Blockchain privacy and regulatory compliance: Towards a practical equilibrium
We study Privacy Pools, a novel smart contract-based privacy-enhancing protocol. The protocol introduces a mechanism for users to reveal certain properties of their transaction without having to reveal the transaction itself. The core concept involves allowing users to publish a zero-knowledge proof...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2024-03-01
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| Series: | Blockchain: Research and Applications |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2096720923000519 |
| _version_ | 1797214912622100480 |
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| author | Vitalik Buterin Jacob Illum Matthias Nadler Fabian Schär Ameen Soleimani |
| author_facet | Vitalik Buterin Jacob Illum Matthias Nadler Fabian Schär Ameen Soleimani |
| author_sort | Vitalik Buterin |
| collection | DOAJ |
| description | We study Privacy Pools, a novel smart contract-based privacy-enhancing protocol. The protocol introduces a mechanism for users to reveal certain properties of their transaction without having to reveal the transaction itself. The core concept involves allowing users to publish a zero-knowledge proof, demonstrating that their funds (do not) originate from known (un-)lawful sources, without publicly revealing their entire transaction history. This is achieved by proving membership in custom association sets, which are designed to demonstrate compliance with regulatory frameworks or social consensus. We illustrate how this mechanism can create a separating equilibrium between compliant and non-compliant withdrawals. Our work describes the technical underpinnings, incentives, and broader implications of this mechanism, highlighting how Privacy Pools-like protocols can create more private yet compliant blockchain transactions. |
| first_indexed | 2024-03-07T22:54:32Z |
| format | Article |
| id | doaj.art-a92b923f2dbb489d86a1fed5f7eccfe8 |
| institution | Directory Open Access Journal |
| issn | 2666-9536 |
| language | English |
| last_indexed | 2024-04-24T11:21:43Z |
| publishDate | 2024-03-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Blockchain: Research and Applications |
| spelling | doaj.art-a92b923f2dbb489d86a1fed5f7eccfe82024-04-11T04:41:10ZengElsevierBlockchain: Research and Applications2666-95362024-03-0151100176Blockchain privacy and regulatory compliance: Towards a practical equilibriumVitalik Buterin0Jacob Illum1Matthias Nadler2Fabian Schär3Ameen Soleimani4Ethereum Foundation, SwitzerlandChainalysis, United States of AmericaUniversity of Basel, SwitzerlandUniversity of Basel, Switzerland; Corresponding author.Privacy Pools, United States of AmericaWe study Privacy Pools, a novel smart contract-based privacy-enhancing protocol. The protocol introduces a mechanism for users to reveal certain properties of their transaction without having to reveal the transaction itself. The core concept involves allowing users to publish a zero-knowledge proof, demonstrating that their funds (do not) originate from known (un-)lawful sources, without publicly revealing their entire transaction history. This is achieved by proving membership in custom association sets, which are designed to demonstrate compliance with regulatory frameworks or social consensus. We illustrate how this mechanism can create a separating equilibrium between compliant and non-compliant withdrawals. Our work describes the technical underpinnings, incentives, and broader implications of this mechanism, highlighting how Privacy Pools-like protocols can create more private yet compliant blockchain transactions.http://www.sciencedirect.com/science/article/pii/S2096720923000519BlockchainPrivacyRegulationSmart contractsZero-knowledge proofs |
| spellingShingle | Vitalik Buterin Jacob Illum Matthias Nadler Fabian Schär Ameen Soleimani Blockchain privacy and regulatory compliance: Towards a practical equilibrium Blockchain: Research and Applications Blockchain Privacy Regulation Smart contracts Zero-knowledge proofs |
| title | Blockchain privacy and regulatory compliance: Towards a practical equilibrium |
| title_full | Blockchain privacy and regulatory compliance: Towards a practical equilibrium |
| title_fullStr | Blockchain privacy and regulatory compliance: Towards a practical equilibrium |
| title_full_unstemmed | Blockchain privacy and regulatory compliance: Towards a practical equilibrium |
| title_short | Blockchain privacy and regulatory compliance: Towards a practical equilibrium |
| title_sort | blockchain privacy and regulatory compliance towards a practical equilibrium |
| topic | Blockchain Privacy Regulation Smart contracts Zero-knowledge proofs |
| url | http://www.sciencedirect.com/science/article/pii/S2096720923000519 |
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