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Switzerland-based data protection startup Nym Technologies has raised US $ 6 million, loosely referred to as the Series A round.
Previous fundraising included a $ 2.5 million seed round in 2019. The founders also raised grant money from the European Union's Horizon 2020 research fund during an earlier phase of R&D to develop network technology.
The latest funding will be used to continue the commercial development of the network infrastructure, which combines an old idea of obfuscating the metadata of data packets on the transport network layer (mixnets) with a crypto-inspired reputation and incentive mechanism to achieve the required quality of service and support a resilient, decentralized infrastructure.
Nym's goal is to "build an anonymous, open-ended overlay network that works to irreversibly obscure patterns in Internet traffic".
Given his attention to crypto mechanics, it's not surprising that Series A investors have strong crypto bonds – and Nym also expects the first users of cryptocurrency-related use cases to come – with the round led by Polychain Capital with participation from a number of smaller European investors, including Eden Block, Greenfield One, Maven11, Tioga and 1kx.
In a statement, Will Wolf of Polychain Capital commented: “We are delighted to be working with the Nym team to advance its mission to provide a robust, sustainable, permission-free data protection infrastructure for all internet users. We believe that the Nym network offers the strongest data protection guarantees with the highest quality of service of all Mixnets and can thus become a very valuable part of the Internet core infrastructure. "
The "original sin" of the Internet was that the core infrastructure was not designed for privacy. Hence, the degree of complicity in Mixnets – the mixing and delaying of encrypted data packets to protect sender-to-receiver metadata from adversaries with a global view of a network – likely seemed like over-engineering when the framework of the web was still being pieced together .
But then came Bitcoin and the crypto boom and, also in 2013, the Snowden revelations that tore the veil from the NSA's “collect everything” mantra when Booz Allen Hamilton's subcontractor, Ed, risked it all to get data on the mass surveillance programs of his own (and other) governments. Suddenly, network-level opponents were making the headlines. And so was the privacy on the Internet.
Since Snowden's great reveal, data protection technology has slowly picked up speed – with increasing consumer awareness that encourages the use of services such as E2E-encrypted email and messaging apps. Sometimes in spurts and spikes, related to certain data breaches and scandals. Or actually anti-privacy policy changes by mainstream tech giants (hello Facebook!).
Legal clashes between surveillance laws and data protection laws are also causing growing headaches in the B2B area, especially for cloud services based in the USA. While the growth of cryptocurrencies is driving the demand for a secure infrastructure to support crypto trading.
In short, the opportunities for data protection technologies, both for B2B and consumers, are growing. And the team behind Nym believes the conditions are ripe for general-purpose networking technology that is privacy-focused.
Of course, a well-known anonymous overlay network already exists: Tor, which performs onion routing to obscure where traffic was sent from and where it ends up.
The node hopping component of Nyms network shares a function with the Tor network. But Tor doesn't do packet mixing – and Nym's claim is that a functional Mixnet can provide even more privacy at the network level.
It sets out the case on its website – arguing that "Tor's anonymity traits can be defeated by an entity capable of" entering "and" leaving " 39; Nodes of the Entire Network "since it doesn't take the additional step of adding" timing obfuscation "or" deception traffic "to obscure the patterns that could be exploited to deanonymize users.
"Although these types of attacks were thought to be unrealistic when Tor was invented, these attacks are a real threat in the era of powerful government agencies and private companies," suggests Nym, pointing out another difference in Tor's design "On a centralized directory authority for routing," while Nym completely decentralizes its infrastructure.
To prove this proposal will of course be quite a challenge. And the CEO of Nym is open to Tor in his admiration and says it is the best technology to secure Internet surfing.
"Most VPNs and almost all cryptocurrency projects are not as secure or as private as Tor – Tor is the best we have for surfing the Internet right now," says Nym founder and CEO Harry Halpin. “We believe Tor made the right decisions when developing the software – at the time there was no venture capital interest in privacy, only the US government. And the internet was too slow for a Mixnet. And what happened has become 20 years faster, things have changed.
“The US government is no longer seen as a defender of privacy. And now – strangely enough – venture capital is suddenly interested in privacy and that's a really big change, ”said Halpin.
With such a high level of complexity in Nym's activities, it clearly has to continuously demonstrate the robustness of its network protocol and design against attacks and vulnerabilities – e.g. B. Those who try to recognize patterns or identify dummy traffic and can relink packets with senders and receivers.
The technology is open source, but Nym confirms that a portion of the Series A funding will be used for an independent review of the new code.
It also touts the number of PhD students it has hired to date – and plans to hire a number more, and says it will use the new round to more than double its staff count, including hiring Cryptographers and developers as well as marketing specialists for data protection.
The main motivation for the raise, according to Halpin, is to invest more research and development to investigate – and (he hopes) – solve some of the more specific use cases that go beyond the basic of letting developers use the network to do so shield user traffic (à la Tor).
For example, Nym's whitepaper promotes the possibility that the technology used enables users to demonstrate that they have the right to access a service without revealing their real identity to the service provider.
Another big difference to Tor is that Tor is not for-profit – while Nym wants to build a for-profit business around its Mixnet.
It intends to bill users for network access – that is, for obfuscation as a service when their data packets are mixed into a lot of mixed, encrypted and proxy node hopping others.
But possibly also for some bespoke services – with Nym's team having specific use cases in mind, e.g. B. whether his network could offer itself as a "super VPN" for the banking sector to shield their transactions; or providing a secure channel for AI companies to process sensitive data sets (such as health data) through machine learning without risking the disclosure of the information itself.
"The main reason we launched this Series A is because we need to do more research and development to solve some of these use cases," says Halpin. “But what impressed Polychain was that they said, 'Wow, there are all these people who are actually interested in data protection – who want to run these nodes, who actually want to use the software.' So when we imagined this startup , we originally envisioned more B2B usage cases I think and what I think Polychain was impressed with was that there seemed to be a demand from B2C; Consumer demand that was much higher than expected. "
Halpin says they expect the first use cases and early users to come from the crypto space – where privacy concerns are routinely linked to blockchain transactions.
The software is planned to be released by the end of the year or early next year, he adds.
“We will have at least some chat applications – for example, it is very easy to use our software with Signal… so we think something like Signal is an ideal use case for our software – and we would like to start with it both a [crypto] wallet and a chat app, ”he says. “Then in the next year or two – because we have this runway – we can work more on applications at higher speeds. Things like trying to find partnerships with browsers, with VPNs. "
In this (still rather early) phase of network development – a first test network was started in 2019 – Nym's network of the same name accumulated more than 9,000 nodes. These distributed crowdsourcing providers only earn one NYM reputation token for the time being, and it remains to be seen how much crypto value they could earn in the future as key infrastructure providers when / when usage begins.
Why didn't Mixnets catch on as a technology earlier? After all, the idea comes from the 1980s. According to Halpin, there are a number of reasons – scalability issues are one of them. And an important design "innovation" that he refers to with regard to the implementation of Mixnet technology is the ability to add nodes over and over so that the network can scale as needed.
Another important addition is that the Nym protocol inserts dummy traffic packets into the shuffle in order to make it more difficult for adversaries to decipher the path of a particular message – with the aim of supporting the packet mixing process against vulnerabilities such as correlation attacks.
While the crypto-style call and incentive mechanism of the Nym network – which serves to ensure the quality of the shuffling ("via a novel proof of shuffling", as the white paper puts it) – is another differentiating component, which identifies Halpin.
“One of our core innovations is scaling up by adding servers. And the question is how do we add servers? To be honest, we added servers by looking at what everyone learned about the reputation and attractiveness of cryptocurrency systems, ”he told TechCrunch. “We copied that – these findings – and attached them to mixed networks. So the combination of the two things is pretty powerful.
“Technology essentially does three things … We mix packages. You want to think of an unencrypted package like a card, an encrypted package that you flip over so you don't know what the card is saying, you collect a few cards and shuffle them. That's all shuffling is – it just randomly permutes the packets … Then you pass them on to the next person, they shuffle them. You give them to the third person, they mix them up. And then they had the cards, whoever is at the end. And as long as different people gave you cards at the beginning, you cannot distinguish these people. "
In general, Nym also argues that it would be beneficial to develop an independent and universal Mixnet technology – grouping all types and types of traffic into one mixed packet – which suggests that in this pooled crowd they provide more privacy for the Packets the user can achieve as a similar technology that a single provider only offers to their own users (such as the recently announced "Privacy Relay" network by Apple).
In the latter case, an attacker already knows that the forwarded traffic is being sent by Apple users who access iCloud services. While – as a general purpose overlay layer – Nym can theoretically provide contextual coverage to users as part of its privacy mix. Another important point is that the privacy available to Nym users scales with usage.
Historical performance problems with bandwidth and latency are additional reasons Halpin cites for the fact that Mixnets are largely left on the academic shelf. (There have been a few other implementations, like Loopix – on which the Nyms whitepaper builds the design by expanding it into a "general purpose incentive Mixnet architecture" – but it's fair to say the technology hasn't exactly gone mainstream. )
Nevertheless, Nym's assertion is that the time of technology is finally coming; first, because the technical challenges associated with Mixnets can be overcome – due to gains in Internet bandwidth and computing power; as well as by incorporating crypto-style incentives and other design optimizations that it introduces (e.g. dummy traffic) – but also, and perhaps most importantly, because privacy concerns will not simply go away.
Indeed, Halpin suggests that governments in certain countries can ultimately decide whether to be exposed to certain mainstream technology vendors subject to state mass surveillance regimes – be it the US version or China's tastes or elsewhere – simply not in the longer term is tenable and that it is a fool's game to entrust sensitive data to corporate VPNs in countries affected by intelligence snooping.
(And it is interesting to note, for example, that the European Data Protection Supervisor is currently carrying out a review of the use of US mainstream cloud services from AWS and Microsoft by EU authorities to check whether these are compatible with the Schrems II ruling from last summer are compatible with the ECJ, which rejected the EU-US Privacy Shield deal after it had re-established that the US surveillance law is essentially incompatible with EU data protection laws …)
Nym is betting that some governments will – at some point – look for alternative technological solutions to the espionage problem. Although government procurement cycles make this a lengthy game.
In the short term, Halpin expects that the interest and use for technology that obscures metadata will come from the crypto world, where transactions must be protected from potential hackers.
"The sites that [crypto] people use – these exchanges – have also shown interest," he notes, noting that Nym also received some funding from Binance Labs, the VC arm of the cryptocurrency exchange, after he was selected to go through the lab's incubator program in 2018.
The problem for crypto users is that, according to Halpin, their networks are (relatively) small – which makes them vulnerable to deanonymization attacks.
"The thing about a small network is that it is easy for random people to observe. For example, people who want to hack your Exchange wallet – which happens all the time. What about cryptocurrency exchanges and companies that deal with cryptocurrency who are concerned is usually that they don't want their wallet's IP address to be revealed for certain types of transactions, "he adds." This is a real problem for cryptocurrency exchanges – and it isn't so that their enemy is the NSA; their enemy could – and almost always is – be an unknown, often lonely, but highly skilled hacker. And these types of people can network observations on smaller networks like cryptocurrency networks, which are essentially as powerful like what the NSA could do with the entire Internet. "
There are now a number of startups that want to decentralize various aspects of the Internet or the shared computer infrastructure – from file storage to decentralized DNS. And while some of them tout more security and privacy as core benefits of decentralization – suggesting that they can "solve" the problem of mass surveillance through an architecture that massively distributes data, Halpin argues that a privacy claim routinely shared with the decentralized infrastructure is connected, is out of place. (He refers to a work he co-authored on this subject with the title “Systematizing decentralization and data protection: Lessons from 15 years of research and provision”.)
"Almost all of these projects are being decentralized at the expense of privacy," he argues. “Because any decentralized system is easier to observe, because the crowd is dispersed … than a centralized system – to a large extent. If the opponent is powerful enough, all participants in the system. And historically we believe that most people who are interested in decentralization are not experts on privacy and underestimate how easy it is to observe decentralized systems – because most of these systems are actually quite small. ”
He points out that there are "only" 10,000 full nodes in Bitcoin, for example, and a similar amount in Ethereum – while other, newer, and emerging decentralized services are likely to have fewer nodes, maybe even a few hundred or thousands.
And although the Nym network has a similar number of nodes as Bitcoin, the difference is also a Mixnet – so not only is it decentralized but it also uses multiple levels of encryption and traffic mixing and the various other obfuscation steps he says "None of these other people".
"We assume that the enemy is watching everything in our software," he adds. “We are not what we call 'security through darkness' – security through darkness means assuming that the enemy simply cannot see everything; don't look too closely at your software; don't know where all of your servers are. But – realistically – in an age of mass surveillance, the enemy will know where all of your services are, and will be able to watch all incoming packets that come in, all packets that come out. And that is a real problem for decentralized networks. "
After Snowden, there is certainly a growing interest in privacy by design – and a handful of startups and companies have been able to evolve for services that promise to protect users' data, like DuckDuckGo (non-tracking search); Protonmail (E2E encrypted email); and Brave (privacy-safe surfing). Of course, Apple also markets its premium hardware very successfully under the motto "Privacy Respecting".
Halpin says he wants Nym to be part of this movement; Building a data protection technology that can touch the mainstream.
“Because so much venture capital is currently flowing into the market, I think we have a unique opportunity – just as everyone in 2000 was enthusiastic about P2P – we have a unique opportunity to develop data protection technology and we should build companies that can Support data protection inherently, instead of just half-heartedly trying to respect it on non-data protection, which respects business models.
"Now I think the real question – why haven't we raised more money – is consumer and business demand so great that we can actually figure out what the real cost of data protection is?" How much are people willing to pay for it and how much does it cost? And what we're doing is we're doing privacy on such a basic level, let's say what the cost of a privacy-optimized byte or packet? Here's what we're trying to find out: How much would people pay for just one privacy-optimized byte, and how much does one privacy-optimized byte cost? And are the marginal costs so low that they can be added to all types of systems – just as we have added TLS to all types of systems and encryption. "
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