Potentially anonymous blockchain transactions may have been discovered by a team of crypto and privacy specialists.
It’s possible that Vitalik Buterin and his colleagues have developed a workable answer to the privacy leakage issue in blockchain technology. Or at least a novel approach to the construction of crypto mixers that may prevent their operators from going to prison.
If you missed it last week, Buterin is co-authoring a new theoretical article that investigates how to combine many current technologies, such as zero-knowledge proofs and “Privacy Pools,” to create something really novel.
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This is essentially a technical and social innovation, allowing users to separate themselves from criminals or bad actors who may exploit a privacy tool for money laundering by joining a crypto washing pool to conceal their blockchain activity.
Not everyone approves of our middle ground between privacy and regulation. Several respectable cypherpunks have expressed their distaste for the idea of picking and selecting which parties to engage with in a smart contract, on the grounds that the fundamental point of digital technology is to ensure that everyone is treated fairly.
CoinDesk TV hosted co-author and Chainalysis researcher Jacob Illum on Monday to discuss the study and its attendant criticisms. Illum said, “The main question is how we can protect our financial privacy on the blockchain.”
Transparency in blockchains is inherent to the technology. The system can only be “trustless” if every node can independently verify the same data, and this means that nodes must have the ability to validate transactions. An obvious issue arises if the blockchain’s built-in pseudo-anonymity is ever broken, despite the fact that this is a novel notion for creating connections between counterparties and settling transactions.
While it is currently possible to use Bitcoin or Ethereum privately by airgapping your alts from your “government name,” doing so properly is extremely time-consuming and requires careful attention to detail, as does ensuring that you control your own dependencies.