Ethereum's co-founder Vitalik Buterin has teamed up with Ameen Soleimani and others to discuss a privacy-centric alternative to Tornado Cash in a new research paper.
In Brief
Buterin, who co-founded Ethereum, plays a significant role in the collaborative research paper discussing the concept of Privacy Pools.
The main aim of this new initiative is to remedy a significant limitation observed in Tornado Cash.
Privacy Pools allows users to present zero-knowledge proofs, confirming that their withdrawals are linked only to an 'association set' that does not include any illegal deposits.
The organization is actively working to harmonize its privacy teams in order to unify proofs and association sets for better compatibility across platforms.
Buterin, who co-founded Ethereum, plays a significant role in the collaborative research paper discussing the concept of Privacy Pools.
Ameen Soleimani, who is also a co-author and the key developer of Privacy Pools, along with researchers from Chainalysis, the University of Basel, and the Center for Innovative Finance contribute to this initiative.
Privacy Pools is designed as a privacy enhancement protocol that could effectively replace Tornado Cash. This initiative aims to tackle a major issue: users had difficulty distancing themselves from illegal funds without examining their entire transaction history, a move only a few opted to take.
Zero-knowledge proofs
With Privacy Pools, individuals can produce zero-knowledge proofs that confirm their funds can be traced back to a clean 'association set', potentially allowing them to comply with regulatory demands while keeping their transactions private on public blockchains.
The innovative idea here is to empower users to publish zero-knowledge proofs, which demonstrate the authenticity of their funds, ensuring they aren’t tainted by any illicit activities.
Ameen Soleimani elaborated on this concept in a post on X (previously known as Twitter), suggesting it could enable users to demonstrate they are following legal regulations while still maintaining their financial privacy on public blockchains. post .
Ultimately, Privacy Pools aims to strike a careful balance between protecting user privacy and meeting the requirements of financial regulations.
According to the co-authors, the next phase in the evolution of Privacy Pools, alongside dialogue with regulatory bodies, will focus on automating the generation of the 'association set'.
The organization is making strides in unifying its privacy protocols to ensure that proofs and association sets can interact seamlessly across various platforms.
Tornado Cash
The authors acknowledge that while tools like Tornado Cash provide significant privacy benefits, these platforms also present risks of being exploited by bad actors.
In August 2022, Vitalik Buterin utilized Tornado Cash to contribute to Ukraine, showcasing a real-world instance where individuals might wish to protect their financial privacy without revealing extensive transaction details to authorities.
That same month, the U.S. Treasury imposed sanctions on Tornado Cash, arguing that it failed to implement necessary safeguards against money laundering activities linked to malicious cyber actors.
In August of this year, Roman Storm and Roman Semenov, the developers behind Tornado Cash, faced serious allegations of money laundering and violating sanctions. charged These allegations highlight that Tornado Cash has been reportedly used to launder funds that can be traced back to cybercrimes, including breaches involving platforms like KuCoin, BitMart, and Axie Infinity.
Reports suggest the cryptocurrency mixer enabled the laundering of over $1 billion, with significant portions connected to groups like North Korea's Lazarus Group.
As such, Privacy Pools could potentially present a way to navigate the long-standing issue of reconciling the need for financial privacy with regulatory obligations.
An entity transferred 0.1 ETH to prominent wallets utilizing the U.S.-banned Tornado Cash platform.
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