Financial privacy with Ethereum?

keokeo Member Posts: 21
How should a Dapp handle privacy of irs users?

With Bitcoin if you have a BIP32 wallet you do not expose your entire history to the party you're dealing with, just a few addresses maybe.

As Ethereum uses accounts, how does one protects its transactional privacy?
As soon as two parties interact with eachother they become aware of the other party's account nr.

Would love to see how this should solved.


  • nejucomonejucomo Member Posts: 40
    Nothing I've seen in Ethereum's overall design protects account confidentiality. The history of interactions with other accounts, including all transactions/calls with all data, the account balance, and any contract state/code are public. This is not a problem addressed by Ethereum 1.0.

    However, we may see various mechanisms spring up similar to the Bitcoin ecosystem to unlink accounts. This is complicated by the presence of stateful contracts.

    There are a few avenues in cryptography that might be helpful for confidentiality needs on Ethereum, such as "obfuscation" and "zero-knowledge proofs". The former is not yet practical, AFAIK, and the latter is just reaching practicality (see zerocash).

    If I understand the guarantees of cryptographic program obfuscation, those techniques would allow upload of obfuscated contract code which could contain secret state used for public computation, despite the fact that all miners/verifiers see "the code" and execute the computation, they would not be able to recover the secret state. I'm not aware of any mechanism, ATM, for mutating or updating that secret state.

    Non-interactive zero-knowledge proofs (NIZKs) could be used when secret state lives off of the blockchain, but the holder of that secret state needs to publicly prove that they've mutated that secret state according to public code, so they can achieve a similar affect at the cost of off-chain "oracles" that hold the secret (but are constrained to following publicly verifiable smart contracts).
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