Zcash Whitepaper - Decentralized Anonymous Payments from Bitcoin

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Zerocash: Decentralized Anonymous Payments from Bitcoin
  • Eli Ben-Sasson
  • Alessandro Chiesa
  • Christina Garman
  • Matthew Green
  • Ian Miers
  • Eran Tromer
  • Madars Virza
Abstract

Bitcoin is the first digital currency to see widespread adoption. While payments are conducted between pseudonyms, Bitcoin cannot offer strong privacy guarantees: payment trans- actions are recorded in a public decentralized ledger, from which much information can be deduced. Zerocoin tackles some of these privacy issues by unlinking transactions from the payment’s origin. Yet, it still reveals payments’ destinations and amounts, and is limited in functionality.

In this paper, we construct a full-fledged ledger-based digital currency with strong privacy guarantees. Our results leverage recent advances in zero-knowledge Succinct Non-interactive AR- guments of Knowledge (zk-SNARKs).

First, we formulate and construct decentralized anonymous payment schemes (DAP schemes). A DAP scheme enables users to directly pay each other privately: the corresponding transaction hides the payment’s origin, destination, and transferred amount. We provide formal definitions and proofs of the construction’s security.

Second, we build Zerocash, a practical instantiation of our DAP scheme construction. In Zerocash, transactions are less than 1 kB and take under 6 ms to verify — orders of magnitude more efficient than the less-anonymous Zerocoin and competitive with plain Bitcoin.

Introduction

Bitcoin is the first digital currency to achieve widespread adoption. The currency owes its rise in part to the fact that, unlike traditional e-cash schemes, it requires no trusted parties. Instead of appointing a central bank, Bitcoin leverages a distributed ledger known as the block chain to store transactions made between users. Because the block chain is massively replicated by mutually-distrustful peers, the information it contains is public.

While users may employ many identities (or pseudonyms) to enhance their privacy, an increasing body of research shows that anyone can de-anonymize Bitcoin by using information in the block chain, such as the structure of the transaction graph as well as the value and dates of transactions. As a result, Bitcoin fails to offer even a modicum of the privacy provided by traditional payment systems, let alone the robust privacy of anonymous e-cash schemes.

While Bitcoin is not anonymous itself, those with sufficient motivation can obfuscate their transaction history with the help of mixes (also known as laundries or tumblers). A mix allows users to entrust a set of coins to a pool operated by a central party and then, after some interval, retrieve different coins (with the same total value) from the pool. Yet, mixes suffer from three limitations: (i) the delay to reclaim coins must be large to allow enough coins to be mixed in; (ii) the mix can trace coins; and (iii) the mix may steal coins.1 For users with “something to hide,” these risks may be acceptable. But typical legitimate users (1) wish to keep their spending habits private from their peers, (2) are risk-averse and do not wish to expend continual effort in protecting their privacy, and (3) are often not sufficiently aware of their compromised privacy.

To protect their privacy, users thus need an instant, risk-free, and, most importantly, automatic guarantee that data revealing their spending habits and account balances is not publicly accessible by their neighbors, co-workers, and merchants. Anonymous transactions also guarantee that the market value of a coin is independent of its history, thus ensuring legitimate users’ coins remain fungible.
 
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