Cloakcoin (CLOAK) isn’t a coin you hear about very much these days, but it is one of the older cryptocurrencies, having been launched back in 2014.

It is a completely secure, fully private and untraceable digital cash with full fungibilty (all coins equivalent). Cloakcoin is able to achieve this privacy through the use of an offchain coin mixing system called “Enigma”

However, with so many better known privacy coins such as ZCash and Monero, can Cloackcoin really compete?

In this Cloakcoin review we will take an a deep dive on the project by looking at the technology, team, development and roadmap. We will also analyse the long term use cases for the CLOAK token and its potential for larger adoption.

Cloakcoin Features

Once you see the features that Cloakcoin brings to the table you might agree that it has been somewhat overlooked. Or you might see why it is being overlooked. Let’s get an idea of what advantages you might get from using Cloakcoin.

Faster Transactions – Cloakcoin was designed with 60 second block times, making it ten times faster than Bitcoin in processing transactions. Of course it doesn’t have the volumes of major coins yet, so we have to wait to see how it would perform under much heavier transaction volumes.

Completely Anonymous and Private – This is where Cloakcoin shines. User identity is never revealed when transacting with Cloakcoin, making it one of the most secure of the privacy coins. It achieves this through its proprietary Enigma technology, which will be discussed in more depth later.

Safe and Secure – The combination of open-source blockchain technology guarantees the security and safety of Cloakcoin.

Decentralization – Cloakcoin is fully decentralized, using proof-of-stake mining to secure the network. This decentralization and PoS system also provides an incentive for users to hold coins in their wallets in a process called staking.

Staking Rewards – Any user who chooses to hold CLOAK in their wallet can stake those coins and receive a reward for doing so. Staking rewards amount to 6% annual return, which is the incentive for users to help secure the network. Users can also elect to process Enigma transactions to get additional rewards.

User Friendly – This is an often overlooked aspect of many blockchains and cryptocurrencies, but the truth is most people aren’t going to use overly-complicated systems. Cloakcoin is user-friendly and simple to grasp. There are no detailed technical instructions, and users can be sending and receiving CLOAK anonymously within minutes of installing their wallet.

Cloakcoin from the Beginning

As was mentioned earlier Cloakcoin was developed and released in 2014, although it has undergone major improvements since that initial release. One thing that hasn’t changed over the years though is the decentralized and distributed nature of Cloakcoin.

Even more importantly is the evolution of the privacy function of Cloakcoin. With the upgrade to Enigma, Cloakcoin became a complete and total anonymous privacy coin. Unlike other coins there is no way to follow a trail on the blockchain to determine where CLOAK tokens may have come from. User privacy is always protected and the fungibility of the currency is maintained.

Cloakcoin History
The evolution of Cloakcoin technology. Image via Cloakcoin Website

The implementation of a hybrid Proof-of-Work / Proof of Stake consensus system ensures users have an incentive to hold CLOAK coins, helping to lift the value of the cryptocurrency, and to help secure the network by processing Enigma transactions.

Adding to the ease of use for Cloakcoin users is a native wallet that allows users to easily send, receive, store and stake their CLOAK. Staking CLOAK yields a 6% annual return.

Like other forms of digital currency CLOAK can be exchanged easily on the open market and can be used a means of payment for those that accept CLOAK tokens. These payments allow users to “cloak” the transaction, hiding any association between buyers and sellers. This is accomplished via an inventive coin mixing system dubbed “Enigma”.

ENIGMA Technology and Privacy

Cloakcoin has CloakShield, which is an onion type protocol, enabled by default to provide end-to-end encryption  and secure communications for every transaction. This technology alone allows nodes to avoid any analysis of the traffic routed through them. However at the next level of privacy and anonymity is ENIGMA. This technology uses as many as 25 hops with symmetric RSA encryption and an ECDH key exchange.

Enigma Transaction
Overview of Enigma Transaction. Image via Cloakcoin Website

ENIGMA was created by the Cloakcoin team and provides a secure and private means for conducting transactions on the blockchain. By using the unique ENIGMA technology uses can be sure their coins are sent completely anonymously, without the need to trust the nodes involved from stealing their funds or leaking their private data.

The Cloakcoin team has also emphasized that they do not support or condone the use of their technology to conduct any type of illegal transaction or activity.

The CLOAK Token

The CLOAK token was launched in 2014, and by the middle of the year it was valued at $1.47. Like the rest of the market it quickly dropped and was worth little over the coming three years. Then it rallied above $10 in June 2017 as cryptocurrencies began to explode. After spending much of the rest of 2017 trading between $3.50 and $10 it surged higher in December along with the broader market and reached its all-time high of $35.99 on December 29, 2017.

Price declined throughout most of 2018, with the exception of the bounce experienced by the broader market in April. As of late December 2018 the CLOAK token is trading at $1.22, which is far from the heights reached just one year prior. That said the coin has been advancing in the Market Cap rankings, and when the broader cryptocurrency market recovers Cloakcoin could be one of the leaders.

Binance CLOAK
Register at Binance and Buy CLOAK Tokens

Users are incentivized to use Cloakcoin in two ways. The forst is the Proof-of-Stake system that generates an annual return of 6% for those who stake their CLOAK tokens to secure the network. The second is the Proof-of-Work consensus used to secure the Enigma protocol which allows users to collect 1.8% of the transaction fees generated during an Enigma transaction that they support.

There is currently a limited supply of just 5,235,507 CLOAK in circulation and because the Proof-of-Work mining phase for the coin is done there will be no more created. That alone makes CLOAK more valuable due to its limited supply.

CLOAK is available on several exchanges, with the largest trading volume occurring on Binance. There is also modest trading volumes on Livecoin and Bittrex. A few other small exchanges support the coin as well.

Storing the CLOAK coins needs to be done in the native Cloakcoin Evolution wallet. This is the third wallet that’s been created since the inception of Cloakcoin in 2014, and it is extremely user-friendly and simple to use. It is available for Windows, Linux, Mac OSX, Raspberry Pi and will soon be available as a web wallet.

Cloakcoin Wallet
User interface of the official Cloakcoin Wallet

The wallet was evaluated by cybersecurity firm Cognosec as part of an overall security audit of Cloakcoin in January 2018. The wallet was found to be quite safe, although it was found that the wallet was storing transaction details unencrypted, which could compromise user privacy if the transaction details were somehow extracted by a hacker. Cognosec recommended this be remedied in future versions of the wallet, and it was fixed with version 2.2.2.0 of the Evolution wallet.

Cloakcoin Team

Cloakcoin seems to have a pretty big team comprised of members with a wide variety of experience. Taking a look at the tech talent, we have the two lead devs which are “Deepend” and “anorak” whose real names are William Danielson and Ante Beslic.

William is the Tech lead and is a C++ developer with two decades of experience in software engineering. Ante is the wallet developer who has extensive experience in front end development. He worked extensively with William in order to shape Cloakcoin into what it is today.

Clok Project Team
From Left: lasvegas89 (Steven Kendar), Deepend (William Danielson) and Anorak (Ante Beslic)

The Cloakcoin project manager is “lasvegas89” who’s real name is Steven Kendar. He joined the Cloak project back in 2014 and was the right hand man of the then project manager. He took over that role recently and is trying to push the Cloak project forward.

There are a number of other team members which we wont go into here. What is interesting to note is that the Cloak project has focused a lot of attention on local community co-ordinators and marketing professionals. Hopefully this could increase awareness above the current levels.

Development Acitivity

In order to get a good sense of how much work is being done by the team, it helps to take a look at the project’s GitHub. The number of commits that a project has been making is able to give us a rough indication. Taking a look at the CloakProject repository, we get the below overview.

Cloakcoin Github Commits
Recent commits to the main Cloakproject Repositories

While this does show that development is still active, it appears to be rather sparse compared to some of the other projects that I have reviewed. Indeed, if we were to take a look at the rankings of the number of commits of cloakcoin, it comes in at 279.

Of course, Cloakcoin is a relatively established coin so there may not have been that much development completed when compared to some of the newer projects that are building new protocols. However, this could change once Cloakcoin starts working on some improvements that they have planned on the protocol.

Cloakcoin Roadmap

This further development has been laid out in the Cloakcoin whitepaper where they plan to work on three main features of the protocol. These include three main components, two of which relate to the PoS algorithm whereas the third is to do with the way enigma transactions are split and combined.

Proof-of-Stake Improvements

When it comes to the PoW improvements, they want to reduce the dependence on the Linear PoS design. This is because of the concerns that surround the hoarding of coins by the users as well as the impact on network security.

Essentially, users will connect to the network, stake their coins and then disconnect when the coin age has been destroyed. This process is then completed again and they will connect to the network once their coin age has been replenished.

The Cloakcoin developers want to create a PoS algorithm whereby those who stake their coins are rewarded on a more regular and consistent basis. This would therefore encourage more regular staking and have no negative impact on the security.

Hence, the Cloakcoin developers want to remove the dependence on the Coin Age component in the staking algorithm. They also want to try and structure an incentive mechanism with a “velocity component” that would reward those users who have been staking for longer periods of time without disconnecting.

Combining & Splitting of Transactions

As mentioned, the current Enigma protocol will allow for one single cloaked transaction. The developers say that they are currently busy working on an update that would allow multiple transactions to be combined into a single “super transaction”.

This transaction will then contain multiple cloaked transactions which would have the affect of obfuscating any one particular transaction through safety in numbers. The developers want to give the user the ability to choose the number of co-operative transactions that will be required for the transaction.

You can think of it as analogues as the “Mixin level” that is applied on the Monero network when it comes to the number of decoy outputs.

Finally, the developers also want to provide users with the ability to cloak a large number of CLOAK as a series of smaller transactions. You can think of this as order batching of the Enigma and CloakCoin transactions. The developers would like to make this compatible with combined Enigma transactions.

Cognosec Security Audit

The security audit carried out by Cognosec found that security for the blockchain, network and wallet were quite robust. The primary focus for remediation was in the Enigma code, and several recommendations were made by Cognosec in their audit report. Since the security audit this past January 2018 changes have been made to improve the security of Cloakcoin even further.

Conclusion

Cloakcoin has been one of the longer running cryptocurrencies in existence, and despite some early claims of the project being a scam it has stood the test of time. It is arguably one of the most secure privacy coins available, and is claimed to be better at providing anonymous transactions than more popular privacy-centric coins.

The recent security audit also provides additional peace of mind for users, since any security flaws have been uncovered by a third-party provider. Since Cloakcoin has released their code as open-source in December 2017 anyone can examine the code to see if recommended security updates have been done.

Cloakcoin provides anonymity and privacy to its users, and provides an easy to use method for transacting with digital currencies. Because it is a PoS coin it also provides its users with the ability to make 6% per year simply by staking, and an additional 1.8% of transaction fees to help secure the Enigma network. This alone is a strong reason to use Cloakcoin as a preferred privacy coin.

While the price of CLOAK has dropped dramatically since its December 2017 high, the same can be said for every cryptocurrency, and if the recent strength of the coin relative to others is an indication CLOAK could be a strong performer in any market recovery.

Featured Image via Fotolia

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

Posted by Steve Walters

Steve has been writing for the financial markets for the past 7 years and during that time has developed a growing passion for cryptocurrencies.