Building and maintaining privacy is a complex proposition involving diligence on a number of potential attack vectors.
Privacy is a human right that must be maintained in our efforts to build an open, decentralized financial system.
Fortunately, the DeFi and greater Ethereum communities recognize that built-in-privacy is critical to the development of a decentralized ecosystem.
Here are 5 of the projects building and defending privacy in the Ethereum ecosystem:
5. Ramp
Moving money between fiat and cryptocurrency remains one of the major obstacles for those wanting to maintain their privacy while using digital assets.
Cryptocurrency users who value their privacy will likely be familiar with LocalCryptos, rebranded from LocalEthereum, the Ethereum-focused version of the (in)famous LocalBitcoin.
LocalCryptos and LocalBitcoin provide location-based message boards (similar to Craigslist) that enable users to meet up and trade cryptocurrency for cash in real life.
Unlike LocalCryptos or LocalBitcoin, Ramp provides a simple, peer-to-peer application for purchasing cryptocurrency with fiat.
The solution leverages a decentralized escrow system that uses payment oracles to verify the submission of digital assets to a smart contract and fiat currency to a wire transfer.
Once the oracle verifies the wire transfer, it releases the digital assets from the smart contract and sends them to the recipient.
While decentralized exchanges have come a long way in terms of sourcing liquidity and providing usable interfaces, centralized exchanges remain one of the few options that many have for obtaining digital assets.
Having bridges between cryptocurrency and the traditional financial system that minimize the amount of personal information and potential reporting required to facilitate transactions is an important step toward enabling the private use of digital assets.
Link: https://www.ramp.network/
4. Tornado.Cash
Tornado Cash facilitates privacy in transactions by breaking the chain (pun intended) between sending and receiving addresses.
The non-custodial solution consists of a smart contract that uses zkSNARKS to create a list of “IOUs” (I owe you), obscuring the address depositing funds to the smart contract from the address withdrawing funds from the contract.
According to the project’s documentation,
“To make a deposit user generates a secret and sends its hash (called a commitment) along with the deposit amount to the Tornado smart contract. The contract accepts the deposit and adds the commitment to its list of deposits.
Later, the user decides to make a withdrawal. In order to do that, the user should provide a proof that he or she possesses a secret to an unspent commitment from the smart contract’s list of deposits. zkSnark technology allows that to happen without revealing which exact deposit corresponds to this secret.”
Link: https://tornado.cash/
3. Mixicles by Chainlink
Mixicles are decentralized financial instruments that take payments from two or more parties and facilitate payouts based on data provided by oracles described in a white paper published by ChainLink.
Chainlink focuses on creating oracles to bridge on- and off-chain data but the company realizes the critical role of privacy in developing decentralized infrastructure.
The company released a white paper in September 2019 describing Mixicles:
“Mixicles ingest input payments from two or more parties and yield payouts that are conditioned on oracle reports. They are designed to provide privacy for both the terms and outcomes of the financial instruments they execute.”
Chainlink technical advisors Ari Juels and Lorenz Breidenbach and fellow authors Alex Coventry, Sergey Nazarov, Steve Ellis, and Brendan Magaura do an effective job explaining what makes privacy so important:
“In today’s complex capital and derivatives markets, privacy is both a given and a legal requirement of most contracts. The reasons for privacy are varied, but often involve protecting against adversarial trading or undesirable market events resulting from specific contract terms becoming public. Meaningful confidentiality in on-chain financial instruments must extend to transactions, oracle queries, and oracle reports.”
Link: https://chain.link/mixicles.pdf
2. AZTEC Protocol
AZTEC team provides an API and other developer tools for integrating privacy-enabled features into Ethereum dApps.
Features include the ability to privately send, mint, burn, swap, and issue dividends of digital assets.
In addition to being used in Plutus DeFi’s coming Lend & Earn application, AZTEC is used by RealBlocks to tokenize shares of real estate funds, to enable Carbon’s private, fiat-backed stablecoin, and to enable private trading on Ren’s decentralized darkpool.
(Full disclosure: AZTEC Protocol is a partner of Plutus DeFi)
1. Enigma Protocol
Enigma Project consists of an open-source protocol for performing decentralized computation on encrypted data.
Instead of focusing on enabling privacy with regard to addresses and transactions, Enigma enables privacy at the smart contract layer by providing a platform that allows dApps to use private data.
The protocol distributes encrypted data across “secret nodes” on the Enigma network, which perform computations on the data without seeing or exposing the data itself.
Link: https://enigma.co/
Conclusion
Enabling privacy is a constant battle as technologies and the way those technologies are exploited continue to evolve.
Plutus DeFi is on a mission to bring privacy to decentralized finance (DeFi) and we couldn’t do it without the incredible support of our community.
To advance our efforts, we’re proud to be work alongside DeFi leaders like AZTEC team, Nexus Mutual, Fortmatic, dydx, Compound, and Nexo.
What are your favorite projects leading the charge to defend privacy? Join the conversation on Telegram.
Want some privacy in your DeFi solution? Sign up for Early Access to beta test our anonymous lending application. 😀
