The researchers from Stanford University and Visa Research have partnered in developing a privacy mechanism for Ethereum (ETH) smart contracts. A description of the mechanism was published on Stanford University’s Applied Cryptography Group website on Feb. 20.
According to the paper, the team has developed “a fully-decentralized, confidential payment mechanism.” Dubbed as “Zether”, the mechanism is consistent with both Ethereum and other smart contract platforms. Reportedly, the new smart contract could be executed individually or by other smart contracts, that maintains encrypted account balances and would enable the deposit, transfer, and withdrawal of funds through cryptographic proofs.
Furthermore, the paper claims that transactions on Zether are confidential. Enhanced confidentiality would be enabled by the option to lock funds in an account to a smart contract. The anonymity guaranteed by Zether is quite similar to Monero (XMR), the report elaborates:
“We describe an extension to Zether that can also hide the sender and receiver involved in a transaction among a group of users chosen by the sender. Though the overhead associated with anonymity scales linearly with the size of the group, no trusted set-up is needed and no changes to the underlying smart contract platform are required.”
“The Zether contract will never transfer funds without first checking an appropriate burn or transfer proof, even if the request comes from another smart contract whose rules do not permit illegal transfers. This design decision ensures that the security of Zether only depends on itself and not on any outside smart contract. Even a maliciously written or insecure smart contract cannot cause Zether to misbehave.”
The market reaction to such privacy coins that provide users with more anonymity is filled with mixed feeling, especially from the government’s side. Charlie Lee, the Litecoin (LTC) creator announced last month that he would focus on making the major cryptocurrency more fungible and private.
Lee explained that confidential transactions could be added to Litecoin through a soft fork and would be implemented “sometime in 2019.” In April 2018, Japanese regulators from the Financial Services Authority (FSA) suggested preventing cryptocurrency exchanges from trading anonymity-oriented altcoins Dash (DASH) and Monero. “It should be seriously discussed as to whether any registered cryptocurrency exchange should be allowed to use such currencies,” an unnamed member of the FSA group said.
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