The programmability of Ethereum makes it one of the most popular blockchains. Therefore, how to maintain privacy during the transaction has become a most important issue. Given that developers are constantly building new DApps and smart contracts on the blockchain to automate daily tasks, ensuring your privacy integrity on Ethereum will be a wise choice. Fortunately, you have multiple options to help you maintain anonymity and protect your digital assets.
The introduction of Bitcoin and blockchain technology has paved the way for other important inventions in the field of cryptocurrency. The most important one is the Ethereum blockchain.
Vitalik Buterin is the brain behind the Ethereum blockchain, and its purpose is to eliminate third parties on the Internet. Vitalik launched Ethereum in 2015, which is not a remake of Bitcoin, but a completely different generation of blockchain technology. The technology can perform various tasks, such as pushing peer-to-peer contracts through “smart contracts.”
Ethereum is a public blockchain, which means it excludes any transaction intermediaries on the network. Although Ethereum is very popular, due to its unique features, many cryptocurrency enthusiasts will think that public blockchains cannot provide the same privacy and confidentiality as private blockchains. So is there such a problem in the Ethereum blockchain? If there is indeed such a problem, how do you protect privacy when trading on Ethereum? Please continue reading this guide for practical answers to the above questions.
Ethereum blockchain
Ethereum is one of the most popular blockchains, thanks to its programmability. Since its launch in 2015, blockchain has been working to build the foundation for a new generation of Internet. Through Ethereum, developers can build a network that allows users to own their own data, access open financial systems, and implement secure currency and payment transactions without being controlled by any central entity.
Ethereum’s native currency is similar to Bitcoin in many ways. ETH is a digital currency and is decentralized. Since its launch, users have been using this currency as a value carrier for collateral and payment operations. In addition, it also needs to pay for computing services and transaction fees through Ether gas to provide support for Ethereum.
The Ethereum blockchain is similar to Bitcoin in that they all store transaction history information in a public shared account book. However, the most significant difference is that Ethereum is programmable and can be used as a platform. Ethereum uses a “Turing complete” programming language. Through this language, developers can implement different programs that allow the automation of blockchain transactions and specific results. Therefore, blockchain users can use ether tokens to create smart contracts and DApps. Ethereum nodes will store the latest status of smart contracts, as well as other transactions on the network.
The pseudonymous nature of Ethereum
Ethereum, like Bitcoin’s blockchain, is pseudonymous. This means that users can conduct transactions on the blockchain without providing names, contacts or any identification information. Each pseudonym (unknown user) on the blockchain has their public and private keys used for transactions.
This is also where Ethereum differs from other blockchains. Most blockchain networks will use public key infrastructure (PKI). PKI will use a certificate authority to connect the user’s public key to his true identity. This relationship is critical to the blockchain because users need to use it to perform all transactions involving digital certificates. On Ethereum, the connection between the public key and the pseudonymous identity only becomes particularly important when the user chooses to expose his pseudonym (for example, when providing some public services).
Unfortunately, smart contracts built on Ethereum have some privacy flaws. The most obvious obstacle is that the contract code is hosted on a public blockchain. Therefore, smart contracts will require users on the blockchain to check and verify procedures before deployment. Further, the confusion in the process becomes a challenge.
Because everyone on the blockchain can access the program code, smart contracts lack confidentiality and anonymity. Confidentiality refers to the ability of a program to hide the amount of digital currency in a transaction. Anonymity refers to the program’s ability to protect the identity of the sender and receiver.
These shortcomings have caused special attention from users on the Ethereum blockchain. So is there a way to protect your privacy when trading?
Ethereum transaction privacy solution
The good news is that there are several solutions you can try. You don’t have to compromise on your privacy and confidentiality, you can also use Ethereum to conduct transactions. Here are some ways to protect your privacy.
1. Use BitcoinMix.org
BitcoinMix.org is a cryptocurrency shuffler that can help you maintain anonymity on the blockchain. BitcoinMix will confuse your digital currency so that you will not leave any clues about identity on the blockchain. When you trade on Ethereum, it comes in handy.
The following is the specific process. For example, when a user on the blockchain sends you some ether. You can send these tokens to BitcoinMix.org and then mix them with other users’ digital currencies on Ethereum. Then, the shuffler will send the money to your wallet after charging 2-5% of the small transaction fee. BitcoinMix will delete all logs after sending new tokens to ensure your anonymity.
2. Aztec Protocol
In February of this year, Aztec was launched on the Ethereum blockchain. Aztec is based on Z-cash and uses encryption technology to provide a high level of security. The agreement uses confidential tokens that hide the amount of private tokens for this purpose. In addition to providing a high level of security, the protocol can also reduce transaction fees on the blockchain.
Aztec Protocol allows users to conduct private transactions in two ways. They can use Aztec to design tokens that support anonymous transmission, or create private versions of existing tokens on Ethereum. The protocol then converts the tokens into notes, which are encrypted representations of the tokens. Whenever users send tokens, Aztec will encrypt them into a note as proof of correctness. Therefore, the recipient account will not be able to see the token information. The sender can keep the note as proof of the amount and token sending address.
Aztec plans to enhance the privacy of Ethereum by hiding senders and receivers and completely privatizing smart contracts.
3. Hopper
Like BitcoinMix.org, Hopper is an obfuscator, but its mechanism of action is slightly different. The open source obfuscator smart contract allows users on the Ethereum blockchain to use iOS devices to enhance the privacy of their transactions.
With iOS devices, you can alert Hopper to let them know that a payment from a specific address is being transferred. You can then transfer a specific amount to the obfuscator, which can be the same as the amount sent by other users. Hopper also has a similar amount of Ethereum fund pool, and its transfer-out destination will be kept confidential. As more and more users deposit Ethereum tokens, your anonymity will become higher and higher. You can then use the application on your device to send funds to different destinations. You will need to provide proof of zero knowledge before the withdrawal is approved.