Authors: Nian Qing, Gu Yu/Chain Catcher
"The inevitable end point of the encryption industry is maximum decentralization and maximum privacy," said Naval Ravikant, a well-known investor.
In its inception and ideally, blockchains are "anonymous" and users are identified by a string of alphanumeric characters known as a public key. But the reality is that with the gradual widening and standardization of applications, people's needs for security are far greater than their needs for privacy at this stage. Various on-chain analysis tools are emerging one after another, and the privacy features of cryptocurrencies are gradually disintegrating.
However, privacy has always been a basic requirement for protecting users and expanding the use of cryptocurrencies, and is considered one of the important directions of Web3.0.
Privacy coins such as Zcash have tried to make up for this market demand, but most of them have been ignored by the mainstream market at the moment when smart contract platforms shine.
However, as a kind of "just-needed existence", more and more top VCs and developers are still entering the field. The competition for the privacy track has become increasingly fierce since the second half of 2021. Both the protocol and the application layer have given birth to many privacy-focused Projects, some of which try to protect data privacy (blockchain hybrid architecture) by using trusted execution environment (TEE), multi-party secure computing, etc.
For example, identity information, medical information, and some projects focus on using solutions such as ZKP (zero-knowledge proof data) to protect asset privacy, such as the number and type of currency.
Just tonight, Sequoia Capital also entered the privacy track, participating in a new round of financing of US$32 million for Espresso Systems, a privacy public chain backed by Stanford University. In the past few months, Aleo, Aztec Network, Iron Fish and many other privacy projects have received large financing.
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1. Privacy Transaction Agreement
The private transaction network mainly conducts privacy processing for on-chain transaction data (the type and amount of currency held or traded), and natively supports users to conduct private transactions through technologies such as zero-knowledge proof, 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 on this protocol.
Since 2021, at least dozens of blockchain networks focusing on privacy transactions have emerged and received support from mainstream investment institutions such as a16z and Sequoia Capital, making them one of the most promising tracks in the capital market.
According to the incomplete statistics of Chain Catcher, the privacy transaction network includes Layer1 privacy protocol and Layer2 privacy protocol. The former includes Aleo, Nym, Secret Network, Iron Fish, Anoma Network, Manta Network, Penumbra, HOPR, Penumbra, Concordium, Evanesco, Espresso Systems, The latter include Aztec Network, Zecrey, Suterusu, etc.
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Espresso Systems
Espresso Systems is a Web3 privacy solution established in 2020. Most of the core team members are from Stanford University. The first layer of blockchain it builds will use ZK-Rollups to achieve higher throughput and lower gas costs. Prioritize user privacy and decentralization.
Compared with other privacy public chains, the main feature of the project privacy solution is configurability.Specifically, the project plans to develop Ethereum Configurable Asset Privacy (CAPE) smart contract applications that allow creators of assets on the blockchain to customize who can view specific information about the ownership and transfer of those assets. Be public, private, or transparent to selected parties only. In addition to supporting the creation and packaging of ERC-20 tokens, the solution will also support NFT in the future.
The project says the solution is particularly well-suited for financial institutions or money services businesses creating blockchain-based assets, as it allows them to balance their clients' needs for privacy with the institutions' needs for risk management and compliance.
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Iron Fish
Iron Fish is committed to providing strong privacy guarantees for every transaction. Including transaction information, mining information, and wallet information are all hidden, and cannot be viewed by any second party except the private key owner.
To achieve this goal, Iron Fish built a brand new PoW network, using zk-SNARKs and Sapling protocol to provide the highest level of privacy protection for every transaction on the chain.
One of the highlights of Iron Fish is that the network hopes to protect privacy without compromising the accessibility of on-chain transactions. To this end, Iron Fish is equipped with an additional view key (view key) for each on-chain address , the address holder can grant other people read-only permission through this key.
Iron Fish aims to be a universal privacy layer for all assets in the crypto industry, building a bridge for users to transfer assets from other blockchains to Iron Fish for completely private transactions on any asset.
Currently, Iron Fish is still in the testnet stage and has launched an incentive plan. Active participants can obtain corresponding points through various contributions, and these points will be exchanged for mainnet tokens when the mainnet is released in the future.
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Aztec Network
Unlike most private networks, Aztec Network is a private transaction network built on Layer 2. The main network has been launched in November 2020.
The Aztec protocol uses zero-knowledge proofs to implement encrypted transactions on Ethereum, enabling transaction logic to be verified while maintaining anonymity and privacy.Aztec Private Rollup can hide Layer 1 DeFi transactions with only one Rollup. This privacy protection makes it impossible to track when users trade tokens, and which protocols are used to do so.
In addition, Aztec combines homomorphic encryption and range proofs, and chooses a unique scheme for encrypting data, which can quickly and effectively verify zero-knowledge range proofs, reducing the gas cost of transactions on Ethereum. Even the Aztec DeFi bridge can batch process thousands of transactions in each Rollup, saving at least 10 times the gas fee in various operations.
Since its deployment on the mainnet, there have been more than 20,000 users on Aztec. In December 2021, Aztec Connect, Aztec's privacy bridge for Ethereum DeFi, has been launched on the test network, allowing users to introduce privacy-protected zk assets on Aztec into the public DeFi protocol on Ethereum, which can save up to 100 times the gas and the default complete privacy trade. Compound will launch Aztec Network in the second quarter of this year.
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Nym
Nym is a Web3 privacy infrastructure that released the Cosmos-based blockchain mainnet Nyx in January this year, and has generated the first block for its Nym mainnet on Nyx.
Nym's privacy protection focuses on applications, wallets and blockchains, and its main technology is a mixed network (mixnet) that provides privacy protection at the network level. Metadata communicated in any internet traffic is stripped by the Nym Hybrid Network, whether broadcasting over the peer-to-peer network in encrypted transactions, or for messages sent between clients or any other type of application.
A hybrid network is a decentralized computer network arranged in a multi-layered format. Instead of sending messages over the Internet, users convert message packets into encrypted "Sphinx packets" on their own devices. The "Sphinx packet" format presents all packets as a uniform size, so they cannot be easily tracked.
At each layer of a hybrid network, computers called "mix nodes" mix a user's internet traffic with that of other users. This makes it impossible for even the most sophisticated adversaries to monitor the entire network, as they can no longer trace packets and analyze communication patterns.
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Aleo
Aleo launched an incentivized testnet on November 30 last year, and its mainnet is scheduled to go live in the third quarter of this year.Its goal is to develop a web platform that utilizes zero-knowledge proofs (ZKPs) to apply privacy to the most fundamental components of any application, namely users and transactions.The technology allows two parties on the internet, such as an application and a user, to mutually authenticate information without sharing the underlying data associated with that information. The core is to provide users and application developers with unlimited computing space and absolute privacy.
Aleo uses zero-knowledge cryptography for privacy and programmability, and uses it as the basis for a system called ZEXE (Zero-Knowledge Execution). In ZEXE, users perform state transitions offline. This process produces a proof, which is bundled into an on-chain transaction. This transaction updates the system state by consuming/creating on-chain records.
Because transactions contain only proofs, not the inputs that generated them, the system provides strong privacy guarantees. Like Ethereum, ZEXE can support smart contracts, enabling users to interact or transfer value in a predefined way.
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Secret Network
Secret Network is a privacy public chain based on the Cosmos ecology. It launched its mainnet in September 2020 and is one of the earliest blockchains to support programmable smart contracts with privacy by default.
Compared with other public chains, Secret Network ensures that transaction data remains safe and private during execution through the Trusted Execution Environment (TEE), that is, to hide the transaction history and status changes of tokens and contracts running on the network. The outside world can only view the transaction time through the block browser, and cannot know the specific transaction content and assets held (except for native SCRT), even for validators.
The only way to view encrypted information is through a set of "view keys". End users have full control over these keys, which gives them access to private transaction details so they can share them with other users or professionals such as tax authorities.
At present, the public chain has launched applications such as the cross-chain bridge Secret Bridge, the privacy DeFi protocol Sienna Network, the privacy transaction protocol Secret Swap, and the Bitcoin trustless privacy solution protocol Shinobi Protocol.
Manta released the test network Dolphin Testnet in December last year, and launched the zkSNARK-based privacy payment function DolphinPay. DolphinPay can convert assets in the Polkadot ecosystem into privacy tokens, and supports the transfer and redemption of privacy tokens.
Manta Network
Manta Network is Polkadot's ecologically focused DeFi privacy protection network, providing complete end-to-end privacy protection in the form of Polkadot parachains. Its first product, called MantaSwap, is a privacy-focused decentralized exchange.
Manta released the test network Dolphin Testnet in December last year, and launched the zkSNARK-based privacy payment function DolphinPay. DolphinPay can convert assets in the Polkadot ecosystem into privacy tokens, and supports the transfer and redemption of privacy tokens.
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Anoma Network
Anoma Network is a public chain that does not require a base currency and can use non-identical asset types for barter. It is committed to protecting users' economic sovereignty through private payments. It will launch the first public test network Feigenbaum in November 2021.Private payments and barter transactions are the two main features of Anoma.
The first is privacy payments, a project that keeps customers’ financial and transactional data anonymized no matter what assets, goods or services they wish to use, transfer or trade. In order to protect user privacy and prevent others from retroactively collecting data, the sender, receiver, amount, and asset denomination are all encrypted.
The transfer of funds is guaranteed by zero-knowledge proof, and there is a unified shielded pool shared among all assets in the transfer, not each asset is shielded individually. The more participants, the more assets, and the more frequent the transfer, which greatly increases the concealment of asset transfer data.
The second is barter. The parties to the transaction can directly barter without the need for a medium of exchange, without involving the receipt and payment of cash, and without the intervention of a third party. In addition, unlike existing financial platforms, Anoma's goal is to promote users to use arbitrary assets in the private payment process, rather than introducing specific assets as currencies.
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2. Privacy Computing Protocol
The privacy computing protocol mainly protects privacy from data generation, collection, storage, analysis, utilization, and destruction. In addition to common scenarios such as DeFi and NFT, it also plans to deeply integrate with big data and AI industries.
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. At present, the main privacy technologies include zero-knowledge proof, secure multi-party computation, federated learning based on modern cryptography, trusted execution element (TEE), etc.
It is worth noting that private computing is not a native product of the blockchain, just like distributed storage existed before the birth of the blockchain. The most fundamental difference between blockchain-based privacy computing and other types of privacy computing is that the underlying technology blockchain is decentralized and excludes trusted third parties (TTPs).
Currently well-known blockchain privacy computing networks include Oasis Network, PlatON, Phala Network, ARPA, Aleph Zero, Findora, and Deeper Network.
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PlatON
PlatON is currently a decentralized basic network for data sharing and privacy computing, connecting data owners, data users, algorithm developers, and computing power providers, and plans to use the privacy computing network, artificial intelligence market, and collaborative artificial intelligence network. A general artificial intelligence network is realized in one stage. The PlatON mainnet has been launched by the end of 2021.
The PlatON privacy solution is mainly oriented to comprehensive data flow scenarios, solving issues such as data usage rights and safe use, and supports two different types of privacy computing, one is secure multi-party computing, and the other is private outsourcing computing.
In the secure multi-party computing mode, data nodes use secret sharing to segment data and distribute it to randomly selected computing nodes. Computing nodes use a secure multi-party computing protocol for private calculations, and the calculation results are returned to the calculation result party through the blockchain smart contract.
In the privacy outsourcing computing mode, data nodes encrypt data through homomorphic encryption and distribute it to computing nodes for outsourcing computing. Computational tasks can be decomposed according to data or models. After the calculation is completed, the calculation node returns the calculation result and calculation proof, which can verify the correctness of the calculation.
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Oasis Network
Oasis Network was founded by Professor Song Xiaodong, who is known as the "Godmother of Computer Security". It was officially launched on November 19, 2020. It is one of the earliest blockchain networks with privacy protection and scalability.
The privacy of Oasis Network is mainly reflected in computing privacy. Oasis separates computing, consensus, and storage, computing nodes generate results in parallel, and submit the results to the consensus layer.
The chain is verified by the consensus layer. Since the network consensus does not require all nodes, the performance is greatly improved, and each computing node adopts TEE (Trusted Execution Environment), and any external application and underlying system cannot obtain the enclave of the node security area (enclave) execute code and sensitive data inside.
Oasis also designed a ParaTime that supports privacy smart contracts.In privacy ParaTime, nodes need to use TEE's secure computing technology. TEE acts as a hypothetical black box for smart contract execution in Privacy ParaTime.
The encrypted data goes into the black box along with the smart contract, the data is decrypted, processed by the smart contract, and then encrypted before sending out the TEE. This process ensures the confidentiality of the data and is never leaked to node operators or application developers.
Personal or sensitive data, such as IoT data such as identification documents, social security numbers, bank statements, financial and credit records, health information, internet usage data, fitness records, and location data, can all be privately protected by Oasis applications on the web.
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3. Privacy application
Privacy applications refer to applications built on Layer1 or Layer2 protocols that provide users or DApps with privacy protection functions in different application scenarios, such as transactions, payments, and emails.
According to the incomplete statistics of Chain Catcher, privacy applications include Tornado Cash, Railgun, Ruby Protocol, Shinobi Protocol, Panther Protocol, Onion Mixer, Parami Protocol, Secretswap, Shade Protocol, Dmail, Orchid Protocol, Boring Protocol, ZKCHAOS, Cyclone Protocol, Umbra, etc. .
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Automata Network
Automata Network is a decentralized service protocol that provides privacy middleware for dApps. It aims to fill the key privacy gap in the emerging Web 3.0 stack. It was launched on the main network in November last year.
The project provides extremely high privacy by combining TEE (Trusted Execution Environment) hardware with the Oblivious RAM algorithm and creating a secure space where user data cannot be viewed, changed, and accessed by third parties (including nodes in the system) Serve.
Automata Network is built on the Substrate framework and consists of three different layers. The first layer is the control layer, which is responsible for state transition, proof verification, and coordination between Geode nodes.
The second layer is where calculations take place via Geode nodes that provide a "safe space". The final service layer is for developers, who can build applications using the privacy features of Automata Network and integrate with other applications in the field without running Geode nodes themselves.
Currently, Automata's products include Conveyor, XATA, Librarian, and Witness. Conveyor is aimed at MEV-related problems, such as front-running transactions and sandwich attacks. Witness is an off-chain governance solution with built-in privacy features. A fully decentralized voting platform across different blockchains.
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Tornado Cash
Tornado Cash is a private transaction application implemented on Ethereum based on zero-knowledge proof, and it is currently the most popular privacy application on Ethereum. It uses zk-SNARK technology to send ETH and ERC20 tokens (currently supports DAI, cDAI, USDC, USDT, WBTC) to any address in an untraceable manner.
In actual use, the user needs to deposit the cryptocurrency in the privacy pool first and obtain a deposit certificate. In the future, the user can withdraw the previously deposited cryptocurrency to any address through the deposit certificate.
Since the data transferred during the generation and use of the deposit voucher does not include the voucher itself, it can be guaranteed that the two transfers of deposit and withdrawal are completely independent. In addition, due to the existence of the relay service, the Ethereum address at the time of withdrawal does not even need to have ETH to pay the transfer fee, that is, the withdrawal can be made to a completely blank address.
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4. Privacy coins
Privacy coins refer to cryptocurrencies that natively support privacy. The outside world cannot view the specific transaction types, amounts and other information between the parties to the transaction. It usually does not support smart contracts and related applications. Related projects were born as early as 2014.
According to incomplete statistics from Chaincatcher, well-known privacy coins include Monero, Zcash, DASH, Horizen, MobileCoin, BEAM, Grin, etc.
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Zcash
Zcash was born on November 9, 2011. Its full name is Zero Cash, or ZEC for short, which is commonly known as Zcash. Most of Zcash's codes are very similar to Bitcoin, with a total of 21 million pieces, but it further improves the lack of Bitcoin's anonymity function.
Zcash is the first blockchain system that uses the Zk-SNARK zero-knowledge proof mechanism to completely solve the problem of transactions being tracked and revealing user privacy. As a fork of Bitcoin, Zcash allows private transactions between parties to provide stronger guarantees for user privacy.
The difference is,Zcash transactions automatically hide the sender, receiver, and amount of all transactions on the blockchain. Only those who have the viewing key can see the contents of the transaction. Users have full control, and they can choose to make viewing keys available to others.
Currently, there are two types of Zcash transactions: transparent addresses (starting with "t") and hidden addresses (starting with "z"). If a user wishes to verify the details of a hidden address, a special access key must be shared with the parties involved. Users can also "selective disclosure", which also comes with an encrypted memo field, allowing institutions to securely attach sensitive data to transactions and make this information visible to authorized parties.
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MobileCoin
MobileCoin is a cryptocurrency designed for everyday transactions where no one can see the details of the transaction except the sender and receiver. The network went live on December 7, 2020, with Moxie Marlinspike, founder of encrypted messaging app Signal, as its earliest technical advisor.
MobileCoin adopts the consensus mechanism of "Joint Byzantine Agreement" - different verifiers decide which other verifiers they trust. When enough trusted verifier circles overlap, consensus can be reached. Such a consensus mechanism can consume less manpower and energy while ensuring transaction speed and privacy.
MobileCoin is currently connected to two major communication software, Signal and Mixin Messenger. In April last year, MobileCoin tested its payment function for Signal users in the UK.
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Monero
Monero, or Monero, is a cryptocurrency with privacy as its main highlight, founded in 2014.Monero provides private transaction services through unlinkability, untraceability, and confidential transaction amounts.
When a user sends an asset to another user, the transaction is "unlinkable" and the recipient or anyone else cannot tell who the sender is from the information in the blockchain. Unlinkability is achieved through secret addresses.
Secret addresses require the sender to create a random one-time address for each transaction on behalf of the recipient. This means that two transactions sent to the same recipient will not be associated as the same recipient. This also means that only the sender and recipient know which addresses are involved in the transaction.
Since the sender can view the recipient's subsequent transactional activity by monitoring the activity of a specific secret address, unlinkability alone is not sufficient to protect privacy. Transactions between parties must also be untraceable. In order to do this, Monero uses ring signature technology to perform transaction mixing.
V. Summary
V. Summary
In the past few years, the market has repeatedly reported that the Web3 privacy track will usher in an explosion, but at present, the privacy track is still a niche market, the number of users and usage is not high, and many people even think that privacy is a false proposition.
However, there are also many views thatPrivacy solutions are highly attractive for attracting more institutional capital to participate in the encryption ecology, ensuring that important financial data and business secrets are not leaked, so it is also an important infrastructure for the encryption ecology to usher in the next wave of explosion.
Judging from the large inflow of developers and capital, the privacy track still has sufficient time and funds. At present, most of the privacy infrastructure and applications are still under development and construction. Whether they can form a strong competition against the general smart contract platform in the future and win more users in a wide range of data usage scenarios in the future is still worthy of attention and observation .
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