When the U.S. government sanctioned coin mixer Tornado Cash, many thought it might spell the end for illicit crypto mixing services. However, they make a comeback with a glossy new institutional sheen and legit use cases to help traders and funds keep their market moves a “trade” secret. Tornado Cash is a mixer that breaks the identifying links in blockchain transactions, providing a certain degree of anonymity for users.
While some use coin mixers to hide illegal activities, there are also legitimate reasons for not wanting every transaction tracked. Supporters argue that Tornado Cash provides important privacy infrastructure. But is it possible to build a privacy-preserving protocol that provides regulators with just enough information to know users are staying on the right side of the law? Various developers are experimenting with redesigned mixers using ZK-proofs and believe there’s a way to make it happen.
The big use case for these new coin mixers won’t be dodgy crypto thieves, but rather the big institutions and hedge funds. These parties want to get ahead of front-running bots and keep their business dealings secret from competitors. Institutions need privacy, as all their transactions can currently be seen on-chain. Ethical privacy protocols can help make this a reality with blockchain technology.
Decentralized IDs and ZK proofs are some of the components necessary to build a solution that balances individual privacy and revealing limited pieces of data to particular entities, such as banks or government agencies. Aleph Zero, for example, focuses on providing developers with the underlying tools and cryptographic primitives necessary to use ZK-proofs for multiparty computation for privacy-enhancing applications.
On the other hand, some governments want to prevent anonymous peer-to-peer transfers altogether, using the financial system for their own purposes and looking to police the on- and off-ramps to crypto ecosystems. Crypto transactions are currently more traceable than cash, which is one reason why mixer advocates argue privacy mixers for individuals are needed.
Ultimately, the evolution of mixers will depend on the choices of founders, investors, and state regulatory bodies. While the demand and legitimate use cases make mixers a necessary crypto-native product, they will have to adapt to regulators’ requirements.
Source: Cointelegraph
