A Privacy-Preserving Method for Ethereum Transactions

Abstract

The increasing popularity of blockchain and cryptocurrencies has led to a considerable proliferation of the cryp-tocurrency market in recent years, pulling more investors into the trillion-dollar industry. The increasing number of users has led to increasing privacy concerns. While the network's ability to facilitate financial inclusion is enhanced by the blockchain's openness and public nature, it also exposes users' transaction histories, raising the possibility of privacy violations and other concerns, such as user profiling. To address these privacy challenges, various techniques emerged, categorized as joint transactions and mixing services. While promising, these methods have limitations, such as potential information leakage and the need for trust in centralized entities. To overcome these shortcomings, we propose a novel system that combines joint transactions and mixing services, incorporating Zero-Knowledge Proofs (ZKPs) for enhanced privacy guarantees. Our proof of concept on the Ethereum blockchain demonstrates improved privacy while providing the basic requirements. The evaluation includes performance metrics and security analysis, focusing on key considerations—unlinkability, verifiability, and double-spending. Our method achieves unlinkability by obfuscating transaction paths through multiple stages (ZKPs, CoinJoin, CoinSwap), ensures verifiability through signatures and commitment exchanges, and prevents double-spending through nonce utilization, all while maintaining a feasible execution time.