The myth of the privacy of Bitcoin has long been debunked. On the guard of anonymity are cryptocurrencies such as Monero, Dash, Verge, and Zcash (it was Edward Snowden who singled out Zcash as the most interesting cryptocurrency due to its "really unique" privacy characteristics). The proverbial "King" does not suffer because of such a distribution of roles, as his loyal subjects appreciate him for other qualities. In addition, a lot of mixers and anonymization applications that "mix" coins from various transactions and send the right amount of coins (no longer tied to the user’s wallet) to the specified address can achieve a high level of anonymity even when using Bitcoin.
Ethereum is taking a different position on the issue of privacy, however, and this is partly due to the specifics of its application. Today, Ethereum has 1,763 decentralized applications, many of which are interested in the privacy of transaction data. In February 2017, the consortium Enterprise Ethereum Alliance (EEA) was formed, one of the main tasks of which is to adapt the public blockchain of Ethereum for corporate use. In early May, the EEA presented the first results regarding the standardized architecture of Ethereum applications. At the same time, executive director of the consortium Ron Resnick said that the "largest internal dispute" in the EEA was about the aspect of privacy, namely, how much information should be transmitted in each particular case. One of the members of the consortium, the financial holding company JPMorgan Chase, implemented in its corporate blockchain the zero-knowledge proof protocol, which underlies the Zcash cryptocurrency. The EEA has not yet presented standardized mechanisms for protecting privacy. "There are various ways to implement this idea. It can happen in the core network or offline or both," Resnick said, also noting that JPMorgan is actively involved in development.
In the meantime, five more projects are ready to offer Ethereum their services to increase privacy.
Secret Storage Parity
In May, the second most popular Ethereum client, Parity, introduced the functionality of private transactions, which allow users to create encrypted smart contracts. Such transactions have the characteristic of exclusivity, that is, only a limited number of approved participants have access to their status, among which keys are distributed. "Private transactions are essentially smart contracts, both the code and the state of which are encrypted. First, the transaction is sent offline to a certain number of validators (set by the contract), and they all have to come to an agreement on a new state. Then, you take a new encrypted state with the signatures of all the validators and update the status on the blockchain. Separation of keys is carried out through a cryptographic scheme that allows a number of parties to securely receive key parts from a place that we call a secret repository," explained a Parity developer on Reddit.
Withdrawal allows working with the contract in the real main network, while not revealing its data and status to all users of the blockchain. Jutta Steiner, CEO of Parity Technologies, notes that the new software encrypts both the storage and the smart contract code, that is, provided that you trust the selected key holders, "it ensures the privacy of any transaction that the contract models and performs."
In May, Steiner reported that the secret storage software was already being tested in partnership with an international pharmaceutical company that used it in supply chains. And on July 25, Parity published a tutorial describing how to configure a secret repository using three nodes.
"I believe blockchain is in itself powerful, but it becomes even more interesting when you combine it with other cryptographic technologies that allow you to build this eventually perfect anonymous computer, global computer, that you can rely on, that's fast," Steiner said in a conversation with Coindesk.
Secret Enigma Contracts
Enigma is a privacy protocol for creating decentralized applications with secret account functionality that allows users to share sensitive information with third parties without compromising data and protecting it from government surveillance or exposure as a result of hacker attacks or leaks. Co-founder of Enigma Can Kisagun believes that Ethereum startups developing solutions in the sphere of voting, geolocation, social media, and identity suffer from the radical transparency of the blockchain, while Enigma technology "allows creating truly decentralized and secure applications while solving the privacy problem.”
According to the members of the project, "the critical component for the success of the "smart economy" and the blockchain is the ability of decentralized applications to analyze data, keeping it completely private.” The solution offered by Enigma is a second-level solution, an offline network using "secret contracts" that hide data from network nodes. The concept of "safe computing" is implemented in the mechanism of secret contracts along with a set of technologies that allow performing calculations using encrypted data.
"This can be imagined as a black box. You send data, it falls into the black box, and only the result goes back. Real data is never disclosed neither to the outside nor to computers that perform computation internally," says Guy Zyskind, a member of the MIT Media Laboratory and CEO of Enigma.
Enigma encrypts the data, splitting it into several components and randomly distributing it to hundreds of network nodes. Then each node performs calculations based on its received data block, and eventually, only the data owner can combine the results of the calculations by decrypting them using the decryption key.
Oz Nathan, a member of the Enigma team, believes that guaranteed privacy will encourage application users to disclose more personal information: "No one wants to give their data to a company without knowing what they will do with it," says Nathan.
Secrets with a Time Lock
Kimono is a privacy project that seeks to combine encryption with game theory. It was created in May at the 36-hour Ethereum hackathon held in Argentina.
Kimono uses the Shamir secret sharing scheme, a cryptographic algorithm of "recoverable secrecy" that allows information sharing between participants so that the decryption is possible when data is combined from all participants and combines it with an incentive system that is responsible for allowing the participants to disclose data at the established time. If users try to deceive the system by forging data or opening it too soon, they are fined.
"We see the concept of time locking as an important primitive and we would like to improve it and get it to a level where it's actually truly decentralized and trustless," said Feridun Mert Celebi, one of the creators of Kimono. In his view, the incentive scheme can be extended so that time is not the only variable that "frees up" the secret—that it can also be revealed after a certain event or after a series of conditions performed on the blockchain.
At the moment, the software is launched in the test network mode of Ethereum, the Rinkeby.
The proposal to improve Ethereum EIP-1024 belongs to the developer Tope Alabi and is another way of encrypting data. "EIP-1024 allows you to generate a pair of encryption keys using your private Ethereum key. Then, this new pair of encryption keys can be used to securely transfer data to any Ethereum address," Alabi said in a conversation with CoinDesk.
In this case, if this proposal is accepted, it will spread its influence over the entire Ethereum network. "This means that application developers do not have to worry about developing mechanisms for different implementations of encryption. They can just deal with their application," Alabi said.
In his opinion, solving the privacy problem will ensure the inflow of "the next billion users to the blockchain. In a world of lock-up where your public and private keys are essentially your digital identity, you need a way to transfer sensitive information so that it cannot be censored by any centralized authority, "Alabi emphasizes.
The latest proposal to improve the privacy of Ethereum was presented during the Symposium on Privacy Technology (PETS), held last week in Barcelona.
It is assumed that Mobius will increase anonymity without traditional compromises in the form of increasing the cost of transactions or the requirements for increasing the amount of memory. Transactions using Mobius are only slightly more expensive than standard Ethereum transactions (according to the simulation, about $0.06), and their execution takes milliseconds.
Mobius will be able to hide the addresses of the sender and the recipient and implement new functionalities in a cryptographically unrestricted manner. Technically, this functionality is implemented in the cryptographic mechanism of the ring signature, as it allows users to hide payment information by mixing the payment data of all the participants of the Mobius contract and, in effect, acting on the principle of a mixer. At the same time, the new project promises not to have the drawbacks inherent in decentralized mixer services, which require most of the offline processes or perform many actions on the blockchain itself, which slows down the processing of transactions and raises fees.
Stealth keys are also implemented in Mobius, a kind of shaded-but-confirmed addresses that allow Mobius contracts to communicate securely (send transactions to each other and exchange information).
The solutions implemented in Mobius have already been compared to Monero's privacy technology, which also uses ring signatures and a one-time stealth address system.
While the technology is not available to users of Ethereum, but the plan for the implementation of Mobius was published by the British blockchain startup Clearmatics and, according to Rebekah Mercer, co-author of the white paper of Mobius, its implementation in Ethereum is not technically complicated. "Clearmatics has full code, that is, you can literally just paste it into the Ethereum blockchain system. They also have manuals, so it's pretty well developed," Mercer said in a conversation with Coindesk.
Mercer said that at the moment, however, she does not know about any attempts to introduce Mobius into the public blockchain of Ethereum. And, in her opinion, this is surprising, since the demand for Bitcoin mixers is quite high.
Mercer suggested that the reason for the low interest in the mixer service for Ethereum is that the implementation of payments is not the main application of Ethereum: "I think this is due to the way Ethereum is used today. This is not what people expect. People do not plan to use Ethereum for private transactions. It's just not its thing yet. It's for decentralized applications, companies, traders, and crypto kittens," she told Coindesk.
Mercer also admits, however, that Mobius is not so convenient from the point of view of user experience at the moment: "I think for mass adoption, we need a user interface that will simply select the anonymity settings, and the backend will check if you made a mistake and then you can simply carry out the transaction in one click," says the researcher.
And although Mercer doubts the popularity of the anonymizers for Ethereum, "anonymous Ethereum" has very influential supporters. "I'm considerably more pro-privacy than I was a few years ago," Vitalik Buterin wrote in May on Reddit, and therefore, there are reasons to believe that the efforts of privately-oriented projects (at least some of them) will find their users.