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🕵️♂️ 𝗣𝗥𝗜𝗩𝗔𝗖𝗬 𝗠𝗘𝗖𝗛𝗔𝗡𝗜𝗦𝗠 𝗜𝗡 𝗗𝗘𝗙𝗜;
You might have been seeing “PRIVACY” narrative but actually wondering what it’s all about? Let me walk you through.
Privacy tokens are cryptocurrencies which allow users to conduct transactions privately and anonymously - 𝗔𝗻𝗼𝗻𝘆𝗺𝗶𝘁𝘆 𝗶𝘀 𝗽𝗿𝗶𝗼𝗿𝗶𝘁𝗶𝘇𝗲𝗱.
This ensures untraceable transaction and identity of the parties involved are kept private!
𝗧𝗵𝗲 𝗽𝗿𝗶𝘃𝗮𝗰𝘆 𝗺𝗲𝗰𝗵𝗮𝗻𝗶𝘀𝗺 𝘂𝘀𝗲𝗱 𝗶𝘀 𝗭𝗞𝗣;
You might be wondering, what’s ZKP?
ZKP is zero knowledge proof allows one party called the 𝗣𝗥𝗢𝗩𝗘𝗥 convince another called the 𝗩𝗘𝗥𝗜𝗙𝗜𝗘𝗥 that a statement is true without actually revealing the underlying information;
For better understanding; “Proving you know a password without revealing it to the third party”
The main mechanism used in privacy is the;
𝘇𝗞 𝗦𝗡𝗔𝗥𝗞𝗦 𝗮𝗻𝗱 𝘇𝗞 𝗦𝗧𝗔𝗥𝗞𝗦
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;
📍 𝗖𝗢𝗠𝗣𝗨𝗧𝗔𝗧𝗜𝗢𝗡 𝗠𝗢𝗗𝗘𝗟
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 what’s zK STARKS and zK SNARKS;
They’re the foundational in zero knowledge cryptography for blockchain scalability and privacy.
Another mechanism used is;
𝗦𝗵𝗶𝗲𝗹𝗱𝗲𝗱 𝗣𝗼𝗼𝗹𝘀
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 pool’s state commitment is updated using Merkel tree.
Also the great @TornadoCash use this mechanism.
Another interesting mechanism;
𝗛𝗼𝗺𝗼𝗺𝗼𝗿𝗽𝗵𝗶𝗰 𝗘𝗻𝗰𝗿𝘆𝗽𝘁𝗶𝗼𝗻 (𝗛𝗘)
It’s 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 it’s very low because this was part of the great idea of $BTC - 𝗔𝗻𝗼𝗻𝘆𝗺𝗶𝘁𝘆.
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