Private Transactions: Why They Matter and the Options Available Today

Transcript

[Music] We will now begin the afternoon session. Now, please welcome our next presenter, Mr. Paul Clemson. The floor is yours. Hello. Hello. Welcome back after lunch, everyone. I'm happy you came. Uh, I'm going to talk to you a little bit about privacy today. Uh, first I guess I should introduce myself a little bit and pray that the clicker is working. Let's

go. Okay. So, I'm Paul. I am a audit engineer at Quonstamp. mostly working on smart contract audits on Ethereum as well as Salana and Ton and various other blockchains. But as you'll see there, I am a big fan of Ethereum. I think Ethereum has kind of won. It's the most decentralized chain. It's got the most spread out funds of all chains. So, just Ethereum good. Uh, also I'm a privacy advocate, which is why I'm talking to you about privacy today. and I I'm on Twitter and I'm I've been doxed now, but that is me. I'm also a toad on Twitter, but let us start. So, I want to approach privacy from a slightly different angle

from what most people do. Usually, we either talk about, oh, we've got nothing to hide and make it very spooky, government's watching us, or oh, the institutions really need privacy, so we have to do privacy for their money. I want to talk about a more personal idea of privacy and why I think it's important for everyone, whether you're doing illicit things on the internet or whether you're just a person buying a coffee at your local coffee shop. So, who knows this guy? This is Brian Johnson. If you don't know him, he's uh he's the data guy. He's tracking

everything about himself. He tracks his sleep. He tracks his health. He takes 550 vitamins a day. He tracks some other weird stuff that I'm not going to mention in this room, but some of you might know. But this is my idea of people today. Whether you know it or not, we are obsessed with tracking everything about ourselves. Whether it's our finances, which understandable, you want to know how much money you've got, but these days it goes so far as your sleep or my sleep quality was only 64 last night. What does that mean? No one knows. Your exercise, if you go outside and do a run or ride your bike, if it's not on Straa

or some other app, did it even happen? Does it does it matter? If a if a bicycle falls in the woods, was anyone there to ride it? Uh CO2 stuff again maybe important. The CO2 in this room is too low. I'll pretend this is the CO2 check. We're good. Uh reading habits. If I read a book and I don't post it on Twitter and performatively tell everyone, oh this is my reading history for 2025 and your work something that for many of us is not working in a factory. How many cogs can you turn?

5,000 a day. We want to turn something that's quite qualitative into numbers, pure numbers all the time. As well as your engagement on Twitter and sports. Everyone's autistic fantasy is my football team XG was 7.4 and theirs was only 2.1 but we lost. And basically data is everywhere and it's unavoidable. And for most of us we like it. Some of this stuff we all do. Even if I'm saying it's big bad data, it's helpful to know some of these things. Maybe we go a bit far, but yeah, data is everywhere.

And so moving on to privacy. Privacy of our data is very important. And you might know this guy more than the last guy, I hope. He said, see if I can hammer this without notes. Uh, saying you don't need privacy is like saying you don't need freedom of speech because you have nothing to say. I think he's on to something. But I also want to point out that there is a distinct difference between something being private and you hiding something. When you have a private party at a restaurant or a bar, no one is hidden in that party. It's not It's

totally different. If I said I had a, "Oh, we have a private party tonight in here." That's a totally different context to if I said we have a secret party tonight at 10 p.m. Secret party sounds like some sort of cabal Illuminati magic happening. Private party is just a group of people who are on their own. You'll run into them in the toilet if you're at the same bar, but it's not the same as a secret party. And the same as if you're a smart contract developer or many language developers, you have private functions.

Private functions are not hidden functions. If the code's open source, they don't close source the functions. It's not a hidden function. It's just private. Only certain people can call them. And this is the same for many other things. Your private jet is not hidden under a big tarp somewhere in deepest, darkest Russia. It's just your private jet. So I just want everyone to have that idea in their mind. When someone asks you, why do you care about privacy? What are you hiding? Don't start on the defensive like, oh, I don't have anything to hide. I think you should clearly tell them something being private is not the same as something being hidden. Same as your private

messages. Obviously, you probably don't want them to be revealed to people, but you know full well, unless you're using something like Signal, your private messages on Twitter or Facebook or even Telegram are probably not that private. So, it's just you talking to someone in private but not in secret as per se. So, yeah, let's move this into crypto is why we're all here. So, onchain in the natural state of Ethereum, we are all when we make an address, we are all initially anonymous.

Until someone knows it's my address, no one knows what I'm doing on chain. So that's the idea of until someone knows you are you have a decent level of what we can call anonymity if not privacy but then as soon as I share my Ethereum address with anyone my friends someone finds my ETH I'm no longer anonymous and we know this implicitly some of us probably have in our Twitter usernames and we understand that if someone really wanted to see everything we've ever done on chain, they can quite easily do that.

But we assume that most sane people maybe they'll take a look and say, "Oh, he's got quite a lot of money." But they're not going to sit there and go through like, "Oh, in 2022 actually he bought this quite weird NFT. We should probably stop talking to this guy." But some people can and will do that. So yeah, we have to we have to understand that it's not an onoff button on Ethereum. Once we are doxed or once our name is linked to an address, there's no going back.

So this is why I want to talk about curtains, which is kind of the dullest topic possible at a conference. But in with curtains, when we're in our home and the curtains are open, we understand that someone could walk past on the street and see, oh, he's watching the football or whatever you might be doing. And typically, we're okay with that. If he stops outside your window and starts watching the game with you, then we might be like, "Hey buddy, piss off." But yeah, when that curtains are open, we understand, "Okay, people can see. we assume they're not going to literally stare at us through the window.

And then the opposite, when it's closed, we expect that we're having some degree of privacy. But yeah, although at the same time at night, I close the curtains. I'm not doing anything exciting in there. Usually, hopefully sometimes, but not often. But yeah, at the same time, you can think about it, it's not perfect privacy because the difference between someone seeing your curtain open and your curtain closed gives them information that you maybe aren't thinking about.

So, yeah, maybe your neighbor is nosy and every morning he sees, oh, 8 a.m. he's opened the curtain. 8 a.m. next day he's opened the curtain. But what if one day you don't open the curtain at 8 a.m.? What information are you giving them? And it's not even that they are getting true information, but their brain will start making information. Maybe sick, maybe they're on vacation. Maybe there's just some glare on the TV, so he had to close the curtain to see the screen. Maybe they're sick. Maybe he's noticed me staring out his window every morning. So, I just want to be clear where we have this idea where like there's a black and white of

I'm private or I'm doxed. You're either doxed or undoced. There is no gray area. But even in scenarios where we think we're not leaking any information to the world, maybe we are. So that's something we have to think about when we're doing things in life, but also on chain. So yeah, and think about this in terms of Ethereum or any other blockchain excluding maybe Monero and Zcash and such chains. Once you open the curtains to someone, not only are the curtains open forever,

but they can see everything that's been in that window in the history of your activity on that chain. So yeah, so for example in if you suddenly go, oh actually I want to close the curtain now. What sort of message does that send people? Again, it doesn't matter if the message is true or false. If you're using an address for five years and then suddenly you deposit all of your money in tornado cash, some people rightly or wrongly might think, what's this guy up to? And that is a problem that any of us here sort of have to deal with and

there's not a good answer for it. So yeah, but what does this mean in the grand scheme of things? Currently, most of our transactions we make on chain are buying NFTts, trading meme coins, not really doing anything that leaks too much significant information about ourselves. Pardon me, but imagine a world where we do use crypto for everything.

If you go into the coffee shop and you say, "Oh, hey, I'll have a have a large latte this morning, please." And when you tap your your phone, whatever way we eventually use crypto in real life, your barista sees, "Oh, he's got 35 ETH in his wallet." Do you want her to know that? Maybe you do. Maybe she's hot. And maybe your dream is, "Oh, nice. I want to flex on this this kind lady." But maybe that lady's got a boyfriend. and she goes home and says, "This guy who comes in my coffee shop every morning, he's got like 200 grand sitting in his crypto wallet, whatever the hell that is." So, you immediately put a local target on your back. They know where you are. If you go in there every morning,

they can expect where you're going to be. So, it's it's dangerous. But think of the other alternative. Think for example that you you're smart. You thought about this. You don't want everyone to know you've got $25 million of Sheba Enu coin. Maybe you use stealth addresses in every every transaction. You make a new address. Again, you think, okay, that's solved it. But now when you pay for that coffee, the cute barista now thinks you're poor. she sees your address and oh, he's only got $25 in his wallet.

That guy sucks. So yeah, what I want to what I want to point out today is even when you think you're being private, you are leaking information to people. Even if it's not true information, people don't need the truth. They just want to know stuff. So yeah, when we're doing things, there's not a good there's not a great option, but I'm going to talk a little bit about the options we do have and sort of talk about what I think is good about them and what could be achieved or changed.

So if anyone's looking to build cool privacy projects, I'll give my my ideas on how we should try to fix them. So, tornado cache, um, I'm not going to ask you if anyone's used it because it's still a bit of a a touchy subject and also free romantor, but who's aware of how tornado cache works vaguely? Okay, so yeah, tornado cache, you can just imagine there is a big pool of money and everything's denominated into, let's say, one ETH. I can throw one ETH into the pool and then later using the magic of ZK proofs I can prove hey that one ETH was belong belongs to me but you

don't show that it was you who deposited it else that would be pointless so yeah this the analogy I want to make going back to the curtain here when you use tornado cache it's like buying a new house you go okay the neighbor keeps watching me. So, instead of doing anything about it, I'm just going to move. And if you ever go back to that house, he can still watch you again. And you move to a new house, which I'm sure is wonderful. But a new neighbor can start watching you from that house. And maybe that neighbor talks to the other neighbor and they say, "Hey, my new neighbor, he always buys Pepecoin every Thursday." Say, "Oh, my old neighbor used to buy Pepecoin

every Thursday." And eventually, if someone cared enough to keep track of you, eventually they'll be relatively sure, hey, this guy, your new neighbor, he's probably my old neighbor. Here's everything I know about him. Oh, let's share. So, yeah, that's tornado cache. Rail gun. Any rail gun people here? No. Good. We can talk. Okay. So, yeah, rail gun is very similar to tornado cashache, but the at least in my opinion, the key difference is you're not denominated in the way you are with tornado cashache. Tornado cashache, you put one ETH into the pool, you have to

take one ETH out of the pool. That's how the like my idea of the buying a new house comes from. And but yeah, with rail gun, you could put one ETH in and you could withdraw 0.05 ETH 20 times to different addresses. I'm going to stretch the metaphor as far as possible here. It's like an Airbnb. We're going to or we're buying little tiny houses somewhere. This, I think, has some pros compared to Tornado Cache because yeah, if you seed 20 addresses, you have more. it's more difficult to put all the pieces back together again.

And another another thing this is possibly good for but very expensive on chain currently. You can technically leave your money in rail gun and you could make your payments directly from the pool which isn't possible in tornado cache unless all your payments were exactly one ETH. So yeah, this is this is slightly better privacy in my opinion. And the final one I'll talk about now, uh I'm not sure who's aware of the EIP 7503, the ZK wormholes EIP. This is the plan to essentially put tornado cash into Ethereum

where you can send your ETH to an address that is unspendable and you can prove it was you who sent it there and prove that you don't know the private key and it would require an Ethereum update. But you could then theoretically mint that Ethereum to a new address and this has extra qualities in my opinion. where your first neighbor, he saw you sent money to some address, but he doesn't see where. He thinks you just literally sent money to an address.

Whereas with tornado cash or rail gun, he saw you send money to tornado cash or rail gun. He knows you're moving out. He saw the sign outside your house. So this one, it adds some extra stuff. And let's see if I can quickly speedrun. So yeah, we were originally sold whether it happened or not. The idea of web 3 was like you own your data. I'm not sure what actually happened with that, but the idea was web two, Facebook, Google own all your data. Web 3 is going to change that. You can own your data. My idea for web 4 when it comes around is where possible, we just don't share that data. We don't own it. They don't own

it. It's just some data is just not necessary. So some of the metadata and stuff instead of like, oh, you can keep it like I don't want it. No one wants it. So yeah, I think that's where I'd I'd like us to go and yeah, so wrapping up, if you're a builder, please don't be afraid to build privacy apps. A lot of the regulation in the US, except for the tornado cash ruling, is looking like privacy is a human right. I don't think I have time for questions, but I am here for the rest of the day. And if you want to follow me on Twitter, then go ahead.

Peace. Thank you very much.