Can blockchain protocols distinguish honest folk from criminals?
Vitalik Buterin, co-founder of the Ethereum network, and four co-authors outlined a way of doing just that in a research paper released Wednesday, detailing a new technological feature called “privacy pools.”
This “smart contract-based privacy-enhancing protocol” is designed to separate transactions that involve criminal activity from those that come from honest users.
The paper, “Blockchain Privacy and Regulatory Compliance: Towards a Practical Equilibrium,” comes as concerns around privacy in blockchain have crescendoed, with governments cracking down on criminal groups who make use of privacy mixers to hide and launder funds.
One of the best-known privacy protocols is Tornado Cash, a crypto “mixer” that has been sanctioned by the U.S. Treasury due to its alleged use by the North Korean hacking group Lazarus as a tool for money laundering.
Buterin acknowledged that Tornado Cash was a good solution to privacy issues, but that it had limited options to dissociate from criminal activity on the network.
Privacy pools that make use of zero-knowledge technology could theoretically solve part of this issue since they would give users privacy around transaction data while also distinguishing it from any criminal activity. By pooling honest transactions together, users could prove that their transactions come from one of the honest deposits.
“All users with ‘good’ assets have strong incentives and the ability to prove their membership in a ‘good’-only association set,” the paper says. “Bad actors, on the other hand, will not be able to provide that proof.”
As more regulators crack down on criminal activity on the blockchain, Buterin aims to show that these technological innovations can comply with regulations.
“In many cases, privacy and regulatory compliance are perceived as incompatible,” the authors wrote. “This paper suggests that this does not necessarily have to be the case, if the privacy-enhancing protocol enables its users to prove certain properties regarding the origin of their funds.”
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Cryptocurrency exchanges review:
#1
OKX - 24h Volume: $ 1 097 255 972.
OKX is an Hong Kong-based company founded in 2017 by Star Xu. Not available to users in the United States.
#2
ByBit - 24h Volume: $953 436 658.
It is headquartered in Singapore and has offices in Hong Kong and Taiwan. Bybit works in over 200 countries across the globe with the exception of the US.
#3
Gate.io - 24h Volume: $ 643 886 488.
The company was founded in 2013. Headquartered in South Korea. Gate.io is not available in the United States.
#4
MEXC - 24h Volume: $ 543 633 048.
MEXC was founded in 2018 and gained popularity in its hometown of Singapore. US residents have access to the MEXC exchange.
#5
KuCoin - 24h Volume: $ 513 654 331.
KuCoin operated by the Hong Kong company. Kucoin is not licensed to operate in the US.
#6
Huobi - 24h Volume: $ 358 727 945.
Huobi Global was founded in 2013 in Beijing. Headquartered in Singapore. Citizens cannot use Huobi in the US.
#7
Bitfinix - 24h Volume: $ 77 428 432.
Bitfinex is located in Taipei, T'ai-pei, Taiwan. Bitfinex is not currently available to U.S. citizens or residents.
My bitcoin-blog:
https://sites.google.com/view/my-crypto-jam/ethereum Crypto Review:
https://my-crypto-jam.blogspot.com/2023/09/portfolios.html =)
