Today we are excited to announce a partnership between RealBlocks and AZTEC, a zero-knowledge privacy protocol, that will enable private, permissioned, and compliant private offerings on a public blockchain. We firmly believe that privacy is an essential pillar for mainstream adoption of blockchain technology by traditional firms, and we are ecstatic to be partnering with a leader in the space.
The Importance of Privacy in Public Blockchains
Previously, public blockchains have been criticized over their lack of privacy, but the RealBlocks solution will allow for privacy while still benefiting from the inherent network effects of building on a public ecosystem. Using our peer-to-peer bulletin board, users will be able to trade amongst themselves in a completely anonymous manner. Publicly verifiable smart contracts will ensure that regulations, such as the 2,000 investor limit, are maintained. You can think of this as a new-age ‘black box model’ — all the happenings inside the system are private, but the actual workings of the system are publicly verifiable. Having this kind of technology is critical for trustless, compliant, international markets to exist.
Imagine for a second a world where High-Frequency Traders couldn’t magnify sell-offs simply because a certain amount of stock was sold, or any kind of change caused by non-material company events! This arguably makes the value of the underlying more honest. Front-running (buying or selling for one’s own account based on advance knowledge of client orders for a security) is also stymied by our solution since the AZTEC protocol masks the trading amounts to anyone not directly involved in the exchange — it could be a transaction for $1 or $1 billion and no one would be the wiser.
This is especially important in the institutional trading world which normally relies on dark pools to make sure large orders aren’t exposed before completed. Funds on either side can be confirmed trustlessly without signaling anything to the general network, so the RealBlocks system will help by making sure buyers and sellers can only post honest intents (ie. a potential buyer can’t post an offer to buy $1 million in shares unless they have $1 million ready in their wallet). We plan to also extend this concept in the future to the idea of ‘permissioned liquidity’ which would allow a user to send an intent across different exchanges through partnerships with RealBlocks. This will ultimately lead to more efficient counterparty discovery and reduced information leakage for all involved.
Industry transformation is just as much about timing as the actual tech, and for finance this is why Zero Knowledge Proofs (ZKPs) are so important. Being able to trustlessly confirm using math that I have something (20 shares of X) without revealing that info to the world is the ultimate gift that ZKPs grant us, and AZTEC is the team we feel best poised to make this consumable at an international level.