Open-source research project Privacy Pools and forked successor of coin mixer Tornado Cash, was deployed on the testnet of layer 2 scaling system Optimism this weekend.
Privacy Pools and Tornado Cash Fork are Deployed on Optimism Testnet
Like Tornado Cash, Рrivacy Рools provide users to transact anonymously, but the key difference between the two privacy tools has to do with how Рrivacy Рools use zero-knowledge proofs to prove that funds in anonymous transactions are not linked to criminal activity.
In August 2022, Tornado Cash, a popular privacy tool on the Ethereum blockchainwas sanctioned by the US Treasury Department’s Office of Foreign Asset Control (OFAC) for its role in money laundering operations in North Korea. In addition, Tornado Cash web developer Alexey Pertsev was arrested the same week.
Although OFAC sanctioned Тornado Cash, making it illegal for US citizens to use coin mixer, Тornado Cash is averaging $7.87 million in deposits and $5.97 million in withdrawals per week in 2023, and “on track to anonymize about $250 million in 2023,” said Privacy Pool developer Ameen Soleimani
Рrivacy Рools has a key difference from Тornado Cash: it allows users to prove their funds are not linked to criminal activity such as North Korea’s $625 million hack on play-to-earn gaming company, Axie Infinity.
According to the protocol’s Github technical documents, “Users can voluntarily remove themselves from an anonymity set containing stolen or laundered funds … This design aims to be a crypto-native solution that allows the community to defend against hackers abusing the anonymity of honest users without requiring blanket regulation or sacrificing on crypto ideals.”
With Privacy Pools, users deposit their funds into a common pool and withdraw their funds to a new wallet address that cannot be traced back or linked to a previous transaction history. Users use zero-knowledge proofs that allow for information to be verified, such as a transaction on a blockchain, without revealing the specific details of the transaction.
As more people turn away from anonymity sets with stolen or laundered funds, the number of sets available to hackers and attackers is shrinking.
“The protocol gives users the ability to help regulators isolate funds without disclosing their entire transaction history. This is an opportunity to prove the ingenuity of the crypto community to self-regulate and to showcase the awesome power of zero-knowledge proofs.” – Soleimani said
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