Traceability: A Wolf in Sheep’s Skin From Amit Chaudhary - Labyrinth

[Music] hi everyone thanks for coming this is Amit and I'm here to present traceability of wolf and sheep skin uh the title might sound like a pretty wague but along the presentation we'll see how we're going to do privacy and compliance together on evm on ethereum I'm a founder of Labyrinth protocol so all of this the research which we're going to see all of the implementation uh is on testet do check it out and uh let me know my Twitter handle is in the bottom Amit CHX uh beside being a Founder I'm also a fellow at University of war and um the and I've been there with like nice people taking care of AI and blockchain together thank you um so let's talk about the Sheep right uh the Sheep is like I'm am traceability like everybody loves the Sheep uh why because it seems harmless uh you go to our uh ether scan that's what the Sheep is that's where the Sheep lies it's in every transaction is immutably recorded there everything is out in open it looks uh pretty nice our wallets are out there in open um pseudo anonymity is right out there but not anymore why because it's a wolf disguised in the Sheep because what this wolf can do your data lying around on the blockchain it can be misused it can be misused by for your personal details ever you can think like you what you are leaving on the public blockchains are the crumbs which can be picked anytime and later and all our um pseud anonymity is getting de anonymized in some centralized servers and you can't do anything about it there is no right to recall on uh blockchain because of it immutability nature and it creates a privacy nightmare lot of things which cannot be done on uh on public blockchains because of this cute nice little sheep out there it's it's clearly it's an Open Secret your wallet is an open book your account balance is public everything what you do your trade in investment salary the meme coin you have been buying instead of the token of the project which you are working on the midnight snack everything out is public you take a crypto card you start using in the coffee shop you're going to have a timestamped history of your historical coffee intake which also includes the location of a shop which you have been going it's a privacy nightmare believe me uh not many people wanted to use the public blockchain precisely due to this reason but there is another fact of this of the sheep this sheep is very secure as well we know ethereum we want to use ethereum we want to use the layer tws because they are secure we want to derive the security but we don't we want to derive the security while being private so here we come what's the flow of vulnerability uh it's obvious but still you do transactions it get recorded in public leisures and that they're out in open you people can data Harvest it can link and moreover we have started using ens we are deliberately tagging our identity to a publicly available ID it can be linked now you can look out at the Twitter your ens your wallet address your all the history is getting recorded what does it do it creates a nightmare around privacy exposure and it exposes you to lot of things um what happens when this wolf strikes and this is what happens if you can see uh various hacks The prominent reason sometime is that somebody is watching those wallets Somebody's Watching those large balances the accounts are public there have been lost billions of dollars using uh public uh accounting public Leisure people been prying on specific accounts and precisely they can do because they can see every move what the account does some numbers actually uh 2.1 Bill lost only in this year buit hack public safe wallet people knew they were moving money in and out how much money is there what was the time biggest hack similar hacks wazirx DMM play appap uh most of them are control exploits public visible wallets making very uh uh being hacked uh some of them are rug pulls as well what is a solution and uh there are various solution which is being proposed um I think you might have heard of mixers like jumble and Shuffle but they come with the Privacy night they come with they give you privacy but they give you the extreme form of privacy it's kind of a privacy which is also bit scary for good people because in mixers bad people can come and also join you AKA tornado cash it is nice technology everyone wants to use it but it is also very tricky uh for good users to use it for a long time because lazzara's group and the terrorists can fund themselves using that ZK proofs are the one of the technology that can verify without exposures but what we are working on is selective deanonymization combined with the ZK Tech that you can reveal only the bad apples so this is what the combination of privacy and compliance which we are doing and that's uh uh that's I think is the next uh iteration of privacy Tech so what what are we talking about in this uh balance uh we try to balance the zero knowledge technology with the selective Den anonymization like ZK you can derive privacy there has been various attempts to do so we use uh two three implementation combined in our technology what we what Labyrinth does it provides privacy on evm chain and arbitrary privacy which can be uh used by any other smart contracts you can privately swap Unis swap but this privacy is balanced using uh proactive disclosure of Secrets you can have specific transactional data controlled in a different setting which can be disclosed to any regulator so that's uh what it is um I have deliberately removed all the math um it's a you know sufficiently last day of a conference we don't want to get bored with the math but it is based on our like a long research which we have been doing from past few years it based on two papers they are on preprint one is white paper another is a protocol spec uh you can check it out but let me go through on the very high level what are we talking about in here uh so uh one thing I think which we were uh very uh certain about that some form of PIV any form of privacy which needs to be given the form of privacy needs to be given where users are that means we uh like I am and uh the people who I chat to they want to use privacy but they don't want to go to the different ecosystem they don't want to use privacy in a different chain wherever the users are you use your metamask wallet or any other XYZ wallet out there you can onboard the users directly from there and that's what it is all about the Privacy can has to be Deployable on where users are there is no red pill blue pill kind of a situation you either be transparent or pick private and go out of the system where you your friends are so that's how it begins uh onboarding through the regular um um cryptographic curves and then the user comes in through uh in a protocol which is um which is a protocol based on zero knowledge technology It's a combination of a classic protocol like uh zero cache in which zcash protocol is based so essentially what it does it it runs uh um a mini uh Bitcoin utxo related uh structures within the evm structures because with smart contract and zero knowledge you can do so uh the cost is a little bit high but we have hyper optimized the cost in that but that's not that's not that's not uh the end of it if you implement that in an evm compatible way you can now interact with any publicly deployed uh smart contracts for example the Unis swaps the staking Lending multi- bash transfer they all can interact with this middleware infra and make uh uh the transactions private um bit of an again um a very important point in privacy in here uh about gas fees it's an it's a non-trivial exercise to pay fees in privacy protocol because you want to be private but uh ethereum uh allows the fees to be taken from your public account right so what we have also done and that's their in the in the white paper as well is to combine the account abstraction within the Privacy domain that means imagine you have a private account this is the one of the private account which you can transfer and do this arbitrary smart contract uh calls then you can also pay the fees privately using account abstraction the last um uh uh the last part which I'm going to expand in next uh few minutes is about balances of compliance because all of this is what uh in enables uh people going dark like once you enter the system there's nothing there's no way you can break the cryptography U it's Quantum resistance uh fii uh and see like who who is doing what inside this uh so what we Implement is a decentralized compliance mechanism it's we are like completely against the phenomena of kyc because what kyc does is uh stores your data it's a centralized mechanism we are here to have like permission entry to the crypto or uh the world of ethereum or the world of blockchain and kyc is completely opposite so what we have done and that's the second part of our research the second paper which you saw earlier is to have decentralized compliance which is the selective disclosure uh uh of uh Secrets happening within this multi-party network I'll go through the very brief overview what is this uh selective deanonymization um why it is a better part to privacy and compliance to together uh the basic design principle in this is uh privacy should be non-negotiable the by default user shouldn't have to expose every transaction just to say compliant that's what the driving thesis is um but we also want to have some accountability in the mechanism that means Regulators some if they demand certain accountability how can we make it happen so what selective Den anonymization network does is it's private by default for honest user but it gives a way to have disclosure of data or disc disclosure of your private actions when there is a suspection going on through uh one of the entity which you trust that means there are multiple parties in the system Guardians and rokers which we call which can make the legitimate transaction hidden and illicit transaction get uncovered using using this protocol uh I'll go through the very high level again what is uh what's the decentralized compliance Network which we have uh built it operates this network operates within a independent rokers and Guardians the what's the problem statement we go back if you remember the previous slides we show we show uh we showed that uh all the users uh might not be the good users so you can see on the slide some of those red users those are like can be malicious actors can be uh Lazarus group can be the hackers but what are what is the Privacy protocol does it hides the all the transactional graphs the the next picture right but these people uh are doing some transactions inside this privacy protocol we want to decrypt only that data and that's where the revoker comes in the protocol enables user to actually give enough guarant anes or enough commitments to the revoker which the uh which the user can choose and those rokers if the suspect that user is doing something can request the network and the network is an the guardian Network which you call it's a permissionless network uh set of nodes uh built on the Zero knowledge uh MPC threshold Network which can requ they can the recers can request to the network look this is the transaction hash which which is completely private but I want some details of it like I want the transaction graph like the red thing which you just saw so the network can return the transaction decrypted transaction data but there are critical feat critical uh features which we also uh Implement about accountability here in this system um here in this system in this graph the rokers cannot get the data as you can see without the without uh passing through the network and this network also cannot see the data independently without getting a request from a revoker and these rokers remember are uh chosen by the user so user has full control it's like what we are what we can see is that a user own privacy user have a full control who to delegate this responsibility of decryption or deanonymization but remember these are three parties uh three-party system everyone has has accountability in it so just uh just to summarize like you know what are the agents which we are looking in this network the rokers they initiate request and uh the request are uh verifiable and they are public that means uh you cannot be decrypted in the public there cannot be any surveillance like State because when the revoker the one do who you have chosen uh posts the request it's on the public Bulletin so anyone can see they can be entities like chain analysis trm lab or maybe some Dow but they uh they are chosen by the people or the users of the protocol and the Guardians here Vote or approv the deanonymization it's a kind of a threshold network but with much more properties Associated um and and remember Guardians cannot see the transaction detail one of the great analogy in this system is like an onion think of your data as a center core of onion and one uh uh one uh layer are the rokers which the inner core or the user chooses and there are multiple layers of the onion you see that onion uh layers and these layers are Guardians so when the request come the unraveling of data happens and even if all the Guardians come together the inner core is guarded by the revoker and then the revoker choose to decrypt and pass on the information privately to other so that's how that's how this works at a high level um so what are the core properties of the decentralized compliance because privacy we have um you know we have we we have given through the zero knowledge implementation on evm the first major property which the network derives is accountability accountable privacy user do face deanonymization if they act maliciously that means any misbehavior or a suspection of a large hack or very illicit funding can lead to loss of privacy so good users are satisfied that bad users are going to be decrypted and they are going to be shelled out of system that's how that's how it works in equilibrium second is accountable deanonymization that means rokers are responsible to decrypt but they cannot decrypt anyone in hiding there has to be a public request there cannot be unauthorized actions and Guardians cannot reveal the transaction data if of the users because user trust Guardians to keep the secrets not to re to and to reveal the secrets but not to see the secrets so this is a very specialized Network which makes it enabled and the third part and that's an again zero knowledge combined with the MPC is the non- fabrication that means honest user cannot be falsely accused how does like what's an example one way which can happen is that the revoker and the guardian come together and then say like you know you this data which is getting decrypted it shows that you are a malicious actor maybe the balances comes from this hack but they cannot uh fabricate this because user data which is being enabled on let's because the protocol let's say is on ethereum right now which is currently deployed there uh that data is getting verified or zik through this Guardian protocol so there is a there is a verification happening that's why I said like it's a ZK MPC kind of a network um yeah uh we are on test net check it out I think you cannot see but it's like a privacy decentralized compliance Explorer where you you can see uh some of the hashes which goes through the transactions some of the transactions and some request uh Labyrinth is on testnet check it out we have in we have integrated some of the major protocols like unisoft a uh curve and others you can do transfer sending liquidity staking liquidity Pool Management uh it's all the wallets are being supported major it's also supports ens you can send money to someone using the ens right if you know the other person's enss um actually it's also based out of SDK so what we are planning to roll out SDK pretty soon so that other builders can develop upon it build their own uh make their own smart contracts private on where they have they have deployed that and it comes with inbuilt compliance attached which is this dcom network so that's how it balances privacy with compliance yeah check it out like you know it's a like we have been doing it for like uh like few few like one and a half years and it would be super nice to get a feedback yeah are you ready for a transformation um feel free to uh check out the the website this is a QR code of website it's labin doac and if you have any questions uh shoot me a DM on Twitter or or even or on protocol handle thank you