addresses that have no trails to Bob’s main wallet.

But how does Bob acquire these “cloaked” CLOAK coins?

Bob is not the only person who desires to acquire “cloaked” coins. Sam wants to acquire “cloaked” coins as well.

Bob is introduced to Sam, and finds out that they can help each other acquire “cloaked” coins.

Bob wants 50 “cloaked” coins. Bob needs to make sure Sam has at least 50 CLOAK in order to be able to do the transaction.

Bob and Sam want to help each other, and they first find out they need to create new temporary PoSA wallets, which they do.

Now Bob and Sam each have two wallets, their original main wallet, and a PoSA wallet (to create their “cloaked” coins).

Bob and Sam agree to use the BLOCK ESCROW to deposit
50 CLOAK from their main wallets to each other’s PoSA wallets. This way they can safely do the exchange.

Bob’s 50 CLOAK is sent to Sam’s PoSA wallet. Sam’s 50 CLOAK is sent to Bob’s PoSA wallet.

Now Bob’s 50 CLOAK has successfully been transferred from his main wallet into a PoSA wallet without creating a link between them!

Because this PoSA wallet has no ties to Bob’s main wallet, for transaction purposes this effectively “cloaks” Bob’s coins.

Bob can do this over and over again, as many times as he wants (or has funds for), to create an arsenal of “cloaked” coins which he can send anonymously, from multiple PoSA wallets.

Does Bob need to “cloak” his money in advance?

Yes, Bob will need to start this process before he can truly send money anonymously, so he will need to decide beforehand how much of his money he wants to be “cloaked.”

To make things even better for Bob, the PoSA system has some settings allowing Bob to decide to what degree his money is “cloaked.”

Bob can decide on the total amount of “cloaked” coins he wishes to generate, the time delay between the “cloaking” of the coins (even random times if Bob wishes), the rate of coins that will be “cloaked” each time (ex.: 10 at a time), and even a special optional setting that “shuffles” the “cloaked” coins around to the other PoSA wallets Bob possesses.

By shuffling the “cloaked” coins amongst Bob’s different PoSA addresses, these PoSA addresses begin to build a transaction history for themselves, rather than having a single transaction (which makes the PoSA addresses more secure).

Bob will incur some transaction fees when shuffling, but the added security this provides him is worth it. (Remember, it’s optional).

These options give Bob a substantial amount of flexibility in deciding how anonymous he wishes to be.

Once Bob has built up enough “cloaked” coins, he can now send Alice 50 CLOAK from those PoSA wallets (each wallet funded by public escrows with different times, dates and amounts at which they occurred).

Finally, the icing on the cake for Bob addresses one last final concern of anonymity:

If Bob sent 50 “cloaked” CLOAK to Alice directly from his PoSA wallet(s), he still will be detectable via his IP Address, which will allow his identity to be revealed to Alice.

This can be solved quite easily by Bob using one more intermediary (Remember Richard?) to send his now “cloaked” coins through BLOCK ESCROW to Alice.

Not only will this add a final layer of obfuscation, but it effectively hides Bob’s IP address from Alice (just incase she is a spy).

And with that, Bob can rest easy knowing PoSA allows him to be truly anonymous while sending funds.