๐ต๏ธโโ๏ธ ๐ฃ๐ฅ๐๐ฉ๐๐๐ฌ ๐ ๐๐๐๐๐ก๐๐ฆ๐ ๐๐ก ๐๐๐๐;
You might have been seeing โPRIVACYโ narrative but actually wondering what itโs all about? Let me walk you through.
Privacy tokens are cryptocurrencies which allow users to conduct transactions privately and anonymously - ๐๐ป๐ผ๐ป๐๐บ๐ถ๐๐ ๐ถ๐ ๐ฝ๐ฟ๐ถ๐ผ๐ฟ๐ถ๐๐ถ๐๐ฒ๐ฑ.
This ensures untraceable transaction and identity of the parties involved are kept private!
๐ง๐ต๐ฒ ๐ฝ๐ฟ๐ถ๐๐ฎ๐ฐ๐ ๐บ๐ฒ๐ฐ๐ต๐ฎ๐ป๐ถ๐๐บ ๐๐๐ฒ๐ฑ ๐ถ๐ ๐ญ๐๐ฃ;
You might be wondering, whatโs ZKP?
ZKP is zero knowledge proof allows one party called the ๐ฃ๐ฅ๐ข๐ฉ๐๐ฅ convince another called the ๐ฉ๐๐ฅ๐๐๐๐๐ฅ that a statement is true without actually revealing the underlying information;
For better understanding; โProving you know a password without revealing it to the third partyโ
The main mechanism used in privacy is the;
๐๐ ๐ฆ๐ก๐๐ฅ๐๐ฆ ๐ฎ๐ป๐ฑ ๐๐ ๐ฆ๐ง๐๐ฅ๐๐ฆ
zK SNARKs and zK STARKs are the main family of ZKP;
Using
$ZEC and
$NPT as an example to explain zK SNARKS and zK STARKS;
๐ ๐๐ข๐ ๐ฃ๐จ๐ง๐๐ง๐๐ข๐ก ๐ ๐ข๐๐๐
For
$ZEC they use the zero knowledge (zK) SNARKs which is fitted to the current model of computation in which there is a direct relation between the input to output ratio proven.
For
$NPT they use zK STARKs which is fitted to the state machine model of computation.
You might be wondering whatโs zK STARKS and zK SNARKS;
Theyโre the foundational in zero knowledge cryptography for blockchain scalability and privacy.
Another mechanism used is;
๐ฆ๐ต๐ถ๐ฒ๐น๐ฑ๐ฒ๐ฑ ๐ฃ๐ผ๐ผ๐น๐
A shielded pools is a smart contract that that holds funds in privacy layer, making transactions inside it unlikable;
How does a shielded pools works?
When a user deposit liquidity in a pool their tokens are immediately converted into a private note or private commitment and any transfer made in the pool are hidden and untraceable using ZKPs.
@RAILGUN_Project uses shielded pools, you can check them out to learn more :)
Quick way how it works;
- Verify the sender has enough balance privately
- Generate proof of validity
- Then the poolโs state commitment is updated using Merkel tree.
Also the great
@TornadoCash use this mechanism.
Another interesting mechanism;
๐๐ผ๐บ๐ผ๐บ๐ผ๐ฟ๐ฝ๐ต๐ถ๐ฐ ๐๐ป๐ฐ๐ฟ๐๐ฝ๐๐ถ๐ผ๐ป (๐๐)
Itโs a type of encryption that that allows computation on encrypted data as to allow the protocol perform operations like yield calculation without decrypting the balance.
This simply allows DAPPs to handle confidential data secured
A good example of protocol that uses this mechanism is
@fhenix
Privacy is a $6B mcap sector in DeFi currently and I believe itโs very low because this was part of the great idea of
$BTC - ๐๐ป๐ผ๐ป๐๐บ๐ถ๐๐.