On-chain privacy protocol RAILGUN is launching a ‘Private Proof of Innocence’ (PPOI) tool, allowing DeFi users to remain anonymous while proving they are not interacting with malicious actors.
This tool is designed to allow users to cryptographically prove that their tokens are legitimately sourced, without having to reveal any information about their balance or display keys.
The PPOI aims to achieve this result by using zero-knowledge (zk) technology, RAILGUN employee Alan Scott told Blockworks.
According to DeFiLlama, RAILGUN is currently one of the largest privacy protocols with a total value (TVL) of $32.6 million, second only to Tornado Cash.
With PPOI, users can use zk technology to prove their balance is 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 are only providing anonymity to other users who are unlikely to be part of that list,” Scott said. “This is really cool because it gives you certainty about the counterparty and overall systemic risk without having to deanonymize yourself or another participant.”
The concept that makes PPOI possible is not new. Vitalik Buterin previously co-authored a paper on Privacy Pools, in which he delved into possible ways a blockchain could remain private and still comply with government regulations.
The PPOI tool supports this vision at the protocol level, Scott explains. PPOI uses a data source that looks at shields from a public address and determines whether or not this money comes from an unwanted source, such as a hack or an exploit.
“Users do not interact directly with the data source. The data source then collects an exclusion list of shields,” Scott said.
Shields that are 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 in a transaction accumulator.
“An accumulator is a method of summarizing a set of values as a single value (root), where each of the individual values can be shown to belong to the set that the summary value (root) represents. If this is done in a zk-proof, something can be shown to be part of the set without revealing what individual value within the set it was,” Scott said.
This means that when a transaction is made, a user can easily generate a zk proof to prove that their transactions took place in a legal, legitimate manner.
“Funds held in the PPOI accumulator are blinded (encrypted) so that only the sender and recipient of the funds can see if they are in the accumulator, so that no outside observer can obtain data on Railgun transactions,” explains Scott out. “Since the recipient of unshields is public knowledge, anyone can check whether the unshield is part of the PPOI accumulator and therefore proven.”