Berlin, May 25, 2023.
Today, we are excited to share two related, yet distinct announcements concerning our strategic partnership with the Mina Foundation, a public benefit corporation serving the Mina Protocol, which is one of the leading zero-knowledge proof protocols:
The completion of a functional prototype using zkApps, Mina Protocol's novel zero-knowledge powered smart contracts, that demonstrate how it is possible to conduct privacy-preserving, yet regulatory compliant payments between two users.
We are also excited to announce that etonec has been awarded a grant from the Mina Foundation to integrate the learnings from the functional prototype to build a state-of-the-art zero-knowledge proof solution (zkp-ID) with Know Your Customer (KYC) and Anti-Money Laundering (AML) functionality. This solution will be integrated within the Lumina DEX, a decentralized exchange (DEX) built on the Mina Protocol, to help satisfy regulatory needs without sacrificing user privacy. Lumina DEX will be one of the first DEXes that actually use zero-knowledge technology in this novel way.
For more details, you can find the full press release here.
For this blog, we will take a step back and give more context around the problem we are addressing and how we will develop our solution.
Privacy Trilemma
You might know the well-known concept of the blockchain trilemma that involves the trade-offs between three major aspects: security, decentralization, and scalability.
Currently, we have been observing that the use of decentralization is growing at the same time that compliance requirements are increasing just as the demand for privacy is as high as ever. We see a new kind of trilemma evolving, a “Privacy Trilemma”, that revolves around trade-offs between decentralization, compliance and privacy.
Specifically, we have seen that
Compliance traditionally has not always been compatible with privacy and confidentiality, because regulation usually requires the sharing of clear text data from users with authorities.
Decentralization traditionally runs counter to compliance, because of challenges to fully regulate decentralized applications, self-hosted wallets, and decentralized autonomous organizations (DAOs) and the like.
Privacy is not traditionally compatible with decentralization, because in many cases data is stored on permissionless, open, decentralized ledger. Would you want to have your salary or business transactions posted on an open ledger for all to see? Probably not!
Our novel solution, which we are calling “zkp-ID” will help address the trilemma by enabling companies to achieve compliance while preserving privacy in a decentralized manner.
As we build out the solution, we see three key elements required to solve for this privacy trilemma:
Zero-Knowledge Proof technology (with Mina’s zkApps) to ensure data integrity and authenticity without exposing confidential information.
Self-Sovereign Identity concepts to help to answer the question: “How can we securely issue, validate and store identity credentials in a decentralized manner?”
Identity Orchestrator which acts like a ‘smart engine' that determines which rules are applicable for a given transaction taking into account various inputs like size of transaction (thresholds), type of digital assets, jurisdictions involved, etc. You can think of it like “programmable compliance” where one can easily adapt the workflow that initiates the next best step depending on the use case.
We look forward to our continuing partnership with the Mina Foundation and will be sure to keep the community updated on our progress. Please feel free to reach out if you have any questions or would like to partner with us!
Onwards!
The etonec team