Thank you everyone for still being here. I know this is uh one of the last few talks. So we're going to talk about private stable coins. So quickly on the agenda we're going to talk about why privacy is necessary. And then the second part we're going to talk about difference between anonymity and confidentiality.
And the third part we're talk we're going to talk about compliance how to think about compliance and privacy. And last part what are the different types of privacy and their UX trade-offs. So this is from the paradigm try to fight tomorrow reports. They interviewed over 300 institutions and turns out privacy is a top three reason why institutions are still not using blockchains and defi. The first two are basically risk right uncertainties and the second one is really around regulations.
So it turns out privacy actually is a pretty big deal for institutions. And so if you think about the blockchain space, right, we want transparency, which is really good for anything related to security, make sure that nobody's cheating, but privacy is also necessary for mainstream adoption. So by show of hands, who here holds stable coins or uses stable coins? Yeah, pretty much everyone here, right? Um, but think about this, right?
What if I can I can always see what you're doing on chain? What if I can always see your bank accounts, how much you're making, what are you buying, right? This would not be basically suitable for mass adoption. Imagine on boarding a billion people today fully on chain. You'll be social chaos.
You'll see what everyone's doing constantly. And so clearly there needs to be some kind of balance between the two. Um, okay. It's a little bit uh we're formatting here, but most most people actually don't realize that privacy actually has many flavors. There's confidentiality and there's also anonymity.
So I'll dive a little bit deeper into the differences here. So let's start with poly blockchains. So what do we have today? We have transparent addresses and transparent amounts which is your balance. If Al sends money to Bob essentially it will be fully in plain text and this is constantly in plain text meaning that you can always see how much everyone's sending, how much everyone owns.
So what is anonymity? Anonymity is when you hide the user balance, but also the amount they're sending and also basically who you're interacting with. And so because you have anonymity, essentially you can hide uh the fact that Alice has some money to Bob for whatever reason. And this amount actually can be in plain text because you are breaking the linkage between the sender recipients, right? So I want to make this clear distinction because we're going to go over the opposite after.
So what are some good example use cases where you want anonymity? So think about if you visit a hospital, right? Do you really want to show the world that you went to the hospital? Probably not, right? So you probably want anonymity.
What if you want to make a political donation, which is can be very taboo. There are literally families that basically fight over this, right? So you don't want to show which party you have donated to. So this is why you need anonymity for payments. And some example projects that that offers anonymity anonymity include tornado cache, real gun or Aztec.
So what is confidentiality? Confidentiality is when you hide the amount and so you can think of it as hiding specific metadata. So in this case we're hiding the amount that people hold on chain but also the amount that you're transferring out. So when Alice sends money to Bob, Alice can also hide the amount uh that she's transferring to Bob. Right?
So we're hiding the balance. while also hiding the amount that you're transferring. Now, you want to know that the flow of funds is actually traceable in this case, meaning that you can see fully on chain who is transferring money to whom, right? It's only the amount that's being hidden. So, kind of like a Venmo uh in the US or Revolute I say in Europe.
And what are some good example use cases where confidentiality is suitable? So, payroll, right? If you know who the employees are, uh you just want to hide the amount being paid out, then confidentiality is actually enough or supply chain. And I think Coca-Cola is probably the the best typical example for supply chain. We know who the suppliers are.
We just want to hide the amounts uh that we're sending out to to these different suppliers. So example projects include, you know, Sana confidential transfers. Avalanche has this EERC and then, you know, we have the show tokens at Ingo. So we should really think about privacy as a spectrum. On the left side, you have commiti, which is the more vanilla version of privacy.
you're only hiding the amount and on the right side you have anonymity which is really untraceability to cash and you're really breaking the the linkage between a sender recipient. Is there something in between? Yes. So we also think in unlinkability is another interesting uh category of privacy. So what is unlinkability?
So we can utilize something called stealth address. The way this works is Alice would look at Bob's public address and derive a stealth address for Bob and so then Alice can send the money to this stealth address which using Bob's public key he'll be able to claim this amount. So one example project is flu key and you can also basically uh swap out the the plain text transfer with a confidential transfer. But so you might ask wait a minute like so what's the difference between entraceability and unlinkability right it sounds kind of the same and the reality yes you can achieve the same use cases as anonymity using a stealth address. The difference here with unlinkability is that you're actually creating a separate wallet for Bob uh that Bob can claim but you are sending basically money to that separate address.
Now note that the flow of funds are still traceable meaning that if chain analysis were to plot the entire flow of funds even with unlinkability you all you're also basically uh plotting the entire flow of funds right so this is still a terrible tool for money laundering but it it does achieve uh additional privacy so we'll probably place unlinkability here somewhere in the middle so by using confidentiality plus stealth address we effectively can move down the right curve in a degree of privacy so what is the right approach for your application whether you're building like a payment app uh commerce etc right how to that really depends on your use case and also the level of compliance performance that you can make so what do I what do I mean by this obviously with a more vanilla type of privacy confidentiality there's a lot less risk because all the flow flow of funds are traceable the odds of someone using your uh confidentiality app for money laundering or laundering stolen funds are going to be a lot lower because all the flow flow funds are traceable. What they will be looking at is probably something like anonymity like tornado cash. The ability to break the linkage between the sender recipients to more effectively launder their funds. Right? So this really means that if you are offering anonymity, you should really think about how can I best enforce risk management and compliance by maybe doing KYC KYB uh maybe making sure that anyone on the OAC list should not be able to use your application etc.
So, Ingo, we provide this full stack suite of privacy to really just enable compliance and private payments across the stack. So, we offer confidential tokens with different degrees of of privacy. We're also working on a separate product for anonymity for folks who like I said before can enforce compliance uh down the line. So, Ingo is a confidential compute layer for existing blockchains. We enable confidentiality to existing blockchains like Ethereum, Solana, Arbitum, Avalanche, etc.
So why is our approach unique compared to existing privacy solution? So we're not an app specific protocol like cache. We're not a separate L1 and L2 where you have to convince users to move over move over to a separate chain. We're not a private blockchain like Hyperledger where you know obviously it's very siloed. You don't talk to existing user base and liquidity.
And we're also not a privacy chain like Zcash that doesn't have smart contract capabilities. So Inkco really is a combination comput layer for existing blockchains where you get to tap into existing liquidity user base and PVL. So last year we published a uh research piece with circle research proposing a new confidential token framework and this is really focused on um privacy and compliance and in this paper we recompare two types of solutions. So one is commitment based solution and the other one is encryption. So what I mean by commitment you can think of a ZK based solutions and then encryption would be MPCF HTT.
The first part that we noticed is that with a commitment based solution typically the decryption rules are a lot more rigid. This is because every single user has their own private key for viewing, right? And so when Bob sends money to Alice, Bob has to specify Alice viewing key during the proof generation. And so only Alice can view her view her own balance. But what if you need to do to do taxes or delegate view into chain analysis or the garments?
It becomes very very rigid. Uh on top of it, you do have to download typically a separate wallet to custody that viewing key. In our case, because it's encryption based solution, it's effectively a share key. So all the decryption rules are fully on chain and so you can always change the rules by casting a transaction or via governance. But it's also the most flexible engine.
So what if I need to delegate viewing to the my accountant uh the treasury department of my company or for a issuer track the velocity of stable coins. The other property that we realize that the combination token has that's very unique is around composibility. So just like a ERC20 or SPL token on Sana that basic primitive can be used to build things like AMMs, money markets, governance etc. So the combination token because it has composability you can effectively achieve the same uh UX essentially people will be able to extend this token to build DeFi uh streaming payments confidential voting etc. And if you wanted to go even more specific in terms of transfer rules, imagine having a identity module that's confidential where I store user, you know, credit score, geographic location, uh, transfer limits, and that you can still program transfer rules without revealing the actual private information that a user has and still be able to basically, uh, program these, uh, compliance and different type of UX.
uh we we also enable folks to encrypt their invoices, memos, etc. And with that, we actually so created a new combination token association in coordination with Zama and also open Zeppelin. Uh highly, you know, encourage folks who want to contribute to the standard to to join us here. Uh I do have a quick demo. Um so in practice, oops.
Okay, maybe the view is not playing. Uh we're also short on time so just wanted to quickly explain this. So basically the way this works this is a demo on basipoleia. Essentially you have a rubber contract on basipoleia. You can send USDC to this rubber contract which turns into a confidential USDC and from there you can basically send a combination amount to different parties.
So imagine for payroll you can just wrap 100k worth of USDC and send combination amounts to different employees that in turn can decide how much they want to unwrap. uh just quickly what's the difference between uh our confidential token versus uh I would say something like uh commitment based confidential token. So uh first of all we're compatible with existing wallets and tools because there's no viewing key concept. It's a share viewing key. We enable flexible decryption rules.
It lowers the cost as well because there's no ZK pro verification and it's fully composable so you can build other things on top versus commitment based uh combination tokens which you know typically everyone has their own viewing key. So you you have to constantly this maybe with the new wallets. Uh it's a more rigid decryption rules. There's a higher cost associated with this because of ZK verification and there's also a lack of composibility. So you know we can think of privacy as you know these four different uh axis uh with you know on the top left corner you have anonymity and permissionlessness which is you know Zcash cache ASC and then on the bottom left you have confidentiality and permissionlessness which are swana commission token avalanche erc uh and zther ato what we maximize the most I'll say is programmability and compliance because we want to rem maximize for you to customize all sorts of business logic, risk management, uh and and basically uh flow business flows and uh we do offer privacy across the entire spectrum from confidentiality all the way to anonymity.
So um yeah, if you're interested in chatting with us for potential integrations uh or do any joint pilots uh for your use case or just do research and explorations, we're happy to chat with you. Uh our team members are here for the next week or so and obviously yeah, feel free to reach out reach out to me on Telegram uh or via email. Thank you.
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