Software engineer and privacy advocate Nicholas Gregory recently sat down with CryptoSlate to discuss Bitcoin privacy and the development of the privacy-focused Mercury Wallet.
The story was particularly pertinent given recent events at Tornado Cash fueling debates about Bitcoin’s superiority, at least in terms of censorship resistance.
With the merge fast approaching, the risk of censorship remains an open issue for Ethereum investors. Notably, the switch to Proof-of-Stake could further expose the protocol to sanctions compliance, but this time through staking his validators.
Bitcoin is not 100% immune from censorship risk, but the general feeling is that proof-of-work mechanisms are more robust when it comes to trustless operations, e.g. exposure to risks via CoinJoin or the Lightning Network. It means being natural.
The Impact of Tornado Cash Reaffirms the Importance of Privacy
The US Treasury added Tornado Cash to the Office of Foreign Assets Control (OFAC) list on August 8th. Officials claimed they were responsible for laundering more than $7 billion in illicit tokens since 2019.
Due to the fallout, Tornado Cash’s USDC wallet was blacklisted, the developer was launched from Github, and the website was taken down. In addition, addresses interacting with blacklisted wallets were also flagged.Founder of Tron Justin Sun tweeted that Aave blocked his account after a malicious prankster sent 0.1 ETH from his Tornado Cash address.
This sledgehammer approach was intended to isolate Tornado Cash and penalize all entities that used the protocol.However, as a non-profit organization coin center As noted, the sanctions were a gross overreach of legal authority that could violate human rights and freedom of speech. I don’t.
“This action may violate our constitutional rights to due process and free speech, and OFAC will act appropriately to mitigate the foreseeable impact of its action on innocent Americans. Is not.”
Critics further argued that OFAC’s action also assumes that all users of Tornado Cash have criminal intent.Still, co-founder of Ethereum Vitalik Buterin I used the protocol in an innocent way when donating to a fundraising campaign in Ukraine.
Statechain technology for privacy
As such, protecting individual privacy in the face of government overreach has become increasingly important, and Gregory believes the solution may lie in the Bitcoin statechain technology on which the Mercury Wallet is built. .
state chain A Bitcoin Layer 2 solution focused on improving transaction privacy. Similar to the Lightning Network, it moves transactions from the main chain to its own chain, enabling instant, low-fee private transactions.
“A statechain requires two private keys to authorize a transaction. One private key belongs to the user and the other private key belongs to the provider of the statechain (e.g. Mercury wallet)”
In essence, Mercury Wallet does not store or manage your funds. Instead, value is transferred by giving the recipient a private key in the sender’s wallet. In this system, the amount of Bitcoin sent in a transaction is fixed once the user creates the state chain (UTXO) and cannot be split into multiple different amounts.
“For example, if you want to send 1 bitcoin to your friend (luckily) in one transaction, once you create the statechain, you cannot send 2 x 0.5 BTC transactions, it has to be 1 x 1 BTC. A UTXO that defines the amount to send.
However, users must trust the Statechain provider not to collude with previous private key holders. Based on maintaining the reputation of the statechain, the above scenario is considered unlikely. Especially since each transaction has a different private key and the malicious person would have to agree with all previous users to trick the system.
Nicholas Gregory Discusses Mercury Wallet’s Privacy Developments
In developing Statechain technology and creating Mercury Wallet, Gregory It said it was done to make Bitcoin easier to use “in terms of scalability and privacy.”
Discussing Mercury Wallet and CryptoSlate, Gregory noted that he finds the mechanism very interesting because it shatters the “neither key nor coin” principle.
“Mercury Wallet is an alternative scaling solution. What I like about it from an entertainment point of view is that it breaks one of the foundations of Bitcoin. I can.”
Nevertheless, by his own admission, he admitted that “not many people know about it,” and the project also suffers from low liquidity.
To address these issues, the wallet developer said the team is trying to broaden its appeal by making Mercury Wallet “blind.” This means that the protocol is unaware of the details of transactions passing through the system and cannot collect data.
“Blindness means we don’t know what we’re doing, which is great from a regulatory perspective in that we can’t collect data.”
To ensure liquidity, Gregory said there are plans to sell bitcoin-paid statechains to bring more liquidity to the network. Statechain buyers are given a “statecoin” that represents the bitcoins held on the statechain.
This will bring more liquidity to the protocol and allow sidechain owners to trade the value of their Bitcoin holdings without having to interact with the main chain.
Gregory hopes that these changes will be enough so that when Bitcoin’s Layer 2 is mentioned, the state chain is considered equivalent to the Lightning Network.