Kieran Mesquita and Alan Scott Jr. I Onchain Privacy for a Better Ethereum I Pragma Sydney 2024

[Music] next up we have two amazing people joining us I'm going to have our uh slides go back on on screen so I want to bring on Allan and Kai from rail gun project uh if you're local you definitely know what rail gun is if you are not a local you about to find out how full rail gun is and Alan and Kai are going to talk about all the things that you should be mindful you should be mindful of and how you think about better onchain privacy on ethereum so we'll cover how you can take advantage of keeping your identity and your assets private and not revealing too much but also what is a good way to do that without necessarily causing too much trouble for everybody else and for yourself in the future so I I'll let them get set up with their laptops and uh without further Ado let's welcome Kai and all on stage [Applause] how's it going everybody yeah good morning um I'm sure that this will be like the most interesting Talk of the day just kidding um I'm Alan uh I'm one of the contributors to uh rail gun hi I'm Kai I'm also a contributor to real gun and um no surprise our talk is going to be on privacy and so uh maybe Kai you can elucidate the crowd to what rail gun is exactly sure so uh in a nutshell uh rail gun is a protocol that adds a new uh private address type to uh ethereum and other evm chains yeah and um we're going to talk a little bit about the Privacy problem that exists in crypto um and the the the reason that I contribute to privacy and why I advocate to uh people to to use privacy is that I believe that it is a keystone to pretty much every Financial mechanism that exists uh in the world um a little bit of crowd participation here uh who here is like used vinmo cash app PayPal some sort of like web2 payment mechanism yeah great for people who can't see uh everybody raised their hand um and um the reality is is with those kind of mechanisms right you don't get to learn what's in other people's uh balance right so if you take a do a wire transfer if you send somebody money on PayPal you don't get to learn how much is in their wallet right nor do they get to know how much you have in your wallet or what your mortgage is or perhaps which banks that you do business with and it's none of a business right it's something that we take for granted in traditional finance and we don't talk about enough in the crypto space right so who here has actually done a peer-to-peer crypto transfer sent crypto to somebody else uh in the world in crypto yeah again pretty much everybody right and and uh you don't have to raise your hands for this part but um who here just think about this for a second once you do that transfer goes to Ether scan and then proceeds to judge them uh harshly for all the nfts and shitcoins that they've purchased and you know maybe look at the age of the wallet right and see if you're more OG than them or something like this and you know which centralized exchanges that they're using and and this sort of thing right the reality is is like we think this kind of voyerism is cute and fun right but the reality is is it's really quite dangerous and I think that It ultimately limits it's the um like the long-term viability for crypto um I think that like real actors in the space of Finance don't want to have their balances uh dox uh on chain and so when we think about that privacy problem right we have a lot of different things when you're um my background's in more traditional Finance um you know strategy leakage would be a really bad thing right who here follows whale alerts on Twitter right yeah if you're not you should it's great uh you can see some really cool stuff um shout out to those dudes um and so yeah you have strategy leakage so if you're charging people 2 and 20 as a hedge fund to trade their money on chain what's the incentive for them to give you a management fee if they can just follow your Wallets on nanson right the reality is is people don't want to do that so a lot of onchain actors go through Great Links that arguably are overhead to their their operations that shouldn't be there because they don't have wallet privacy right there's other Market limitations in fact we held an event yesterday and I had several people I won't point you guys out don't worry you have to raise your hands who take their um you know their invoices and salaries and pay them through rail gun to prevent um you know leakage of people's salary information which in some uh Nation States is considered to be uh privileged in private uh by law right uh and then there's the there's surveillance and and safety uh questions right um the last thing you want to do in my opinion is take entire name to a wallet address that has a lot of money in it right this creates issues and uh potential vectors for fishing attacks right and Sim swaps people want to go after your wallets if they have lots of money in them right and if we expect this to take over right people are going to have money on chain uh they should be able to have privacy to protect themselves against these uh wouldbe identity actors in the space right and then there's a lot of questions around like uh just general data compliance right gdpr uh there's a lot of public defi usage that goes directly against privacy regulations around the world um and then there's the uh the other privacy problem right um privacy tools are under Tech um if you guys weren't aware there's people around the world uh getting in a lot of trouble for contributing to uh you know privacy Tech and this ask a lot of questions about the legality and uh you know the regulatory uh uncertainty is pretty great right um and then we have the other side of that right which is like the issues with onchain analytics and the heuristics that are associated with these cases um and just onchain analytics in general right uh in fact Cipher Trace very famously came out with a study and found a 64% error rate with the clustering around the bit uh the Bitcoin fog case um in fact Elizabeth Bisby who's a pretty big deal in chainalysis she's in the sea Suite uh was asked for uh statistical error rates around that same case and you know what she said we don't keep any they don't do any of that stuff right there's no science around it right and this leads to things like Mass uh misattribution to hacks and things like this very famously FTX got hacked and it was attributed by elliptic to Russia and you know who it turned out to be three random dudes in flyover country in the United States they weren't Russian at all right and so like uh it's not all bad though right there's a lot of really interesting and good Pro privacy regulations and rulings that are coming out around the world right uh you know there's HR 4108 right which is uh an anti-s surveillance uh mechanism in the United States great read by the way and uh challenges a lot of the things that are going on from the doj today uh there was the um uh the the Russia case that was decided by the human rights courts over in Europe to say that back door encryption is uh against your human rights so you have the right to encryption according to uh certain human rights U courts uh and then as a as an American I think that like the Cal the California consumer Privacy Act uh is is really great it's a good read it's pretty uh low brow easy to understand um and then uh yeah there's a lot of problems let's talk a little bit about the other other privacy problem yeah so like actually building privacy um on chain um is pretty hard um so number one um I think we're all familiar with etherum here being a etherum conference um you know like privacy Tech is very uh computationally intensive and um you know the computation costs gas on chain and so the more uh computation you use the more gas the more expensive it is for uh users to use it uh if you're building on uh on chain you don't really set the consensus rules you kind of have to play by uh the decisions that um someone else has made and so um you know you're kind of constrained in the uh way that you're able to design your uh protocol um there's a limited set of of like cryptographic perimet that you get to use so maybe there's like a hash function that might be ideal for your use case but if it's just not supported by the environment that you're building in well like too bad you got to pick something else right um and you know you like be being a privacy application you want to run everything client side for both privacy and and security purposes right um because you know the more sort of like touch points we have with the uh external world the more Avenues there are for um you know potential like security issues or uh avenues for like privacy leakage right um and so um doing all this client side though is like you the majority of people um interact with the internet through their mobile phones right these are while they're very capable devices just still nowhere near on the same level as like a server farm and so um doing things like generating um SN proofs on device um you know these are pretty computationally intensive tasks um are like really difficult um and you know just plain synchronizing data with the chain um if you don't have the um if you don't have the luxury of running like a centralized indexer or something um you know you need to somehow get all the data from uh an RPC process it all store it locally and you know the compute that you have on these on like mobile devices and the uh storage um is just not the same performance and same availability that you'd get um if you just had a server Farm somewhere um and I think the last one is probably the the spiciest right like um the D and defi is like really hard um so you know a lot of uh protocols you know that claim to be defi uh end up uh sort of relying on these uh centralized Services you know maybe like an indexer or um you know maybe they go and take uh transactions and like simulate them server side to see what the outcome would be and and things like this which um if you're building an application where you're trying to do as much client side as possible um having these like you know client uh or these server side centralized components in the in the mix uh makes things really difficult yeah and so maybe you can kind of walk us through like just to take a step back for a second like for people who don't know about rail gun like what's like the easiest way to understand it yeah um so you know as I said earlier um you know it adds a new private um address types these address start with uh zero ZK um and you know if you try to look these up on a block Explorer you can't see the uh address itself um all you can see is just sort of a smart contract which uh contains uh ZK utxos um but you know if you have the uh private key to uh one of these addresses you can now go and magically decrypt these uh these encrypted utxos and and see what your balance looks like and what your transaction history looks looks like yeah and so like the ultimate goal is to create something that's uh very effective at being a um a private eoa and so you know there's some other considerations back to the the the single other um privacy problem right is around like uh assurance and compliance mechanisms and so over the years um for people don't know rail gun's been around for U God almost going on four years now but yeah three years of this uh you know there's things like viewing keys right so you can actually take and uh give read access to your your private balance and this is actually what I would call like true self- sovereignty right so you have the the individual liberty to uh self- select who sees exactly what uh when it comes to your private transactions um right when real gun got started uh we did a partnership with the guys over it coin Le um and made it such that uh wallet providers can take and uh give uh CSV exports that are uh compliant with coin Ley so if you're doing your taxes and you have your your private transactions you can export those and Huck them into coin Ley and they'll uh uh they'll spit out a nice little uh tax report for you which is really great um and then um yeah we've been working and contributing to this whole new thing called privacy pools which people are probably familiar with from the Amin salamani and uh vitalic paper around um a practical equilibrium in privacy right effectively what these tools allow you to do is generate zero knowledge proofs uh around um your non- interaction with a specific accumulator of addresses and so this can be something like the ofac sdn list it could be something like scam sniffer or like the metamask API for Bad actors chain abuse fill in your favorite U reporting mechanism uh Sam cz's new thing right seal 911 Etc um in fact you know maybe you can talk a little bit about like the the more mechanical architecture of this yeah so I mean uh essentially you're um taking all of the shields um that um occur in uh the Privacy system um you uh prune out all of the um Shields that are in your um exclusionist from uh the Merkel tree that you're approving against um and now you're left with uh a mercel tree that um consists only of the um activity that you do want to associate with um and you can generate a proof against this Merkle tree showing that whenever you do a transaction um all of the uh inputs into that transaction exist in the tree right so by definition must not exist in the uh exclusion set um and you take the outputs of those um of your um transaction that you've just proved and add it back into the tree and so now anyone that uh receives your um the output of your transaction can then go ahead and uh create a proof um against those new outputs because they now exist in the tree um and this can be repeated um on and on through subsequent transactions as as far as needs to be done yeah and so effectively what you can do uh is you can split the anonymity set in between um you know what you would consider to be uh you know good actors uh and Bad actors and effectively make tools uh in the Privacy space that are as obnoxious as humanly possible for people who would be considered to be chain abusers uh to to use um and I'm happy to report right in spite of uh what most people would consider to be a pretty uh sad State of Affairs right that privacy tools are on the up and up uh rail gun usage uh has um definitely been an up into the right experience people are really excited to have privacy in the space right uh there's been a lot of people who've contributed to this over the years and have like deployed rail gun on different chains uh arbitrum poly BC it's on ethereum hopefully some people in here are Builders and they want to deploy it other places too right uh people contributed to new ZK circuit cryptography which has been really really fascinating um and allowed rail gun to get like gas savings over the years um and there's a lot of stuff in the future right um that we're we're pretty excited about as well right um we've been working on uh as uh a bunch of contributors uh on this new thing that we call rail gun connect uh and effectively if you guys want to actually if you want to learn more about about that I could totally stand up here for another 20 minutes and talk about it so find me after and we'll we'll give you all the great Alpha but suffice it to say what it allows you to do is connect this private EA to any front end that you would like and transact from this private balance so you can have that true private EA experience that you would expect from a privacy solution that says it's a private wallet uh we're continuing research on privacy pools uh there's this new thing called V3 uh which is going to be like a really great modular architecture for rail gun um connect as we mentioned uh and we're doing a lot of res search on gas savings because I think a lot of the reasons why people move privacy offchain uh is because they don't want to do the due diligence associated with making something exist in a fully onchain architecture um and they want to write their own rules in an L2 or something like this and so in in closing remarks I would say that you know I've been really excited to meet a lot of people uh it's my first time in Australia uh in spite of working with various Australians over the last couple of decades actually um and it's been really cool to hear about people telling me that like they're using rail gun to do various things and one of the things that I would tell you is like if you don't want to go on Twitter and Proclaim your privacy advocacy like tell your friends right you know a lot of people uh use vpns now because their friends told them to do so right and this is a really great way to protect your data on the internet and by like Word of Mouth we can take and do a lot in this SP right I spend a lot of my time did I go out so I spent a lot of my time like doing advocacy reaching out to um you know governments and law enforcement agen genes and things like this and I think that one of the things that we should do as uh citizens of the nation is make sure that we talk to our leaders about this stuff um I see like a lot of the things that are going on today in the space is a continuation of the crypto Wars of the 90s uh you know we we basically uh decided with the Bernstein case in the United States that we can talk about cryptography and Export it without ammunitions license um and now we're going to take and decide whether or not we have the right to use it in a peer-to-peer ecosystem and we won't be able to do that unless people voice their opinions that they want to use that stuff so please do thanks for coming