The significance of privacy in the world of cryptocurrency cannot be overstated. A seminal paper recently co-written by Vitalik Buterin offers a potential solution to the inherent privacy leak in blockchain whilst trying to circumvent potential legal pitfalls. The synthesis of zero-knowledge proofs with less familiar “Privacy Pools” could birth a unique tool that allows crypto users to obfuscate their blockchain history without associating with illicit actors.
Put into practice, this represents a balance between privacy and compliance. However, reactions are mixed. Some cypherpunks contend this method of selective smart contract interaction contradicts the egalitarian principles outlined originally in digital technologies ethos.
Further, the notion of ‘compliant privacy’ might seem out of place in an era dominated by the Bank Secrecy Act. Jacob Illum, a co-author and researcher at Chainalysis, explained the driving force behind the research is the quest for achieving financial privacy on transparent blockchains.
Application of privacy tools in cryptocurrencies such as Bitcoin or Ethereum exists but is laborious, difficult, and presents significant challenges as blockchains’ inherent pseudo-anonymity could potentially be cracked in due course. Tools like Tornado Cash have provided flexibility, yet remain inaccessible for those wary of sanctions violations.
The research’s novelty, an association set, allows a group of reliable crypto users to run their individual crypto mixers. Layering in zero knowledge proofs serves dual purposes: eliminating tainted funds and bad actors while augmenting privacy as users can selective reveal the necessary level of information. However, it must be noted the practical efficacy and legality of such a system still sits on uncertain terrain.
Though promising, the system has garnered criticism. The co-creator of Zcash, Zooko Wilcox, argued the ‘Guilty Until Proven Innocent’ mentality inherent in the model. Furthermore, Zooko contested that mixers could never provide real privacy due to observable patterns in human behaviour.
Finally, at this early life stage of crypto, complaints against ‘over-compliance’ should be negligible. Privacy Pools allowing dissociation from bad actors should not be the dividing factor in the dialogue; protecting oneself should not be undermined. For now, Ethereum remains the crypto of choice for most people, and sooner or later, it will have to offer a viable privacy solution to meet the pre-existing expectations of ‘crypto.’ Naked blockchains and privacy cloaks, both have their limitations, and it’s essential to choose the lesser of two evils wisely. As Illum stresses: individuals wanting a safe blockchain experience should have access to the means to do so.
Source: Coindesk
