Bridging Financial Institutions and Privacy: Ethereum’s Institutional Privacy Stack

Transcript

Uh hi everybody. Um I'm Yianis. I'm I'm working at the Ethereum Foundation. Um super happy to be here. Um it's my six ECC. So always a pleasure to present to present here. Uh I'm part of a team called the IPF for institutional privacy task force. Um it's a it's a team um that was created like uh last summer. uh it came from the observation that um EF discussing more with institutions uh we realized that the main blocker was actually privacy uh and so we created this team to actually address this problem and uh listen to all the requirements that this institution have and build a lot of resources about like how can you use uh Ethereum in a in a private way. Uh so how do we do this?

How do we answer this problem? We have like many initiatives. Uh the main one is a privacy map. So it's a fully open sourced work uh in the form of a GitHub repository uh where you can find a world knowledge based knowledge base about like uh what are the different use cases these institutions have uh what are the building blocks that you can use to address this uh we try to form solution in the form of approaches um and for institutions that would like to actually like build something we list vendors that actually provide uh the technology that we we list in the in the map. Uh we also we are also doing like some proof of concepts. Uh so here the the the goal is to not only like um um speak about these building blocks but have like a

hands-on approach of them. Uh and so it's uh it's having like a yeah more like developing an engineering culture in the in the way we can answer like to these institutions. Um and also we are doing like uh some coordination uh with uh with uh stakeholders in like uh that that are on the on the institutional market um and as well as doing like workshops for these institutions where we try to dive a little bit more into uh privacy on SRM today. So um why do we have this initiative? So as I introduced like um we observe that the the the main blocker uh today is privacy while it was like regulation few months years ago. Uh now that the

regulation in some jurisdiction is a little bit clearer. Uh we are seeing a big push from these institutions to like uh switch from uh private blockchain to like public blockchain and therefore the the main issue that they have like making the switch is privacy. Um there is also like a lot of overlap with the one trillion security initiative at DEF. Um and also of course like this notion of leverage that uh if we find um institution that resonate with with Ethereum and we we we we have success in on boarding them on Ethereum. It's a huge leverage for the for the world world space uh but as well as the end user that would use like these solutions. Um yeah and uh basically Ethereum is like

is is public by default. Um so everything everything is uh is um is public uh for for an observer. Um and so we are trying to actually build mechanisms to prevent um all this all this an observer to to see all these public informations. So um why Ethereum like why these institutions now they want to make the switch and like they are interest they have interest in in Ethereum. Uh I'm not going to explain like here but basically it's like a uh they want to access deep liquidity. They want a censorship resistance because this institution actually do care about censorship resistance because for them it's translate to like a um no counterparty risk. They need like a settlement

shelling point like a a neutral place where they can come and like trade. Um and they also need like a composability that uh that Ethereum offers compared to like the other models where uh you have like full privacy but you you don't really have like interoperability. It's like a kind of a wall garden. Um and you also have like a vendors that provide this technology and it's not very uh open about like what you can do and and you can end up like in a in vendor lockin. So um yeah it's it's quite a challenge but that's that's what what we are trying to address. So how do we work like what's what's our uh day-to-day um job? Uh first is talk to institutions uh try to find them to meet them where they

are. So participating in like a lot of uh um conferences like go there uh try to um have discussions with them organizing workshop as well um and yeah try to gather as much uh real requirements as possible. We don't want to speculate anything here. we just want to to listen to like the the actual problems that that they have and try to to to solve them. Um we so as I said like all this uh all the all these discussions uh they are open sourced so we anonymize who we are speaking to but then then like in in our open open source resources you will find like a set of use cases that are actually like curated from from these discussions. uh and we want this like to be like

something that this the the world ecosystem can use as okay so um I'm thinking about my my next road map and I want to tackle some institutional use cases and then I can come here like see the the set of requirements and try to shape my solution going into that direction um yeah so we also list a lot of uh patterns so the methodology we apply here is like try to think by the first principles try to think like in terms of of cryptographic patterns like in terms of building blocks. Um and without know not necessarily like an opinated view on them. Um and then like from these building blocks try to build a more opinated view about like how to to to

build a solution which we name approaches. Um so basically it would be like a all right there is this institution wanting to do like that want to do like this private derivatives. Uh how can we how can we how can we build a solution from this first principles? Uh we also like uh want to do more on this uh on this on this side like uh more like open specifications that anybody can like use and and build from it. Uh and also like playbooks in the form of workshops guides for the these institutions to uh to actually use and uh and understand more like the space.

Uh so just a a sneak peek of the of of the current state of the mapping. So we have like 52 pattern listed from uh shielding to uh to to to te to FHE. Uh we have 20 20 use cases. Um and we also list 21 vendors I think on that space. So uh that's probably like ECC is a good place to uh call all these vendors to come and like add their protocol uh if they want to address like some institutional privacy use cases. Uh it's very open. you can open a PR, explain what your um uh protocol is doing, what your tech is solving uh as institutional problems uh and then we would be happy

to to have you add it to the to the vendors. Uh as well as if you if you're if you have like a um um a policy policy expertise uh we do have like some some jurisdictions artifacts trying to explain like how how are how are the different like rules in each juris jurisdiction and how it translates in terms of uh build for builders like what are the the thing I need to implement uh to to address these requirements. Um a recent change as well is like um it's uh making sure that um we give an overview of like crops alignment in terms of solutions. Uh so of course not all not all the the solutions are like um on the same line

when it comes to like censorship resistant openness uh privacy and security. So we are trying it's something that we just started try to like um give uh as well for institutions like um like some uh some criteria that they can use to understand better like uh guarantees that a solution can offer. So um this is like a breakdown from the privacy cluster of of Ethereum uh known also as PSC. So uh we can divide privacy at different in different dimensions. So you have privacy of reads. Uh I want to read the state uh the state of uh uh my state like privately. Um I want to I want to be able to also like transact

privately with privacy of rights and I want to be able to like be sovereign have sovereignty in terms of my own state. Um and be able to prove over my state and therefore like have the the capability to do that like on my uh on my own like on my client. Um so this is the main tree track and there is like uh also a side track which is like network uh how do we achieve network privacy um and uh and therefore like having having the ability to transact fully privately. um if you if you go to the maps or if you go to to our work like it's heavily like um about privacy of rights and there is like a clear explanation about this uh is that as I as I introduced like we really like try to shape um with

uh institutional from institutional requirements and there is today a big push for tokenization and therefore we we we try to um address this problem but I think that in the future we want to also have like a a wall stack approach and uh try to map uh solutions that are not just privacy of rights but uh how can you deploy from an institution uh how can you deploy um uh yeah something that is that also protect like end user privacy in terms of reads for example um so this is like some prototypes that we that we um so we started to to prototype solutions like in in January so that's like some things that we we tried to hack in the in the last quarter um

Again, I think the goal here for us is not to to make big breakthrough, but it's like more um educational. Uh so um if there is an engineer from one of these big institution that is like actually working on some project and wants to have like a sense of what's practical today to use on Ethereum, then he can come like consult like this uh proof of concept to try to like be to use as much pattern as possible without being like too much opinated. So like for example we we we use TE to explain like where does it where does it solve problems but where it brings also like a lot of issues um like shielding of course like is a is is one of the main primitives. So we we tend to develop a lot of use cases around that because

it's we think it is very practical. So we want to illustrate it uh the best as we can. Um and so we tried to um to also address some use cases with uh with validiums and how you can have like your own private um uh private deployment. Um yeah so the goal of this in this presentation I'm I'm going to zoom in a little bit on shielding because um a lot for a lot of these institutions they they're overwhelmed by about like the world privacy space um and sometimes they come to us and they say they want like something that is practical that they can um deliver tomorrow and they they're completely lost like they they're like yeah I I've heard like that FHE is is actually the best solution or

how can we leverage MPC or what's the specific threat model of uh of having a specific rollup architecture. So um we we tend to develop a lot on shield tool because it's just that from our own observation it seems that it's very practical um and that actually like that in in the short term like solve their problem pretty well. Um so I'm I'm not going to enter too much into details but it's just that just a rough specifications about like what what a solution like this look like. is just basically like uh the same old commitments and and unifiers. Um and the wall this wall construction like goes back to to the zero cache paper. Um and we just uh we just want to do like um

more of this and more education toward the toward this uh because we think that it's uh again it's it's practical and it's uh it's like the space also proved that a lot of a lot of uh the privacy solution relies on it. So we just want to like make sure that we explain it from the from the first principles. Another uh good point about like why shielding is interesting as a as a primitive to to develop and to double down on is that it gives you like some um some compliance features that are interesting. Uh so you have like a separation of concern. You can have like a keys that are only meant for spending and keys that are like meant for viewing. So um like if I'm an

institution, if I'm a bank for example, I can uh just share my viewing keys to uh the regulator and he can like audit my um history of of transactions. Um and also you can use it as a as a way to um to Kway uh to to have a private KYC. So I can I can show that I'm I'm I'm generate a membership proof that I'm part of like the the the people that have been cared and therefore like not not giving my my full identity there. Um yeah so uh we we've applied this like to to uh to for example a use case which is a private bond. Why we choose private bond

is just because it's the in in this um movement of like tokenizing to tokeniz tokenize a lot of real world asset like bond is like the most simp simplistic form of of asset uh because it's very simple there is not not a lot of operation and just like you can for example apply shielding to a bond and just like uh change the the the data structure about your commitment uh and uh and to make to to suit like the the requirements of of a bond like in that case is just for example adding a maturity date um and use the same the same shielding techniques on real world asset. Um and so also one good point about like um um about shielding applied

to institution is that usually a problem with shielding is that you you need to farm this anonymity set otherwise like you don't have like plausible deniability. uh but working with these institutions that want to deploy at a large scale, it's actually make this mission easier because uh they can farm their own anonym. Um yeah, so basically you just you you need like a you need um uh this uh this component you need you need a commitment scheme you need as well as a a nifier scheme that they all ash based mercular membership proofs um and and then like the dual key architecture to have like both like spending capabilities but as well as

vend vendor viewing capabilities. Uh yeah, I think we want to we want to we want to show that we want to show that shielding is a is could be seen as a as an abstraction. Um and just do more of of it like to for example um uh help like if there is initi in initiative to like standardize the space um have like open specifications about like how to handle this type and how to build this type of protocols. Um that's that's something that come that comes often like when discussing with with vendors is um and vendors that are working with shielding is all right like we should we should sit at a table and like um agree on like what what are the compliance

rules for example when deploying like a shielded pools. Um there's also like a research to be to be done on this on this primitive. Um of course like as you have like to store like all these commitments and unifiers like you have a state blood. So uh there there exist um uh solutions to that uh but still it's not like there doesn't seem that there is a golden standard about uh how to how to solve it. Uh postquantum is also like a topic. So while all the primitives um of the abstract are postontum because it's mostly like a um ashing uh you still need to uh have like a zik proving capabilities and therefore like there there's some like benchmarking to do like in terms of what's the best prover

like for the next quantum quantum era. uh censorship resistance. Uh today most of the shielded pools like rely on a on a on a relayer uh to to keep the possible deniability property because you need you need to start on a fresh address and therefore you need someone to uh to pay the gas for you. Um there is a discussion about this new EIP 8141 with frame transactions plus fossil might be like the solution for that. uh but still it's uh it seems that the frame the framing IP is not is not decided yet. Um and also like network privacy uh even if like your transaction is opaque uh in terms of of data still someone can like see that all the all

set of transaction coming from the the same IP address for example. Um so on in terms of next steps uh I think we want to double down on this uh framework with uh differentiating uh privacy for institution but privacy from institution as well. Uh so we want to make sure that uh the end user is not uh is not forgotten in the in the in the loop uh and make sure that when we discuss with uh with institution and doing education we also like put awareness about like um the end user. So for example, it could be like yeah they want to deploy their their private private rollup and we we need to develop more technology to make sure that um uh user can force exit for example uh things like that u so yeah

what's next like more work on the end end user privacy uh we also want like to um as I introduced like have like a more wall stack approach like so think about like how institution needs to deal with identity and credential both internally but also like on a on a more like a public um uh public uh standpoint um governance and exit guarantees of of this of this tech deployed by institutions and as well as um how it can what can be done like at the at the network level in terms of privacy. Uh and yeah that's the that's the head of my presentation. Uh again like if if you're working like toward like more like privacy for for end user with like we'd like to connect but as well as if you're solving like institutional

privacy problems we would love to have you like uh in the map and we are also like publishing all our uh work uh on our uh website. Um so if you want to if you want to uh check this out uh please uh um yeah come and come and read our work. Thank you for your uh thank you for your presentation. We almost run out of time, but maybe we can take one question. Does anybody have any questions? Yeah, thanks for the talk. At the beginning of your talk, you said your job is mainly about education for institution. Do you

also help institutions implement solution or do you leave that for the private sector like with Aztec and Zikasync deploying previdium or do you also help companies institution deploy uh private solutions? Yeah, I think the goal here is uh when if they if they are like really eager to put something into production or like do a more serious prototyping then it's why we are listing vendors and we are probably like just tell them hey we we are listing vendors like here are like people like to can you can follow up with and actually build with uh we are not positioning ourselves like in in the the person that are going to help them deploy. We educate, we try to like like our mission is at the end of the day they need to

like make their trade-offs with like the full picture about privacy and Ethereum and then they can like choose whatever vendor they want to like work with. Yeah. >> Thank you.