Anonymous coins, coin mixers, etc. are the "blockers" in fund tracking that you often encounter in current case investigations. There are also some privacy protection schemes (hiding transaction-related information) in the blockchain, which you may seldom dabble in. There are no obvious manifestations in the blockchain-related cases. We also hope that through this topic, we will bring everyone to pay attention to and understand some new developments and trends in this field, so as to plan ahead and prepare in advance.
Therefore, the content brought today is: privacy chain!
Privacy has always been a rigid need, especially in the current blockchain industry. The anonymous coins and coin mixers shared before the topic are part of the current blockchain privacy scheme. While protecting user privacy, they also breed criminal activities such as money laundering.
The privacy chain is also an important direction of the current privacy scheme, so what is the privacy chain? As Monero, Tornado Cash, etc. are sanctioned and supervised, what challenges will the privacy chain bring in supervision and related criminal activities?
What is a privacy chain?
The privacy chain is the privacy public chain (which can be understood as "privacy + public chain"), and it can also be called a privacy platform.
The privacy chain can provide users with privacy protection solutions through zero-knowledge proof, secure multi-party computing and other technologies, and users can selectively hide sensitive information. The privacy chain supports private smart contracts on the underlying architecture, but native tokens are not privacy coins.
The privacy chain has three characteristics: programmability, interoperability, and ecological scalability.
Programmability : refers to the fact that the privacy chain can enable any developer or organization to build and expand truly private applications.
Interoperability : refers to the privacy chain that enables two-way interaction between various blockchains, providing users with an extremely fast cross-chain experience with the Layer1 chain. Users can use the original cross-chain bridge of the privacy chain to realize the cross-chain transfer of assets and protect their privacy during the transfer process.
Ecological scalability : the ecology of the privacy chain includes various DeFi, NFT, and chain game applications. Developers can build various Dapps based on the privacy chain. Some people may ask: Isn’t the public chain public? Since it is public, what about privacy? Data ≠ information. What the privacy chain discloses is data, but others do not know the specific information content.
The privacy chain provides an environment for deploying privacy smart contracts, enriching various privacy-based applications; it also provides the possibility of interoperability, allowing the privacy chain ecology to blend with the non-privacy chain ecology.
What are the common privacy technologies in the privacy chain?
In order to better privacy attributes, privacy chains generally use a variety of privacy technologies. Here we will introduce several technologies that are used more in privacy chains.
Zero-knowledge proof technology
In the previous chapters of the topic, we also briefly introduced the zero-knowledge proof in anonymous coins. Zero-knowledge proof means that the prover (prover) can make the verification without providing any useful information to the verifier (verifier). believe that a certain assertion is true.
In on-chain transactions, zero-knowledge proof can ensure the privacy of information such as transaction parties, transaction time, transaction amount, etc., and verify the validity of on-chain asset transfers without revealing transaction details.
There are three main types of zero-knowledge proof protocols, zkSNARK (simple non-interactive zero-knowledge proof), zkSTARK (simple zero-knowledge proof) and Bulletproof. The most used in the privacy chain is zkSNARK (concise non-interactive zero-knowledge proof).
Secure Multi-Party Computation
The main problem that this technology solves is how to design a function without a trusted third party, so that multiple parties can safely obtain the output without disclosing any information. That is, how to protect and ensure the correctness of the data of each participant among the data participants.
Trusted Execution Environment (TEE)
It is a hardware-based CPU that implements secure computing based on memory isolation. The basic idea of the Trusted Execution Environment is to allocate an isolated memory for sensitive data in the hardware. All sensitive data calculations are performed in this memory. Except for authorized interfaces, other parts of the hardware cannot access this memory. Blocks information in memory isolated from each other. The most common specific application scenarios of trusted execution environments include: authentication and comparison of private identity information, cross-institutional joint modeling and analysis of large-scale data, data asset ownership protection, confidential calculation of data on the chain, privacy protection of smart contracts, etc.
homomorphic encryption
Homomorphic encryption is a cryptographic technique based on computational complexity theory of mathematical puzzles. Processing the homomorphically encrypted data yields an output that, when decrypted, yields the same output as the original unencrypted data. To put it simply, using homomorphic encryption technology can process ciphertext, but the real data cannot be obtained.
Homomorphic encryption systems are roughly divided into four categories: partial homomorphism, approximate homomorphism, finite series full homomorphism, and complete homomorphism. A homomorphic encryption system is roughly composed of four algorithms: key generation algorithm, encryption algorithm, decryption algorithm, and operation algorithm.
What are the main categories of privacy chains?
According to the industry's division of the privacy track, the current privacy chains account for a relatively large proportion of private computing network public chains and private transaction network public chains.
Privacy Computing Network
In essence, privacy computing is to solve data service problems such as data circulation and data application under the premise of protecting data privacy. It is an effective way to solve data islands. Privacy computing mainly protects privacy from data generation, collection, storage, analysis, utilization, and destruction.
Compared with other forms of privacy projects, the privacy computing protocol is a lower-level infrastructure. The specific transaction information (currency type and quantity, etc.) can often be viewed publicly through the block browser, but more emphasis is placed on the use of data by users. privacy.
Although there are already some high-profile projects in the privacy computing network, the current practical application scenarios and development are relatively limited.
Privacy Transaction Network
The private transaction network mainly performs privacy processing on the transaction data on the chain. It natively supports users to conduct private transactions through technologies such as zero-knowledge proof, and hides user transaction data (transaction objects, time, amount, etc.) without using tools such as Tornado Cash. You can ensure that your private data will not be viewed by the outside world, and at the same time support the development of more types of privacy applications in this protocol.
The privacy transaction network includes Layer1 privacy agreement and Layer2 privacy agreement. At present, most private transaction networks are in the testing and development stage.
Privacy chain supervision and crime fighting challenges
The privacy chain provides users with privacy solutions. At the same time, will these privacy measures become an accomplice to crime?
In some popular privacy chains, we can see that their ecological fields mainly involve DeFi and NFT, cross-chain bridges, wallets, GameFi and other fields. In previous articles, we also shared that DeFi, NFT, GameFi, etc. are very easy to cause criminal activities such as money laundering, and in privacy platforms, all transaction information will be hidden, so whether these privacy measures make it easier for related criminal activities Better conceal funds, encourage the growth of crime, and increase the difficulty of combating related criminal activities?
Because of their high anonymity and easy use for money laundering, anonymous coins and coin mixers represented by Monero and Tornado Cash have been banned and sanctioned to varying degrees. Compared with anonymous coins and coin mixers, the privacy chain can achieve anonymity in more links from transaction to transfer, which also poses more and greater challenges for privacy supervision and the governance and crackdown of related criminal activities.