Hey friends 👋
At the time I’m writing this, the year is 2022, and it’s been almost 14 years since the Bitcoin white paper was first released, yet when the broader public talks about cryptocurrencies, especially those which prioritize user privacy, we always hear the same old refrain: this technology is only used by criminals, hackers, and the far right.
Despite my passion for cryptocurrency, I myself am none of the above and, believe it or not, I identify as a progressive, falling somewhere more towards the left of the political spectrum. However, as I’ll remind the reader, politics are not quite so simple as left and right.
You see, I’m a collectivist who also believes that personal freedom is a key ingredient in a functioning society. At various points in my life, I might have leaned into titles ranging from social democrat to democratic socialist or even libertarian socialist. Incidentally, politicalcompass.org rates me very much in the latter camp.
I’m saying all of this because I want to set the stage for an argument as to why cryptocurrency, and more specifically privacy preserving cryptocurrencies are a crucial technology for protecting human rights and democracy from fascism, religious extremism, and authoritarianism; something which the so-called left claims to care a lot about.
I believe discussions like this are more important than ever in today’s political climate. Simultaneously, as the world becomes increasingly more digital, privacy should be at the forefront of our minds, regardless of where we fit in politically. I’ll get into why in the paragraphs that follow, but first, I have a question…
Anonymity-enhancing cryptocurrencies (AECs) build on the original tenets of Bitcoin which was intended to be a peer-to-peer electronic cash system. Bitcoin’s creator and early proponents had hoped for it to allow for private transactions much in the same way cash does. After all, throughout the past, and to this day, private transactions occur all the time, both for nefarious and obviously for non-nefarious purposes, using the world’s most popular currency, the US dollar.
However, carrying any substantial amount of dollars is conspicuous and puts the holder in danger of physical violence and theft. Bitcoin solves for this, with a robust digital money that lives on the blockchain, meaning that as long as the user can remember, or hold on to a physical backup of their private keys, they can pass through difficult situations and even cross boarders without risk of losing their money.
Unfortunately, Bitcoin never developed a system to become a truly private currency. Contrarily, the open ledger that most cryptocurrencies employ makes it quite easy to follow the flow of money. This has been highlighted by how easy it is to track down hackers who use Bitcoin in ransomware attacks. In some ways this level of transparency is itself a refreshing feature, the antithesis of our corrupt financial system, but it also leaves the door open to endangerment of users, including some already at-risk groups like victims of religious or ethnic persecution, journalists and political dissidents, and even those on the wrong end of ill-conceived, punitive laws—more on that shortly.
This missing feature (privacy) led many of Satoshi Nakamoto’s cypherpunk contemporaries to work on novel approaches to truly private peer-to-peer electronic currencies. Two of the most notable of these projects are Zcash and Monero. These chains make use of cutting edge cryptography and computer science concepts, like zero-knowledge proofs and ring signatures, to hide the details of sender, receiver, and even amounts sent and received. All while remaining verifiable, fraud proof, and censorship resistant.
Privacy preserving technologies like these can create greater personal and political freedom and perhaps most importantly greatly improve safety for their users. Let’s look at how.
One issue that digital currency transactions from debit card swipes to Bitcoin transfers have in common is that they leave a trail of breadcrumbs.
With a debit or credit card, an abusive spouse or embittered ex could gain access to the bank account and review transaction history to stalk the spender. Similarly a hacker, spy, or even domestic government could gain access to transaction history to show up at the hotel or coffee shop of a political dissident only to whisk away the transactor in an unmarked van.
While it’s not commonplace, this can and does happen in the United States, Canada, and Western Europe, but in countries like Russia, Saudi Arabia, and China, it’s not just possible, it’s the norm.
Unfortunately, cryptocurrencies like Bitcoin and Ethereum not only don’t solve this particular issue, they exacerbate it. Imagine that not only can your ex see where you’ve spent money recently, but anyone, anywhere in the world can, and they can see your entire history.
It would be very easy to stalk celebrities or family members, track down journalists and political dissidents, union bust, or intimidate citizens in search of reproductive healthcare and other services the authoritarian right may seek to prevent. Are you starting to see why I’m pitching this as an issue progressives should care about?
A trail of easily dissectible location data is not the only information that can put users at risk. The value of their transactions are also visible on the blockchain…
One of the best product market fits for cryptocurrencies so far are remittances. Imagine being able to send your family abroad any amount of money, instantly, for just a few dollars in fees. Until recently this was just not possible. Services like Western Union have long been able to exploit immigrants and their families abroad with exorbitant fees, unreasonable delays, and a complete lack of transparency.
Since the introduction of Bitcoin and especially since stablecoins (more on that here) have grown in popularity, remittances by cryptocurrency have skyrocketed. But once again there is a too-much-transparency issue. Imagine a group of bandits have learned some of the public addresses of members of a small town or village, and begin monitoring them for inflows. On a day when hundreds, or even thousands of dollars is remitted to a needy family member, the bandits see the balance in the wallet and use it as an opportunity to attack the recipient and extort the funds.
Serving as perhaps the best counter to this risk are AECs and mixers.
Mixers, like the now infamous Tornado Cash, provide a simple and invaluable service to users. You put in money, it gets mixed up with everyone else's money, and when you withdraw it later to a new or different wallet, the trail of breadcrumbs is gone.
What’s the benefit of this you might ask?
Let’s say your wallet becomes associated with you personally. Would you want your neighbour to be able to know your account balances and transaction history? One of the most common uses for a mixer is to allow users to transfer assets to a fresh wallet such that they can regain their financial privacy. This is an especially useful feature for those who actually intend to spend their cryptocurrency, whether on NFTs and other digital assets or, more importantly, for those who want to spend crypto in the real world (for the reasons mentioned above).
A lot is made of the ability for criminals to use this technology for money laundering, tax evasion, and other crimes, but that only underlines the strength of this tool to do what is intended to do: provide privacy to users.
And this actually gets to a bigger point.
“Why do I need privacy? I haven’t done anything wrong?”
This common refrain surely must be CIA or Kremlin psyops seeped into the common culture because it’s the kind of statement that just can’t withstand even the most basic scrutiny. So let’s throw a little at it in the hopes that we can dispel some of the power of this propaganda.
We’ll start by looking at the idea that underlies all modern privacy (and security).
Cryptography, from which cryptocurrency derives its prefix is a technique that allows for secure communication in the face of adversaries. Originally a technique used most commonly in war time, today it is a major component of modern computing. In fact, despite the US government trying to ban citizens from using encryption since at least the 80s, it is now a fundamental part of almost every piece of software we use, from our web browsers, to email, to online banking, to text messages (at least on imessage, whatsapp, telegram, and signal), online banking portals, and more.
Encryption protects users privacy and safety. It is a necessary tool. Even still, the government of China doesn’t allow encrypted messaging because they are overt in their surveillance. And through laws like the PATRIOT Act and programs like PRISM, the US government either forces companies to provide backdoors or uses special techniques and technologies to break encryption. They are usually less overt in their surveillance, but as I’ll point out, this is still a big, and worrisome issue in the western world.
Especially as of late…
One of the most disturbing ways surveillance has been used recently in the US is by the growing authoritarian, theocratic right wing of the Republican Party. Having recently repealed the right to abortion, a growing number of privacy and safety violations have already begun to rear their ugly heads. You see, with many states making not just abortions illegal, but also banning travel across state lines to have a procedure, as well as attempting to make ordering safe and otherwise legal medications related to reproductive health illegal, every piece of data can be used against those seeking to exercise their own bodily autonomy.
Ironically, this should be an issue which the libertarian right stands up for given the assault on personal liberty but as usual, they are strange bedfellows with the authoritarian religious wing of the party; aligned, I can only assume by deep-seeded misogyny and/or desire for power. As a result, many are left wondering how they can safely access reproductive health care, and many care providers are wondering if they will be the next ones under attack from this heavy-handed government enforcement.
With hints that contraception and gender affirmative care may be in the crosshairs as well, many are growing fearful and turning to a common privacy-first solution…
In a recent interview with Ezra Klein, living legend, award winning author, and fellow Canadian, Margaret Atwood opined on the many attacks on freedom by authoritarian governments and religious groups past and present.
I had until recently assumed that the incredible dystopian novel-turned-series The Handsmaid’s Tale was written in this decade about this generation of republican politicians. Little did I know, this ever-prescient work was actually published in 1985!
In the interview, Atwood, points out that methods of payment like joint bank accounts and credit cards that can be cut off by a woman’s husband have long been a way to control women. She adds:
I would suggest that we retain the use of cash money. Not for everything but just in case. Some negotiable currency that isn’t controlled by other people. Might be a good idea…
Here she is underlining the importance of cash as a secure method of payment that can’t be stopped. While this is more or less true, and itself shows that society has always benefitted from the innate qualities of private transactions, it’s unfortunately a solution that doesn’t fit well into the modern world.
For example, how does one transact online or across borders using cash? How does one pay for high ticket items in cash without exposing oneself to tremendous risk?
Digital currency is, in my opinion, an inevitability and yet, Atwood is still correct that we need something with the properties of cash money: peer-to-peer unimpeded exchange; privacy such that only the transacting parties know the details of the transaction or its purpose; fungibility such that its very difficult to follow breadcrumbs or track either of the parties involved.
Whether paying for an out of state abortion, fleeing an abusive partner, or helping others who are oppressed without drawing attention to them, progressives needs to consider cash or its closest digital counterpart, private cryptocurrencies, as a necessary tool.
Before we look at the different kinds of AECs, I want to provide one more example of a place where they’re necessary that I believe progressives and liberals alike should care about:
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
Whether or not one lives in the United States or elsewhere, and regardless of their political affiliations, most people agree that the First Amendment of the United States Constitution is a standard bearer for human rights.
While the right likes to focus on the freedom of speech aspect and misinterpret the part about the government (not private companies or individuals) being the party which is prohibited from restricting it, it’s important to acknowledge two of the other protected classes of expression therein: journalism and protest.
Through all of modern history these two categories of expression have seen citizens risk life and limb to bring forth progress, truth, and equity. And now, perhaps more than ever, they are under assault. In the US, the old fascist playbook is at work to declare all just critique and exposé to be dishonest. Meanwhile, abroad, autocratic regimes have taken to outright violence.
The Saudi government murdered a Washington Post reporter and dismembered the body; Belarus faked a bomb threat to force a plane carrying an independent journalist to cross borders and land; shortly after Russia invaded Ukraine, armed forces executed multiple journalists and documentary filmmakers. In Russia, China, Hong Kong, Brazil, Colombia, the United States, Canada and beyond militarized police have turned to violence against peaceful protestors on multiple occasions.
And as if that wasn’t enough, the use of financial censorship has become a tool to exclude activists who have not been charged with crimes as a way to exclude them from society altogether.
Here again the tendency may be to assume that this is an issue faced only by those on the right like the trucker convoy in Canada or the Trump acolytes in the US, but that’s a foolishly naive read of the situation. All journalists and all activists are at risk in a world without financial privacy.
Don’t believe me? Look no further than Edward Snowden, NSA Whistleblower and President at the Freedom of the Press Foundation. Snowden has advocated for private cryptocurrencies on multiple occasions, and in 2022, he admitted to having been a participant in the trusted setup ceremony of Zcash.
Snowden points out that he was not a developer of Zcash, was not paid to participate, and has no stake in the project but rather viewed the private currency as a public good and participated to help ensure the project was secure.
As I’ve pointed out already, in recent years conservatives have been pushing further and further towards authoritarianism, and have increased their offence against those who disagree or shine light on corruption. If progressives truly believe that citizens should be able to protest peacefully and journalists should be able to operate confidentially and safely, then they should pay attention to what Snowden and others are saying, and support financial privacy and AECs.
This is far bigger than narratives of right or left.
Now that we know why we need private cryptocurrencies, let’s learn a bit more about the different kinds.
When it comes to crypto privacy there are two main approaches. AECs like the aforementioned Zcash tend to be part of their own dedicated blockchain ecosystem. This allows for a fully siloed environment which can add an additional layer of protection. The downside (or upside depending on who you ask) is that without the benefits of the broader DeFi ecosystem, functionality is limited. Below, we’ll briefly discuss the key features of popular AECs as well as solutions built on top of Ethereum.
A quick note: this article links to the websites of various privacy preserving cryptocurrency projects and information about them. It is advised that those with concerns about surveillance make use of tracker blocking browser extensions like DuckDuckGo Privacy Essentials or Brave Shield as well as a VPN like Mullvad (which you can pay for with cryptocurrency or even physical cash!)
Starting as a fork of the Bitcoin codebase, Zcash was originally a project of Johns Hopkins University professor Matthew Green and some of his graduate students and was made into what it is today thanks to funding from the for-profit Electric Coin Company (ECC).
ECC’s CEO Zooko Wilcox is a computer security specialist and self-proclaimed cypherpunk who believes that Bitcoin’s biggest flaw is its failure to provide a truly private experience, akin to cash.
Zcash uses Zero-Knowledge Succinct Non-Interactive Argument of Knowledge (zk-SNARK) technology to maintain encryption of all of the details of a given transaction (including the identities of the parties involved and the amount of the transaction) without allowing for fraudulent transactions or double spends to occur. Zcash is credited as being the first cryptocurrency to make use of zk-snarks.
Below is an excerpt from the post “What are zk-SNARKs?” that explains the meaning of the acronym.
“Zero-knowledge” proofs allow one party (the prover) to prove to another (the verifier) that a statement is true, without revealing any information beyond the validity of the statement itself. For example, given the hash of a random number, the prover could convince the verifier that there indeed exists a number with this hash value, without revealing what it is.
In a zero-knowledge “Proof of Knowledge” the prover can convince the verifier not only that the number exists, but that they in fact know such a number – again, without revealing any information about the number. The difference between “Proof” and “Argument” is quite technical and we don’t get into it here.
“Succinct” zero-knowledge proofs can be verified within a few milliseconds, with a proof length of only a few hundred bytes even for statements about programs that are very large. In the first zero-knowledge protocols, the prover and verifier had to communicate back and forth for multiple rounds, but in “non-interactive” constructions, the proof consists of a single message sent from prover to verifier. Prior to Halo, the most efficient known way to produce zero-knowledge proofs that are non-interactive and short enough to publish to a block chain was to have an initial setup phase that generates a common reference string shared between prover and verifier. We refer to this common reference string as the public parameters of the system.
I recommend reading the whole post when you have time to get a deeper understanding of the concepts. For those of you who like a little follow-up reading, check out this post from Ethereum co-founder, Vitalik Buterin. It goes a lot deeper on both the technology itself and the potential use cases, well beyond payments systems.
Zcash was originally built to allow for transactions from two types of addresses:
Transparent (t) addresses which are fully public and operate exactly as the Bitcoin transactions from which their codebase is derived
Shielded (z) addresses which include the privacy enhancements from zk-proofs
Users can decide based on the purpose of their transaction which kind of transaction they’d like to send, from the four configurations below 👇
The broad consensus seems to be that more users choosing fully private transactions is best, but there are a number of reasons why Zcash introudced this two-pronged approach, based on the assumption that it could one day become the predominant cryptocurrency in use. If that were to happen, one might ask the question, how do organizations that we want to operate transparently like, for example, charities share a trustworthy public balance sheet?
As we can see above, either a public transaction or a deshielding transaction (with the charity as the recipient) would allow the contents of their wallet to remain publicly visible. The former would also show the information of the sender, while the latter would provide the person donating with privacy, while maintaining transparency on the receiving end. This could be a viable approach for certain businesses, governments, or in any circumstance where an audience needs to verify for themselves that a transaction took place.
In order to abstract away this complexity and improve user experience and safety, in 2022, during the Halo Arc suite of upgrades—which also implemented the new Halo proving system and eliminated the need for trusted setup officially—a new address format was introduced.
Unified addresses remove the need to keep track of separate t and z addresses.
Acccording to the ECC website:
If your wallet supports it, anything you receive to this address can be shielded automatically — into the latest, most-secure shield pool — even if it’s sent to you from a transparent address.
This means that users can send and receive private-by-default transactions unless they opt for a transparent-address-only wallet, a list of which can be found here. This change brings Zcash closer in approach another popular privacy coin…
While Zcash sought to improve upon Bitcoin, beginning with a fork of the open-source code base, Monero chose to start fresh and built a project that is technically quite fascinating.
As you might have intuited from the above statement, Monero is not based on the Bitcoin code base, but rather the CryptoNote protocol, first employed by Bytecoin. It features both a dynamic block size and dynamic fees. Like Bitcoin it does use Nakamoto Consensus and employs proof-of-work sybil resistance, however, it does so with its own algorithm called randomX which is designed to be ASIC resistant (for more on consensus, read this post).
A core concept of Monero is fungibility. As we’ve seen with Bitcoin, Ethereum, and other supposedly fungible cryptocurrencies, the history that’s left on the blockchain can lead to blacklisting of tokens which have passed through specific wallets or smart contracts. This blacklisting removes the fungibility of the marked tokens and thus undermines the idea that they were fungible in the first place.
According to the Monero website:
This is a problem, since the receiver of money needs to constantly check the money they are receiving to not end up with tainted coins. Monero is fungible, which means people do not need to go through this effort.
In the wake of the recent sanctions on Tornado Cash and how they’ve affected users with no relation to illicit financial activity, the value of fungibility is becoming clearer to everyday users.
There are three key privacy preserving technologies that underly Monero’s design:
Ring Singatures: a group of cryptographic signatures with at least one real participant but no way to tell which it is
Ring Confidential Transactions: a way to hide the amount sent
Stealth Addresses: automatic one-time addresses for every transaction
According to the Monero community, these technical features are fundamental to offering a truly private, fungible, peer-to-peer electronic cash.
A testament to its efficacy may be found in the degree to which regulators around the world have sought to ban Monero from being purchased by civilians.
Most major exchanges have delisted the privacy coin and as such it may be difficult for you to acquire it. Solutions to this include mining the currency yourself, creating a wallet and accepting payment at your small business, using exchanges that have not delisted the currency, or using Thorchain to swap across chains.
In doing so, be advised that you may find yourself at the end of sanctions in the future. However ill-conceived those sanctions may be.
If you prefer another option that you can buy freely on exchange, then one of the OG cryptocurrencies has something for you by way of a recent update…
Litecoin has always billed itself as “the silver to Bitcoin’s gold” and its design decisions have always reflected this ethos. With larger blocks and faster confirmation time, and a supply cap exactly four times that of Bitcoin (at 84,000,000 LTC) it’s clear that maintaining a lower price per coin and cheaper transaction cost has always been a priority.
Opinions on Litecoin tend to be fairly black or white. I myself have never been a fan of this little brother narrative and lack of compelling features. Furthermore, it never sat well with me that the founder of Litecoin, Charlie Lee, sold all of his Litecoin holdings. He claims this was to stifle conflict of interest criticisms, but to most onlookers it read more like him dumping his stake in a project he no longer believes in.
With that said, Litecoin is still a relatively popular cryptocurrency, sitting at #22 by market cap at the time of writing. For context, Monero is sitting at #29 and Zcash all the way down at #61. Though keep in mind this is in large part due to its higher supply cap, as market cap is simply token price x circulating supply (I feel like this needs to be said)
You can see below that this is in fact exactly why the market cap is so much higher. (Source: Coingecko, August 21st, 2022)
Litecoin: $55.12 x 70,994,495 = $3,913,327,561 Monero: $155.89 x 18,147,820 = $2,829,062,554 Zcash: $64.93 x 12,780,462 = $829,784,650
Despite Litecoin’s popularity, it has never been a good option for privacy, until recently…
On May 19, 2022 Litecoin’s highly anticipated MimbleWimble upgrade was deployed to the network introducing the capability of private transactions via extension blocks. These MimbleWimble Extension Blocks (MWEB) function similarly to Zcash in that they are opt-in and thus require a shielding transaction before you can send private transactions.
But what’s with the name? MimbleWimble takes its name from a spell in the Harry Potter books:
The Tongue-Tying Curse (Mimblewimble), also known as the Tongue-Tying Spell, was a curse that tied the target's tongue in a knot, preventing them from making coherent speech.
Source: Harry Potter Wiki
Why Harry Potter? Well, it’s important to note that Litecoin did not create MimbleWimble (henceforth referred to as MW; for my sanity), nor were they first to implement it. It was originally proposed on the BitcoinTalk forums in 2016 as a protocol for scaling Bitcoin through the use of several other well known cryptographic protocols including confidential transactions (CT), CoinJoin, and CutThrough.
The whitepaper is written in relatively plain language and so, assuming you take the time to learn what each of those terms mean, you can probably get a basic understanding by reading it. This article from CoinMarketCap has a pretty good breakdown.
MW can also be found at the heart of its own blockchain MimbleWimbleCoin (MWC) and another project known as Grin. However, neither of these has much traction, and for a privacy technology to be truly useful it has to able to be used broadly. That’s why I’ve chosen to focus on Litecoin which is able to be purchased on most exchanges and has a fairly robust user base.
Now that we’ve covered three separate options for AECs, you might be asking yourself, what do I do if I’m already invested in the Ethereum ecosystem? After all, with so much of the content I write being about DeFi and Web3 protocols, it’s clear that I believe this is where the innovation and mass adoption is set to take place. So how will we protect ourselves on the infinite machine.
We’ve already talked about zk-proofs and zk-SNARKs and their roles in cryptocurrencies like Zcash, but in truth, the majority of development around these technologies is happening on Ethereum. In fact, PLONK, a technology which is core to Zcash was developed by the team at Aztec (which we’ll discuss below), and Polygon has committed to investing over $1B in zk technology as part of their Polygon Thesis. And don’t forget the article I linked above from Vitalik about the ways zk-SNARKS can (and can’t) be used.
But so much of this is focused on the incredible scaling opportunities provided by this technology, with privacy remaining an afterthought, one assumes because discussions about privacy tend to scare away institutional investors fearful of regulation.
When it comes to privacy on Ethereum, there are currently two preferred options…
I explained the basic concept of mixers earlier in this article. A quick reminder these don’t allow for truly private transactions but rather a way to obscure the sender. Let’s say you’re a successful crypto blogger (one can dream right?) and you want to send money to your mom, but you don’t want to leave an obvious trail of breadcrumbs from your very public .eth address to your (hypothetical, moderately tech-savvy) mom’s wallet.
In this scenario, you decide to deposit an amount of Ether into Tornado Cash where it sits and gets mixed in with other users’ funds. After a sufficient amount of time goes by (called seasoning), you feel comfortable no-one will deduce it’s you withdrawing, so you do so, directly to your mom’s wallet address.
This would have been a great way to obscure the source of the funds from prying eyes on the public blockchain. In fact this is still a great way to do this type of transaction, or the aforementioned setting up of a new wallet… with one caveat.
By doing this, you likely just got your mom’s wallet blacklisted from being able to interact with an exchnage, meaning she can’t cash out. And regardless of how tech savvy your mom is, it’s pretty likely the reason you’re sending her money is so that she can make use of it.
I think this example really illustrates how a technology like Tornado Cash is not inherently nefarious. A person earning funds legally through investing, trading, working as a writer or content creator online, even just a twitter user with twitter tips activated (like me!); they want to send these funds to another law-abiding citizen, for non-nefarious purposes, but they don’t want to open that person up to risks.
The recent assault on Tornado Cash, under the guise of preventing cyberattacks or money laundering is just enforcement agencies who are too lazy to do actual work and prefer just being able to surveil everyone and collect a paycheque. Unfortunately this approach puts everyone at risk.
Preface: in this moment of uncertainty, especially if you live the United States, you probably shouldn’t use Tornado Cash. If you’ve used it previously or are one of the many public figures whose wallet has been dusted with Ether sent from Tornado Cash, you should prepare yourself for potential legal consequences from the absurd laws passed unilaterally and without due process by OFAC.
With that said, if you are elsewhere in the world and this excellent technology is able to protect your safety from dangerous, repressive governments or terrorist groups, then absolutely you should use it. You can do so by going to tornado.cash and following the instructions. Read them carefully as the approach to using a mixer requires some steps which must be followed carefully.
NOTE: a new option is available called Privacy Pools. I will update this post soon.
If you read the above paragraphs about Zcash or Litecoin’s MWEB upgrade and thought to yourself why doesn’t this sort of thing exist on Ethereum, I have some good news for you: you can have essentially the same functionality by using Aztec Network.
Aztec bills itself as “the privacy layer for Web3” a nod to its use of rollups (a layer 2 scaling solution). More specifically, Aztec’s zk.money is—you guessed it—a zk-rollup. The benefits of building a private cryptocurrency network on a rollup are many. One obvious one is cost. Rollups allow for off-chain batching of transactions, making them cheaper, and helping to scale the network’s throughput.
Like Tornado Cash, users can deposit their funds from one wallet, and withdraw to another (in fact doing this is essentially a requirement of good privacy hygiene; more on why here), but that’s where the similarities end, and the real strengths of Aztec begin.
Here’s a great explanation from the post Infinite Privacy: New Anonymity Paradigms with Aztec Network:
Imagine Aztec as a walled city. All an outside observer can see is users entering and leaving Aztec via our bridge.
Within the walls of the city, users can exchange assets with fully private transactions. Neither the network nor its participants can see the senders and recipients of transactions, nor their amounts.
In addition, once inside the system, users can batch transactions and teleport back to L1 — to swap, stake for yield, lend funds, vote in DAOs, or buy NFTs. […]
Because Aztec allows for these two new anonymizing activities — internal transactions and batched interactions with Layer 1 Ethereum— the privacy set is significantly harder for an observer to calculate than, for instance, on a privacy mixer without those features.
This post, which I strongly recommend reading, goes over methods by which one might de-anonymize data from mixers or even Aztec Network itself. This candid walkthrough will not only help you understand the risks and benefits of a service like zk.money but also the design decisions that go into these kinds of systems.
What you should take away from the above quote is that mixers offer a fairly rudimentary service that can be greatly improved upon. And what Aztec wants you to know is that they have made those improvements.
NOTE: zk.money has been sunset. I will update this post soon. In the meantime, ignore this section.
You can get started using Aztec’s zk.money rollup today, by going to, well… zk.money
There you can create a user name by depositing at least 0.01 ETH into the network. Once that transaction is confirmed, you can transact privately within the network with other users via their custom handle or Ethereum address, or you can take advantage of the DeFi that’s currently available. At the time of writing, that’s limited to Aave, Lido, and Element Finance, but there’s a number of integrations in the works including Compound, Reflexer, and Index Coop.
The cool thing about DeFi on Aztec is that thanks to their Aztec Connect infrastructure, there’s none of the headaches that plague other networks. According to this blog post, the reason for that is…
…because Aztec Connect relies on Ethereum as its execution environment, protocols keep liquidity and contracts on mainnet while maintaining Ethereum ecosystem composability.
That means partners can access the benefits of a private rollup with:
No liquidity fragmentation
No contract redeployment
No re-audits of code and contracts
This means as a user, you simply deposit to the network, get all the benefits of Ethereum DeFi for a fraction of the cost, and when you’re ready to withdraw, you withdraw back to a different wallet to maintain your privacy. When withdrawing, Aztec will prompt you to do so in common values like 0.1 ETH or 1 ETH such that your withdrawals look just like everyone else’s.
At present, within the Ethereum ecosystem, Aztec Network seems like the most promising, capable, and user-friendly option available. However, I would be remiss if I didn’t mention that just like Tornado Cash, Aztec could be in the crosshairs of regulators, so, if you’re overly worried about blowback you may want to wait for the dust to settle.
That brings me to what I think will be my closing thoughts on a very long article…
I started this article with an appeal to the left, more specifically to progressives who care about human rights. I wanted to write the article this way because I feel like the more common narrative is comes from a place of rugged individualism, the American bastardization of libertarianism that Rand Paul and the Koch brothers have long espoused. If you follow that ideology, you didn’t need this article because you were already convinced of the need to protect privacy, for somewhat different reasons.
Looking around, I see very few people who truly believe that anarcho-capitalism is the future we want. And there is a tendency amongst collectivists then to assume that every argument individualists make is just an effort to undermine collaboration and redirect us towards their vision of society.
I have to say that I find this both cynical and unrealistic. And more importantly, for the many reasons I’ve listed in this post, I believe undermining financial privacy actually harms any chance at achieving the stated goals of the left; most notably, equity for members of vulnerable communities.
I want to leave you with a PSA that Zcash made, which went viral on twitter in the wake of the recent sanctions on Tornado Cash, just in case you haven’t seen it ⬇️
Beautifully written if you ask me. And a perfect place to end things.
Until next time,
If you enjoyed this blog post, consider collecting a copy. It's like tipping and receiving a unique digital collectible as a receipt.
And for the cypherpunks, I accept anonymous tips with Zcash to my shielded address:
The image used in the header graphic is from Ethereum.org