The crypto-oriented investment arm of risk capital company Andreessen Horowitz argues that modern cryptographic techniques, such as zero-keernis testing, can protect the privacy of users, but still allow law enforcement to combat poor actors.
In a report on Tuesday, A16Z Crypto Policy Partner Aiden Slaven and Regulatory Council David Sverdlov said that ZK-proofs, who verify the authenticity of data without making detailed private information, have the “biggest potential” by showing the origins of funds, but without publicly information about private information.
Their report comes only two weeks after Roman Storm, the co-founder of the Crypto Mixing Service Tornado Cash, with which users can mask the origin and destination of cryptocurrency, was found guilty of charges with regard to conspiracy to run a money without a permit.
Legal enforcement and public prosecutors in the Tornado-Cash Case argued that mixed services that obscure the origin of funds helps the criminal activity to offer a means to hide unlawfully obtained profit.
“If users can provide such evidence when exchanging Crypto for Fiat-Maluta, the cash walls will have reasonable guarantees that the crypto is not derived from the yield of crime, while users are able to maintain privacy about their onchain transactions,” said Slaven and Sverdlov.
Source: A16Z Crypto
ZK-proofs have a wide range of privacy-related use
Slaves and Sverdlov also suggest that ZK-proofs have a use that goes beyond only finances; They can help with other daily tasks, such as proving the citizenship of a country or equivalent.
“With the help of a zero knowledge certificate, a person who can prove a proposition to someone else without making a driver’s license, passport, birth certificate or other information known,” they said.
“With a zero knowledge certificate, that fact can be confirmed without exposing the specific or additional information or it is about the address, date of birth or indirect passwordhints-this can endanger privacy.”
US Securities and Exchange Commissioner Hester Peirce repeated a similar sentiment on August 4 at the Science of Blockchain conference, with the argument that privacy protection technologies must be protected.
Privacy technology ready for mainstream adoption
Critics often raise scalability problems about cryptographic privacy technology, but claims such as reducing computational overhead make it more practical for greater implementation, according to slaves and Sverdlov.
“Cryptographers, engineers and entrepreneurs continue to improve the scalability and usability of zero knowledge certificates, making them an effective tool for fulfilling the needs of law enforcement, while the individual privacy retains,” they said.
The Crypto Report of the US Government in July marked ZK-proofs as a method to protect the privacy of users and at the same time enable compliance controls. The private blockchain of JPMorgan, Nexus, also uses the technology for Tokenized Cash settlements and interbancial messages.
Related: SECs Peirce defends the privacy of transactions such as Tornado Cash Oudden Opomme
Other cryptographic privacy technology that is worth exploring
In addition to ZK-proofs, Slaven and Sverdlov said that there are other options that are worth exploring, such as homomorphic coding, a type of cryptographic technique that can use part of data, such as figures, without decoding other private info, such as names.
Other possibilities include multi -party calculation, so that several people can work together to calculate their private data to someone, and differential privacy, which ensure that aggregated data collected by methods such as surveys cannot be used to identify individuals.
“New technologies – from De Telegraaf and telephone to the internet – have always caused new fears about the upcoming downfall of privacy,” said slaves and Sverdlov.
“Block chains have turned out to be no different and privacy on block chains is often misunderstood when creating a dangerous level of transparency or a refuge for crime.”
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