This article explores whether the ETH main network can realize private transfer

Original editor: Colin Wu

Original editor: Colin Wu

Previously, ETH developer Tim Beiko wrote that he hoped that ETH L1 could realize the privacy function instead of relying on third-party applications such as Tornado Cash or L2 applications such as zkMoney. Scheme's Ethereum Puzzle".

Previously, Tornado Cash was sanctioned by OFAC, and zkMoney was also affected by it. It can be seen that third-party applications are more likely to be reviewed and supervised by centralized institutions. In contrast, if private transactions occur on the ETH main network, the only way to prevent transactions is not to package them on the chain, which requires controlling all ETH nodes, and the difficulty increases significantly.

policy

policy

The discussion on censorship resistance became more intense after ETH completed the Merge, because in the PoW period, ETH, like BTC, is a "mineral" resource rather than an interest-bearing asset. However, after converting to PoS, ETH can automatically generate interest, which has the property of securities, so centralized institutions such as OFAC have more reasons to take censorship measures. But even so, heightened scrutiny doesn't mean on-chain transactions can't be done.

There are two ways to review. The first one is to not allow some non-compliant transactions to be uploaded to the chain, which means that some centralized node service providers will reject your submitted transactions. But not all nodes are under the control of regulators. As long as you can wait patiently, you can eventually be packaged and uploaded to the chain by unsupervised nodes. Unless a node's ETH pledge exceeds 50%, which obviously violates the underlying logic of the blockchain. If so, ETH is not only facing the problem of being unable to resist censorship.

The second is to install software with censorship capabilities on MEV repeaters. Previously, developer Micah proposed at the 145th ACD meeting that relayers operated by Flashbots censor ETH addresses. But most developers are opposed to this and support the establishment of non-censorship relays, such as Bloxroute proposes to build a censorship-resistant relay for validators. Therefore, the final result is similar to the first case. As long as validators still choose censorship-resistant relayers, it is only a matter of time before even non-compliant transactions are finally recognized.

technology

technology

The privacy payment function has long been realized on the blockchain based on the UTXO model or on third-party applications, but it has never appeared on ETH L1. The main reason is the commonplace network performance problem. The blockchain based on the account model needs to consume a lot of gas to achieve privacy functions, so ETH developers have always placed their hopes on L2 (mainly ZK technology) for this task.

In early August, Nerolation proposed a privacy solution in the community based on Vitalik's "stealth address" proposal: EIP-5564. This EIP defines a solution for creating stealth addresses for smart contract wallets, thus more suitable for account-based blockchains. According to the scheme, only the recipient can figure out the matching private key, and only they can unlock the private address. Also, no one else can link to the recipient's private address to learn their identity. Currently, the EIP is still in draft status.

Another solution is to borrow the crList function of Danksharding. crList is an anti-censorship list, and the verifier must prove that all transactions in crList are included in the block, otherwise the block will be deemed invalid. This Proposer/Builder separation (PBS) scheme increases the cost of censorship, and for nodes that have to exclude a portion of transactions every time, it will lose a lot of MEV revenue. This approach does not rely on altruism and is economically more sustainable.

With the current technology, ETH L1 can realize simple privacy payment, but more complex functions need to wait until the realization of Danksharding technology. In addition, the biggest challenge in the future is not technology, but regulation. At present, complete decentralization and anti-censorship may only be utopia. If the blockchain ecology wants to further develop, it must involve traditional financial institutions and large investors. Therefore, embracing supervision is the only way out for ETH. However, this does not mean that ETH will be fully under regulatory control. Even non-compliant transactions can eventually be recognized unless the "power person" has 51% attack capabilities. This is not only based on an idealized consensus based on the community, but also based on self-interest that is more in line with economic principles.