Privacy-Preserving Attribution in Protocol-Level Taxation: A Formal Treatment of the Aggregation-Leakage Tradeoff

Abstract

A protocol-level transaction tax faces a structural privacy tradeoff: jurisdictional attribution requires releasing aggregates from which an adversary with auxiliary information may attempt to learn properties of the underlying transactions. This paper formalizes the tradeoff and proves two mechanism-level theorems. Theorem 1 establishes that the composition of Pedersen commitments with zero-knowledge validity proofs preserves individual-transaction hiding under standard cryptographic assumptions, with no distributional requirement on transaction amounts. Theorem 2 separates two cohortaggregation threats that prior analyses have conflated and bounds each. Theorem 2a (event detection): against an adversary attempting to detect that an anomalous transaction of magnitude 𝜏 occurred in a cohort of size 𝑘, the optimal likelihood-ratio-test.