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One of the main selling points of cryptocurrencies is the fact that they offer a superior degree of privacy when compared to traditional fiat currencies. As such, Bitcoin, Ethereum and the like are all semi-anonymous, meaning that users do not have to share any personal data. Regardless, the blockchain network publicly stores information on all past transactions, alongside current address balance.
Because of this, analysis of
blockchain activity can detect patterns, and trace funds back to their owners. This
isn’t often the case, but it remains a factor worth keeping in mind if you are extremely
conscious about your privacy. Recent reports indicate that
JPMorgan Chase is actively working on a solution that would enhance the overall
privacy of Ethereum transactions. According to its blockchain team, the privacy
feature is capable of hiding the amount of coins being sent out, alongside who
the sender is.
The tool works as an extension to
Zether, which is a decentralized payment mechanism that aims to increase
overall privacy for Ethereum and other smart contract-compatible blockchains. Zether
was developed as a joint effort between the Visa Research department, and the
Stanford University. It achieves extra privacy by leveraging zero-knowledge
proof to verify transactions.
According to JPMorgan, their
solution will be released as an open-source tool that can be trialled directly
on Quorum, JPM’s permissioned blockchain running on Ethereum. As part of the
announcement, the chief of Quorum, Oli Harris, stated: “In the basic Zether, the account balances and the transfer accounts are
concealed but the participants’ identities are not. So we have solved that. In
our implementation, we provide a proof protocol for the anonymous extension in
which the sender may hide herself and the transactions recipients in a larger
group of parties. (…) The performance is quite good; we had done multiple
iterations to improve it and we are doing the verification in solidity smart
contracts. We’ll be including in our report the performance measurements for
proving and verification.”
It is important to keep in mind
that there is a key difference between the payment architecture employed by the
Zether protocol and Bitcoin, for instance. As such, it relies on an
account-based approach, rather than the unspent transaction output utilized by
the bitcoin blockchain. This means that the tool isn’t targeted to the masses,
but rather it will help enhance privacy for transactions carried out within
enterprises on smart contract-enabled blockchains.
It is not yet known whether
JPMorgan plans to release the tool to the public in the future. Regardless,
there are several other work-around strategies meant to improve privacy for
big-name cryptocurrencies. Additionally, the market already has privacy-focused
altcoins, such as Zcash, which promise complete anonymity for all transactions
being carried out.
Based on everything that has been outlined so far, this recent event showcases that banks throughout the world are well-aware of the potential offered by blockchain technology and cryptocurrencies. After all, JPMorgan’s blockchain development team is also working on its very own stable crypto, the JPM Coin.
Featured Image via BigStock.
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