Even with the advancement of blockchain technology, Less importance is given to Blockchain Privacy. It’s because very few people realize the importance of privacy on the blockchain and at the same time, none of the existing privacy projects can truly address the underlying problems plaguing the privacy of blockchain. With blockchain evolving on a faster phase along with hackers getting smarter, We need a more advanced solution to help us address the current state of privacy on the blockchain.
On January 28, 1981, the member states of the Council of Europe signed the 108 Convention, which was the first legally binding international instrument in the field of data protection, marking the beginning of the right to data privacy. After the recent recurring data breach incidents in Google, Facebook and other giants, European Union and the United States successively introduced the “General Data Protection Regulation (GDPR)” and “2018 California Consumer Privacy Act” aiming to regulate data compliance and to make sure the information is: used fairly, lawfully and transparently.
In the presence of a centralized authority and due to the presence of strong Data Protection laws, personal and asset information of individuals are safe up to a point under the centralized regime. However, when it comes to a decentralized scheme of things, privacy protection is still in the nascent stage or even non-existent.
The Fallacy of Anonymity.
When we are talking about anonymity in blockchain transactions, we need to understand, the anonymity of the blockchain networks are relative to the real world. Within the blockchain network, all asset transaction and information is completely transparent and its availability to those who wish to find it.
Due to the nature of the open ledger of the blockchain, user information was easier to track since the beginning. From a trading perspective, All centralised exchanges had to integrate a centralized mechanism to track user data and transactions which means data was open for any centralized authority or even a hacker to accesses.
As per a story carried by Decrypt, 130,000 Ethereum domain names were analysed last year. Using simple data mapping methods, a lot of prominent names from the Ethereum community was identified or in crypto terms “Doxxed”.
The analysis method employed by Decrypt was to use publicly available information such as name, social media accounts, work profile etc. The most typical example was the ENS name “bobbyong.eth” of Bobby Ong, co-founder of the blockchain data platform CoinGecko. By analysing the transaction records of the account, it was deduced that he will be participating in a conference in Osaka. This was easily tracked by following a deposit of 10 DAI made to the event’s Ethereum address. If this data falls into the wrong hands, this can compromise his personal security.
Another instance is of trader Nick Chong with Twitter ID Nick Chong. He used the data on the chain to doxx some lead Whale Wallets to analyse the buying pattern and trends. Using those pattern he made some very early trades which made his trades highly profitable.
Do you still feel happy for someone to spy on you in the same way?
The curious case of KYC
In many countries, to carry out cryptocurrency-related business, KYC controls are implemented by the regulatory authorities, otherwise, the corresponding license cannot be obtained. The KYC system has indeed played a vital role in combating money laundering and tackling various illegal criminal activities even in the cryptocurrency sector, but this does not mean that KYC is a perfect solution.
In February 2017, South Korea’s largest Bitcoin exchange Bithumb, has been fined 60 million won by the Korea Communications Commission (KCC) for allegedly leaking users’ private data. The investigation was conducted by the Korea Internet Security Agency (KISA), which revealed that Bithumb leaked 31,506 customer information in April and 3,434 customer information in June.
In an unfortunate situation, if your personal information is leaked, you will be faced with phishing attacks and it may even lead to receiving threat to you as well as your families. The best example is the recent instance where names, mailing addresses, and phone numbers for 272,000 customers of cryptocurrency wallet company Ledger was released online by hackers which even lead to various users receiving threat calls and tons of phishing messages.
These are not what you want to experience, but the existing KYC system can hardly guarantee that these instances will not be repeated. As long as the user’s private data is stored in a centralized server, or there are individuals outside the regulatory agency with management or viewing permissions, your personal privacy cannot be protected.
Current situation of privacy and its limitations
With the emergence of Dash and Monero in 2014, people prefer to use these privacy coins instead of Bitcoin in transaction scenarios that required privacy. Speculators once advocated that privacy coins are the best solution for privacy on the chain. This is true where the user uses cryptocurrencies for transactions only.
However, due to the recent surge of various DeFi Protocols, people started to uses crypto assets to participate DeFi and current solutions are not effective.
Let’s analyse some pitfalls of current privacy solutions.
Anonymous coins can only protect the privacy of transactions when there is just a sender and receiver involved. With the rise of Uniswap, many of the users started to hold and use ERC based assets such as Ethereum, DAI, USDT etc to participate in various DeFi protocols or even hold BTC as a store of value.
In these scenarios, existing privacy solutions are inadequate. Privacy in the DeFi app has almost become non-existent as there are no solutions currently available. Only when a user wants to want to encrypt a certain transaction, then he/she has to convert his assets into anonymous currencies such as XMR and then use these privacy coins to conduct his/her transactions.
The majority of ordinary users just hold, trade and transfer BTC, ETH and another host of cryptocurrency on regular basis without bothering much about privacy. Users who hold or transfer anonymous coins regularly are people who value privacy or wish to stay under the radar for positive or negative reasons.
To doxx or control the privacy coins, all regulators have to do is to prohibit all registered exchanges and wallet service providers from stopping anonymous currency-related services. This can deal a death blow to all these privacy coins, as they are heavily dependant on centralised exchanges for conversions.
Nowadays, users have realized one of the keys to privacy protection is to protect the privacy of crypto assets that they hold or uses daily basis, instead of depending upon privacy coins. With the arrival of tornado.cash, the era of privacy 2.0 arrived.
Any user can now deposit ETH into tornado.cash and can send it to a new address ensuring the privacy of his transaction. Even though tornado.cash is a great project which allows Ethereum to send 100% anonymously by breaking the on-chain connection between recipient and destination address, there are still chances to doxx the user if you can narrow the scope according to the time and the amount of deposit and withdrawal. Apart from that, tornado is based on the Ethereum main chain a user has to spend a lot of money as gas charges.
Say hi to ZKchaos-Privacy 3.0
To find a better solution to address privacy, we need the below-given features
1. Friendly operation (low gas fee, low latency)
2. Diversified scenarios (except for anonymous transaction scenarios, other high-transaction application scenarios)
ZKCHAOS is the first decentralized privacy protocol to enhance privacy for all kind of cryptocurrency through multiple fair games. It means there is a large number of transaction volume contributed by platform players, not mixers.
Based on layer2 through ZK-Rollup technology, ZKCHAOS provides unlimited scalability and privacy. It provides a high-performance anonymous trading for token holders on multi-chain, and transactions in ZKCHAOS do not require any gas fees.
Especially emphasize the disruptive innovation of diversified scenes. Whether it is an anonymous currency represented by Monero or a DeFi mixing protocol represented by Tornado. Cash, it is impossible to get out of the limitations of a single scenario.
We can easily determine that all users of privacy coins or traditional coin mixing protocols are coin mixers and condition cannot be called complete currency mixing.
Whereas ZKCHAOS uses a fair games platform as the main product of the protocol, through a large number of game players (corresponding to the number of independent addresses) and real high-frequency transaction volume (corresponding to transaction volume and lock-up volume) to create excellent shield for anonymous transaction thereby ensuring the privacy of all data on chain.
The introduction of ZKCHAOS means that privacy on the chain is completely protected, and this can usher in the Privacy 3.0 era.
We hope everyone’s privacy on blockchain can be protected. Let’s start fighting.
About ZKCHAOS
ZKCHAOS is a layer2-based anonymous transaction protocol and a fair game platform, which is built to enhance privacy for all kinds of cryptocurrency.
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