A stablecoin allows fiat payments to be made without leaving the blockchain ecosystem. This is often an advantage, especially when trading, because it saves you from having to go through a bank. It’s hard to imagine the DeFi sector without them, as they represent an important bridge between the traditional fiat world and the world of cryptocurrencies. After all, a stablecoin maps euros, US dollars and Co. in a ratio of one for a. What is still missing, however, are options to pay anonymously with them.
Anonymous stablecoin payments are possible
A study that BTC-ECHO received in advance now shows that this may soon change. In “How to design a compliant and privacy-preserving fiat stablecoin via zero-knowledge proofs”, study authors Dr. Jonas Gross, Johannes Sedlmeir and Simon Seiter that non-interactive zero-knowledge proofs, in short: zKs -SNARK, can play a decisive role here.
However, as shown by the study carried out under the aegis of eTonec, Hauck Aufhäuser Lampe and the University of Luxembourg, the use of this method of proof would make it possible to protect the privacy of users while respecting the regulations. on money laundering. guidelines.
The authors suggest using the Mina Foundation blockchain protocol for this. Dr. Jonas Gross summarizes it to BTC-ECHO as follows:
Zero-knowledge proofs will be an essential element for payments of the future, as they help keep sensitive digital payment data private. As we have shown in the study, zero-knowledge technology combined with digital identities can even be used to develop a stablecoin system that protects privacy while meeting anti-money laundering legal requirements. . The Mina protocol is a suitable technology to make zero-knowledge evidence-based use cases a reality due to its zero-knowledge capabilities and extreme efficiency and the reason why we chose to work with the Mina Foundation decided on this study.
Dr. Jonas Gross, eTonec GmbH
zK-SNARK: Verification without details
The idea behind the proposed zK-SNARKs is to verify transactions without entering sender and receiver details. This means that it is confirmed whether a transaction has been completed correctly. However, no information about the respective parties will be released.
Thus, what has long been possible analogically is finally becoming digital: the exchange of small amounts of money without disclosing personal information. The practical side effect is that everything happens quickly because less information has to be sent. Johannes Sedlmeier sees this as an opportunity for the future of payment traffic. The study co-author told BTC-ECHO:
With the decreasing importance of cash as a means of payment, consumers are gradually losing the ability to make small private payments. I think in the future, digital payments should be possible as a replacement, which offer cash-like privacy; up to a certain monthly or annual limit to prevent abuse, e.g. B. for money laundering. Confidentiality must be maintained without having to rely on a bank or government not to analyze or store these transactions […].
Johannes Sedlmeir, SnT, University of Luxembourg
Anyone who has been involved in the crypto space for a while may be familiar with zK-SNARKs. The ZCash privacy coin uses it to hide transactions. The downside of private coins, however, is that they can only be used to a limited extent in payment transactions due to fluctuations in crypto-typical exchange rates. They are also a thorn in the side of regulators.
The future of stablecoins
The study lays the groundwork for the development of a new stablecoin with privacy features without sacrificing security. Kurt Hemeker of the Mina Foundation identifies the study as an indicator for future developments:
The Mina Foundation’s cooperation with etonec, Hauck Aufhäuser Lampe and the University of Luxembourg has shown that it is possible to use ZK technology to protect privacy and comply with legal regulations in payment transactions. This information guides the design and adoption of fiat-based stablecoins and central bank digital currencies (CBDCs) that promote trust and stability in the digital economy.
Kurt Hemeker, Mina Foundation
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