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This Is Great for Ethereum Privacy! (A Little Too Great in the Eyes of Law Enforcement)

TL;DR

  • Ethereum co-founder Vitalik Buterin has co-authored a new research ​paper​ exploring 'privacy pools.'

  • Vitalik's soultion? 'Privacy pools,' where users put their ETH into a big shared account and it all gets mixed around (muddying the origins of each token/fraction of a token).

  • Sounds great! But good luck getting the Department of Justice to give it the green light - because as far as we can tell, it's still un-auditable.

  • Moral of the story: This is great for privacy! (A little too great in the eyes of law enforcement).

Full Story

Ethereum co-founder Vitalik Buterin has co-authored a new research ​paper​ exploring 'privacy pools.'

...but what does that even mean??

First, for those of you playing at home: all Ethereum transactions are public. If someone knows your ​wallet​ address (aka 'the crypto version of your Venmo username') they can track everything.

Vitalik's soultion?

'Privacy pools,' where users put their ETH into a big shared account and it all gets mixed around (muddying the origins of each token/fraction of a token).

Then, when users want to take their ETH out - the system checks that the funds aren't being sent to (or from) a known criminal wallet address.

To which we say:

Sounds great! But good luck getting the Department of Justice to give it the green light - because as far as we can tell, it's still un-auditable.

Meaning, as long as you don't have existing public connections to a criminal wallet, you could still use the system to hide/launder money - and there's no central authority that the IRS could force into giving up your account details.

Moral of the story:

This is great for privacy! (A little too great in the eyes of law enforcement).