Paper 2023/710

PriFHEte: Achieving Full-Privacy in Account-based Cryptocurrencies is Possible

Abstract

In cryptocurrencies, all transactions are public. For their adoption, it is important that these transactions, while publicly verifiable, do not leak information about the identity and the balances of the transactors. For UTXO-based cryptocurrencies, there are well-established approaches (e.g., ZCash) that guarantee full privacy to the transactors. Full privacy in UTXO means that each transaction is anonymous within the set of all private transactions ever posted on the blockchain. In contrast, for account-based cryptocurrencies (e.g., Ethereum) full privacy, that is, privacy within the set of all accounts, seems to be impossible to achieve within the constraints of blockchain transactions (e.g., they have to fit in a block). Indeed, every approach proposed in the literature achieves only a much weaker privacy guarantee called $k-$anonymity where a transactor is private within a set of $k$ account holders. $k-$anonymity is achieved by adding $k$ accounts to the transaction, which concretely limits the anonymity guarantee to a very small constant (e.g., $~$64 for QuisQuis and $~$256 for anonymous Zether), compared to the set of all possible accounts. In this paper, we propose a completely new approach that does not achieve anonymity by including more accounts in the transaction, but instead makes the transaction itself ``smarter''. Our key contribution is to provide a mechanism whereby a compact transaction can be used to correctly update all accounts. Intuitively, this guarantees that all accounts are equally likely to be the recipients/sender of such a transaction. We, therefore, provide the first protocol that guarantees full privacy in account-based cryptocurrencies PriFHEte The contribution of this paper is theoretical. Our main objective is to demonstrate that achieving full privacy in account-based cryptocurrency is actually possible. We see our work as opening the door to new possibilities for anonymous account-based cryptocurrencies. Nonetheless, in this paper, we also discuss PriFHEte's potential to be developed in practice by leveraging the power of off-chain scalability solutions such as zk rollups.