At the core of CloakCoin’s privacy system is Engima, which acts as a decentralized mixing service allowing users to make transactions that are securely private and remain untraceable. Enigma is also deemed to be the foundation to build the underlying system for decentralized applications to run on the CloakCoin network.

Enigma ensures the mixing process is secure and untraceable to any external third parties. To keep transactions private, network participants work together to “hide” the real amounts being sent and received. In exchange for “cloaking,” network participants receive a reward for their assistance.

As network participants provide several inputs and outputs, the Enigma transaction stays private and impossible to trace. All Enigma messages routed through the network remain hashed and encrypted to ensure data security and integrity.

The whole mixing process is done to make it challenging to perform blockchain analysis to identify the true outputs and inputs of an Enigma transaction.

Enigma Announcements 

The process starts whenever a user makes a cloaking request announcement. Enigma nodes communicate over the network while a node keeps track of active Enigma nodes. The Enigma announcement broadcasts the public session key and the current cloaking balance to other Enigma nodes.

Enigma Requests

The user can elect a series of Enigma nodes that have a high enough current balance and request their assistance in cloaking. Any Enigma node can choose to either assist or decline the request. If an Enigma node refuses to participate in cloaking or the response times out, an alternate Enigma node is selected.

The Cloak network has DDoS (distributed-denial-of-service) protection wherein it will blacklist any nodes found to be misbehaving. A node is deemed to be misbehaving if it repeatedly refuses to sign a transaction or refuses to relay Enigma messages during the same session. Enigma cloaking nodes use an Elliptic Curve Diffie Hellman (ECDH) key exchange to derive a shared secret with the Enigma initiating node, which is used to generate a shared secret key for symmetric RSA-256 data encryption between a cloaking node and the sender node.

Enigma Cloaking Acceptance

When an Enigma node accepts a request, it provides a list of transaction inputs and outputs to be used for the Enigma transaction. Input amounts provided by a cloaking node must be greater or equal to the amount sent plus fees. Outputs are carefully selected so that they match the true output of the Enigma transaction as closely as possible.

CloakShield

CloakShield provides secure communications between nodes on the Cloak network using symmetric RSA encryption backed by an Elliptic Curve Diffie Hellman key exchange (ECDH). This allows nodes to exchange data securely, providing protection from third parties trying to monitor the network as well as malicious actors. 

CloakShield was designed to secure data stays as private as possible. CloakShield allows the encrypted sending of data to one or more recipients. When sending to a single recipient, the payload is RSA encrypted using the ECDH shared secret. When sending to multiple recipients, the payload is encrypted using a one-time key, and the key is then encrypted for each recipient using the ECDH/RSA method.

CloakShield Data

CloakShield also allows for data objects to be serialized and transmitted securely to one or more recipients. A CloakShield data packet-header contains the sender’s Enigma public key and the hashes of the public keys of the recipients. CloakShield headers contain a verification hash, which is generated using the sender’s public key and the raw unencrypted data. This hash is verified during decryption of CloakShield data to ensure that the recipient information in the header matches the encryption key, and that data integrity has been maintained.

CloakShield Onion Routing

The Cloak network uses Onion routing for relaying messages. Onion routing is a technique that enables anonymous communication over a network. In an onion network, messages have several layers of encryption, similar to how an onion has layers. The encrypted data is transmitted through a series of network nodes called onion routers, each of which decrypts a single layer, uncovering the data’s next destination. When the final layer is decrypted, the message arrives at its final destination. The sender remains anonymous because each intermediary node knows only the location of the immediately preceding and following nodes.

CLOAK is the network’s native currency. The currency is mainly used as a privacy-enhanced medium of exchange. In order to “cloak” transactions network participants need to hold and stake CLOAK coins.

There is no minimum requirement for staking coins and the yearly expected return on staked coins lies around 6%.