One of the main selling points of cryptocurrencies is the fact that they offer a superior degree of privacy when compared to traditional fiat currencies. As such, Bitcoin, Ethereum and the like are all semi-anonymous, meaning that users do not have to share any personal data. Regardless, the blockchain network publicly stores information on all past transactions, alongside current address balance.
Because of this, analysis ofblockchain activity can detect patterns, and trace funds back to their owners. Thisisn’t often the case, but it remains a factor worth keeping in mind if you are extremelyconscious about your privacy. Recent reports indicate thatJPMorgan Chase is actively working on a solution that would enhance the overallprivacy of Ethereum transactions. According to its blockchain team, the privacyfeature is capable of hiding the amount of coins being sent out, alongside whothe sender is.
The tool works as an extension toZether, which is a decentralized payment mechanism that aims to increaseoverall privacy for Ethereum and other smart contract-compatible blockchains. Zetherwas developed as a joint effort between the Visa Research department, and theStanford University. It achieves extra privacy by leveraging zero-knowledgeproof to verify transactions.
According to JPMorgan, theirsolution will be released as an open-source tool that can be trialled directlyon Quorum, JPM’s permissioned blockchain running on Ethereum. As part of theannouncement, the chief of Quorum, Oli Harris, stated: “In the basic Zether, the account balances and the transfer accounts areconcealed but the participants’ identities are not. So we have solved that. Inour implementation, we provide a proof protocol for the anonymous extension inwhich the sender may hide herself and the transactions recipients in a largergroup of parties. (…) The performance is quite good; we had done multipleiterations to improve it and we are doing the verification in solidity smartcontracts. We’ll be including in our report the performance measurements forproving and verification.”
It is important to keep in mindthat there is a key difference between the payment architecture employed by theZether protocol and Bitcoin, for instance. As such, it relies on anaccount-based approach, rather than the unspent transaction output utilized bythe bitcoin blockchain. This means that the tool isn’t targeted to the masses,but rather it will help enhance privacy for transactions carried out withinenterprises on smart contract-enabled blockchains.
It is not yet known whetherJPMorgan plans to release the tool to the public in the future. Regardless,there are several other work-around strategies meant to improve privacy forbig-name cryptocurrencies. Additionally, the market already has privacy-focusedaltcoins, such as Zcash, which promise complete anonymity for all transactionsbeing carried out.
Based on everything that has been outlined so far, this recent event showcases that banks throughout the world are well-aware of the potential offered by blockchain technology and cryptocurrencies. After all, JPMorgan’s blockchain development team is also working on its very own stable crypto, the JPM Coin.
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