blockworks.co
On-chain privacy protocol RAILGUN will be launching a “Private Proof of Innocence” (PPOI) tool, enabling DeFi users to remain anonymous whilst simultaneously proving that they do not interact with malicious actors.
This tool is designed so users can cryptographically prove that their tokens are legitimately sourced without having to reveal any information about their balance or viewing keys.
The PPOI aims to achieve this outcome through using zero-knowledge (zk) technology, Alan Scott, a RAILGUN contributor, told Blockworks.
According to DeFiLlama, RAILGUN is one of the largest privacy protocols today with a total value locked (TVL) of $32.6 million, second only to Tornado Cash.
With PPOI, users can use zk technology to prove that their balances are not part of known malicious transactions, but also not reveal any information about themselves, Scott said.
Read more: Aleo blockchain adds zPass, a ZK protocol for verifying identities
“This way, they can be confident that they’re only providing anonymity to other users that are probably not a part of that list,” Scott said. “This is really cool because it allows you to get assurance of counterparty and overall system risk without needing to deanonymize yourself or any other participant.”
The concept that PPOI enables is not new. Vitalik Buterin previously co-authored a paper on Privacy Pools, which delved into possible ways a blockchain could remain private whilst complying with government regulations.
The PPOI tool grants this vision at a protocol level, Scott explained. PPOI uses a data source that looks at shields from a public address and determines whether or not these funds originated from an undesirable source, such as a hack or an exploit.
“Users do not interact with the data source directly. The data source will then collect an exclusion list of shields,” Scott said.
Shields not included in the exclusion list or are not pending a decision will be added to a PPOI accumulator. It also accumulates transactions that have occurred in the system and accumulates them into a transaction accumulator.
“An accumulator is a method of summarizing a set of values as a single value (root) where it can be shown that any of the individual values belong to the set that the summary value (root) represents. If this is done in a zk proof, it can be shown that something is part of the set without revealing which individual value within the set it was,” Scott said.
This means that when a transaction is performed, a user can easily generate a zk proof to show that their transactions occurred in a legal, legitimate way.
“Funds that are in the PPOI accumulator are blinded (encrypted) such that only the sender and receiver of the funds can see if they are in the accumulator, ensuring no external observer can gain any data about Railgun transactions,” Scott explained. “Since the receiver of unshields is public knowledge, anyone can check that the unshield is part of the PPOI accumulator, and is therefore proved.”