Ethereum Co-founder Vitalik Buterin Collaborates on Privacy Pools Research
Ethereum (ETH) co-founder Vitalik Buterin, along with other crypto veterans, has collaborated on a research paper exploring the development of a privacy protocol called Privacy Pools. The aim of the paper is to address concerns about existing privacy platforms like Tornado Cash while advocating for the coexistence of financial privacy and regulation. The research team includes core developer Ameen Soleimani, Chainalysis researcher Jacob Illum, and academics Matthias Nadler and Fabian Schar.
Privacy Pools is a smart contract-based privacy-enhancing protocol that utilizes zero-knowledge proofs to verify user funds without revealing the complete transaction history. The objective is to establish a separating equilibrium that filters out funds associated with criminal activities while maintaining a balance between privacy and regulatory requirements.
Increasing Privacy and Filtering out Unlawful Transactions with Privacy Pools
The proposed approach allows users to publish zero-knowledge proofs demonstrating the origin of their funds without disclosing the entire transaction graph. This offers a potential solution for verifying fund legality while preserving transactional privacy.
The authors acknowledge the usefulness of platforms like Tornado Cash as privacy tools but highlight their susceptibility to misuse by illicit actors. Tornado Cash faced legal challenges last year and was blacklisted by the US Treasury Department’s Office of Foreign Assets Control.
By developing Privacy Pools, Buterin and his collaborators aim to address the concerns raised by Tornado Cash’s legal troubles while advocating for a privacy protocol that aligns with regulatory requirements.
Hot Take: Privacy and Regulatory Compliance Can Coexist
The authors of the research paper argue that privacy and regulatory compliance are not necessarily incompatible. They propose that a privacy-enhancing protocol should enable users to prove certain properties regarding the origin of their funds. This approach aims to bridge the gap between privacy and regulatory requirements.
Addressing Centralization Challenges in the Ethereum Network
Vitalik Buterin has recently acknowledged that the centralization of nodes poses a significant challenge for the Ethereum network. Most active Ethereum full nodes are currently run on centralized platforms like Amazon Web Services (AWS). Buterin hopes that in the future, fully verified Ethereum nodes can be run on mobile devices, which would contribute to making Ethereum more decentralized.
Hot Take: Solving the Centralization Issue for More Decentralization
Buterin considers solving the centralization issue of full nodes as a crucial aspect of making Ethereum more decentralized. He believes that overcoming this challenge is a significant piece of the puzzle in achieving greater decentralization in the Ethereum network.
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