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Privacy with Compliance in Mind: A Deep Dive into Elusiv's Privacy Solutions in the Age of Transparency

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FT
April 19, 2023

When it comes to transparency, blockchain technology is a total game-changer.

Here's how it works: every time someone makes a move on the blockchain, like buying a new pair of sneakers or sending money, that action is recorded on a digital ledger that everyone in the network can see.

That's right, every. single. action.

This creates a system where every transaction is transparent and visible to all.

It's like having a super-powered surveillance camera on every single move made on the blockchain.

This transparency reduces the risk of fraud and enables new possibilities, like decentralized finance, supply chain tracking, and digital identity verification, among others.

And that's a good thing!

…right? right?

Well, yes, of course. 😅 But like all good things, it can come with a cost.

Or as I would put it in this context—it can come with the cost of our privacy.

Transparency is often seen as an opposing concept of privacy—transparency involves making information available to others, while privacy involves keeping information hidden or confidential.

Individuals may feel their privacy is being compromised in the pursuit of transparency.

So admittedly, there can be some tension between transparency and privacy.

And as blockchain technology pushes for transparency at new heights, this raises grave concerns for the protection of our privacy.

Blockchain’s Privacy Problem

To better understand this concern for privacy in the blockchain, let’s meet Vicky and Weirdo.

Vicky is your average blockchain enthusiast, always on the lookout for the latest and greatest in decentralized technology.

Weirdo, on the other hand, well, let's just say he lives up to his name.

One day, Weirdo posted his digital art online. Vicky was immediately drawn to it and reached out to him to purchase it via blockchain. They made the transaction without a hitch, and everything seemed fine.

But here's where things get interesting.

Weirdo took a liking to Vicky and he tried to reach out to her again on chat. However, Vicky was no longer interested in talking to him. Weirdo, being the creepy stalker he is, decided to check the blockchain to see if he could find any information on Sandy.

And what did he find? He found a trail of transactions that led him straight to Vicky's wallet addresses.

He saw that she had

  • purchased a Stress Ball band concert ticket in Palo Alto this weekend,

  • bought a limited-edition Tiffany Baguette bag, and

  • made a payment to Candelaria Hotel

So with the information he gained from Vicky's transactions, Weirdo decided to take his chances and go to Candelaria Hotel on the day of the concert.

A few hours later, Weirdo spotted a girl wearing a limited-edition Tiffany Baguette bag—the same limited-edition bag that Vicky had purchased.

Instantly, he jumped in front of her and said,

"Hi, I'm Weirdo, the artist for the art you bought online. Glad I caught you here, you weren't replying to my chats."

Okay, this story may sound extreme, but you get the idea—there is a grave need for privacy solutions in the blockchain. Because, if this ain’t screaming PROBLEM, I don’t know what else is.

Fortunately, Elusiv solves this problem.

ELUSIV AS A SOLUTION

What is Elusiv?

  • Elusiv is a blockchain-based, zero-knowledge privacy protocol enabling users and applications to access universal encryption

  • It combines privacy with safety by offering compliance-in-mind next-generation privacy solutions for a better Web3.

  • It overcomes a central Web3 pain point: ensuring privacy remains a human right without sacrificing security, safety, and decentralization.

If blockchain, Web3, zero-knowledge, and privacy protocol are all new to you, this may sound gibberish.

So if it helps, for now, think of Elusiv as like an invisibility cloak in the decentralized world.

Just like an invisibility cloak allows a person to move around unseen, Elusiv allows users to make transactions on a blockchain without revealing their identity or transaction history.

How does Elusiv work?

If blockchain technology creates a system where every transaction is transparent and visible to all members of the network, Elusiv helps to break the link between transactions.

Okay, let me just show you.

So this is what Weirdo can see by default on the blockchain:

And this is what Weirdo can see on the blockchain if Vicky was using Elusiv for her personal transactions on-chain:

As you can see, with Elusiv, the link is broken from the observer’s point of view.

Needless to say, if Sandy was using Elusiv in any of her personal transactions, she could’ve avoided that creepy encounter.

But really, how does Elusiv work?

I see you’re interested in the intricate details of Elusiv’s technology.

Well, here’s a simplified explanation (with animation!) of how Elusiv works under the hood.

But if you’re more of a reader, here’s a comprehensive explanation of Elusiv’s technical specifications.

Now, you might be wondering, how can we trust Elusiv to keep our transactions private and secure?

Elusiv is open source, which means that anyone can review the code and contribute to its development. This helps to ensure that the protocol is transparent, trustworthy, and constantly evolving to meet the needs of its users.

In addition, Elusiv is audited by OtterSec with all vulnerabilities successfully resolved. You can see a copy of the audit report here.

How does it compare with other privacy protocols?

Decentralized privacy protocols are nothing new. Some of these are Light Protocol, OtterCash, TornadoCash, Zcash, Monero, Decred, and SecretNetwork.

So why do we still need Elusiv?

In a podcast episode of "The Cove”, Nico, co-founder of Elusiv, explained how the company is focused on addressing three pain points that other privacy protocols are failing to address:

  1. Price point - Elusiv sees privacy as a human right and believes that achieving privacy should not come at a high cost. The team aims to eliminate any friction to achieve privacy, which is one of the reasons why they are building on Solana, a fast, cheap, and efficient blockchain.

  2. Composability - The team envisions integrating the Elusiv protocol on all crypto wallets to further eliminate any friction in achieving privacy. This would allow users to access privacy right then and there.

  3. Compliance - Elusiv places a high value on compliance and believes that privacy should not come at the cost of non-compliance. For this reason, the team has designed compliance tools and anti-money laundering systems that enable secure privacy.

Elusiv’s Compliance Components

Elusiv's team aims to provide great user experience while making it difficult for people who use the platform for illicit purposes. To achieve this goal, the company has designed several key compliance components:

  1. Proof of Origin - This component allows senders to prove that the source of their funds is not illicit.

  2. Proof of Identity - As the flip side to Proof of Origin, this component allows recipients to protect themselves from transacting with people who have "dirty" funds. The system is designed with the concept of certificates, which can prove that a user has been KYC'ed without revealing any personal information.

  3. Capping send amounts - This is a conventional way to prevent money laundering and other illegal activities.

  4. Flagging system - The flagging system monitors transactions in the relayer system and identifies patterns or characteristics that may indicate suspicious activity. When a commitment is flagged as suspicious, the protocol penalizes the user with lower anonymity sets. The team has clarified that flagging rules are initially defined by the team and the community, but will eventually be managed via DAO proposals to ensure the system is not misused for censorship.

Plus here are a few more details on how Elusiv makes compliance empowering.

Overall, Elusiv's compliance components reflect the company's commitment to providing a secure and reliable platform for blockchain transactions. By combining cutting-edge technology with robust compliance measures, the team is well-positioned to attract users who value privacy, security, and regulatory compliance.

Step-by-Step Guide to Elusiv

If you've read this far, I'm sure you've already taken an interest in Elusiv, so I highly suggest you just try it out for yourself.

While the platform's interface is already pretty intuitive, here's a step-by-step guide to getting you started:

1/ Go to app.elusiv.io and connect your chosen wallet

2/ Click “Get Started with Elusiv” and approve signature on your wallet

3/ Top up private balance (you can skip this if you already have enough on your private balance)

Important: It’s best to top-up private balance that is different from the amount that you will privately send so observers can’t take a probabilistic guess and link your transactions from Elusiv’s shared pool.

4/ Send privately from your private balance. You will need to approve signature twice (one to trigger send and another to confirm send)

Important: It’s best not to privately send tokens immediately after private balance top-up so observers can’t take a probabilistic guess and link your transactions from Elusiv’s shared pool.

5/ Done! You can check your confirmed transactions under ‘Transactions’ tab

You can also then check on blockchain explorer to confirm that it was indeed sent privately. As you can see here, only the 10 USDC top-up to private balance is reflected in the sender’s wallet.

And the receiver’s wallet successfully reflected the receipt of 5 USDC, without revealing any sender’s info.

Key Features

Elusiv just recently launched Mainnet Beta in early March but the following features are already available:

  • Privately send SOL, USDC, and USDT

  • Pay your transaction fees directly in the SPL token you’re sending privately (currently USDT or USDC)

  • Viewing Keys (i.e. users can generate viewing keys to provide access to specific data that authorities may require without exposing their entire history)

  • Solana Pay integration

  • Custom RPC

  • Optimized transaction fees

  • Compliance Explorer

  • Night mode 😎

With more features coming soon!

The Future with Elusiv

Crypto mass adoption is not a question of if, but rather a matter of when. But needless tos ay, mass adoption is out of reach until privacy risks are addressed and solved.

By addressing the concerns and needs of both regulators and users, Elusiv is building trust and confidence in its platform, which could in turn attract more users and drive adoption. With everything Elusiv has to offer, I believe Elusiv is very well poised to be at the forefront of consumer crypto adoption.

References:

Privacy vs. Transparency by Sunil Abraham