Virtual currency transactions have become increasingly common among a wide range of users. Consumers and organizations across the globe are sending and receiving digital currencies such as Bitcoin (BTC), Bitcoin Cash (BCH), and Ethereum (ETH), among many others.
While permissionless and decentralized cryptocurrencies have their benefits, they do present certain challenges for end-users. One of the main issues that many individuals and institutions are concerned about is financial privacy. This problem has become even more evident with the rise of decentralized finance (DeFi).
Many established institutions might be eager to explore DeFi applications, however, they are looking for greater financial privacy and security. First generation and second-generation blockchains like Bitcoin and Ethereum are not supporting privacy features by default. Every BTC or ETH transaction that’s conducted can be publicly viewed on the blockchain.
Blockchain Analytics Firms Making Easy to Identify Financial Information
Companies like CipherTrace, which was recently acquired by Mastercard, and Chainalysis, which has raised hundreds of millions of dollars to support its product development, are now leading the way when it comes to monitoring blockchain activity. These tech firms may also be working cooperatively with various other organizations, which means that blockchain-based transactions are being closely monitored.
While it’s understandable that law enforcement may want to identify potentially fraudulent money transfers or those related to terrorist or illicit activities, there has to be some balance when it comes to maintaining a certain level of financial privacy. This can also be achieved while maintaining regulatory compliance.
A Decentralized Protocol for Compliant and Fully Private Crypto Transfers
Panther Protocol is a newly-introduced decentralized solution that aims to offer end-to-end privacy for any digital asset. It will protect personal financial data and trading strategies for DeFi investors by ensuring that all virtual currency transfers are carried out in a confidential manner.
The Panther Protocol may monitor the minting and burning of zAssets, which are described as being confidential clones to the real Assets they represent.
zAssets are synthetic assets that are 1:1 collateralized to the actual users’ assets they represent and reside in a secure vault. zAssets may be routed via the Panther network in a private manner for use on DeFi platforms, in a completely composable fashion.
Panther Protocol utilizes game theoretic bounds to price the privacy service of the network. The protocol will be introduced on the Ethereum network and cross-chain solutions will be launched afterwards. In Q1 2022, Panther will publish Version 1.0 of a Privacy Cross-chain DEX (or non-custodial exchange) on a Layer-2 solution.
The protocol’s founders are Oliver Gale, a well-known tech entrepreneur and Fintech-focused professional; and Dr Anish Mohammed, an experienced cryptographer and ZK-proofs expert.
Blockchains Are Ideal for “Targeted Monitoring” and “Mass Surveillance”
Blockchain or distributed ledger tech is “celebrated for paving the way to decentralization by removing censorship and anti-competitive power from traditional centralized institutions,” the Panther Protocol team writes in its whitepaper.
Although blockchains aim to take away control from centralized institutions, their openness makes them an ideal platform for “targeted monitoring” and “mass surveillance,” the Panther team explains.
To achieve network consensus, the typical blockchain or DLT model requires complete
transaction transparency. This means that all transaction data, including the sender and recipient addresses, value, currency or token type, smart contract data, and transaction timing
are “all in the clear for all to see,” the Panther Protocol team notes in their whitepaper.
Blockchains may be considered a “treasure trove” of data representing peoples’ private remittance payments, financial status, NFT purchases, currency exchanges, and other highly-sensitive information.
These may be further supplemented by off-chain metadata “to unmask the real
world identity behind the wallet addresses,” the Panther Protocol team notes. In their whitepaper, they cite research from Angeris et al., which reveals that in the context of a type of decentralized exchange, called Constant Function Market Maker (CFMM), “privacy is impossible with the usual implementations of CFMMs under most reasonable models of an adversary and provide some mitigating strategies.”
But recent breakthroughs in cryptography and privacy-focused tech have enabled us to ensure adequate privacy when conducting blockchain transactions. Notably, Panther Protocol has leveraged the latest technology and innovations to create their solution for confidential and compliant crypto transactions.