Privacy has become a buzzword in the industry of cryptocurrency and ethereum developers are beginning to recognize its importance.
Vitalik Buterin on Ethereum Privacy Features
Ethereum has been frequently headlines in 2019 over its slow transition to ETH 2.0. The Constantinople upgrade represents a first of its kind: a non-hard fork, massive overhaul that will shift ethereum’s algorithm from proof-of-work (PoW) to proof-of-stake (PoS).
Security features have likewise become a focal point in the transition.
In May, Ethereum co-founder Vitalik Buterin published a piece on HackMD claiming the network was in need of a step towards “more privacy.” Buterin proposed a feature for allowing ether users to obscure their activity on the blockchain in one-off transactions, calling his design a “minimal mixer” that relied upon “anonymity sets.”
Buterin further explained his idea in an email with CoinDesk,
“Anonymity set is cryptography speak for ‘set of users that this thing could have come from.’ For example if I sent you 1 ETH and you can’t tell who exactly it was from but you can tell that it came from (myself, Alice, Bob or Charlie), then the anonymity set has size 4. The bigger the anonymity set the more privacy you have.”
Development Focus For Ethereum
Blockchains provide public ledgers that allow for transparency--a concept that has been antithetical to anonymous transactions in the past.
However, the evolution of mixers and zero-knowledge proofs has created the opportunity for privacy on a platform like ethereum, while still maintaining the integrity of the blockchain.
Itamar Lesuisse, CEO of Argent, gave his support for increased privacy on ethereum, even in the ‘simplest’ of use cases,
“If you just look at the most simplest use case, if I say, ‘Hey Christine, can you send me ten dollars [worth of ether]? Here’s my wallet address.’ Now, you know how much money I have.”
“It’s so transparent, which is a great picture of blockchain, but for some users, it might scare them away to use it at scale.”
The Argent CEO and other developers are working towards the creation of tools that allow for private transactions, which they believe will lead to increased adoption. The blockchain team at Big Four auditor EY has also been active. Last month, the group released code on GitHub under the name ‘Nightfall,’ which provides a solution for enabling anonymous ether transactions.
According to the GitHub post, Nightfall integrates a set of smart contracts, microservices and zk-snarks to enable ERC-20 tokens to be transacted on ethereum’s blockchain in “complete privacy.” While the code is still an experimental solution, it could provide ether users with privacy transactions to rival top anonymity cryptos like monero and zcash.
Privacy Needed More Than Ever
Two recent developments will enhance the need for privacy features moving forward. Social media giant Facebook is wading into digital currencies with the launch of libra, despite having been proven inept at securing user data in the past. In addition, the intergovernmental Financial Action Task Force (FATF) passed a controversial mandate on Friday requiring crypto exchanges to share user data.
Both could have the effect of pushing users towards privacy coins, in an effort to escape the increased centralization and regulation imposed on cryptocurrency.