Compliant Privacy in Public Blockchains: The Missing Primitive

Transcript

So, we're going to talk about the missing primitive and sort of all of blockchain you guys been dealing with since the dawn of dawn of the Satoshi. Um, so if somebody sends me crypto, right, I gave them an address. How do I know that they really sent it? That was really actually them. was that person that sent the money was their private keys. No one knows. That's been a problem since we got started, right? So, this is why Coinbase, not Coinbase, I'm sorry, Binance got sued. They didn't do enough to prevent the money laundering because there was no way to actually tell, right? So, what's the other missing primitive? The other missing

primitive would be u that there's no privacy. So by default like everything is public whereas in every other financial system everything is private. Not only do you who sent the money but no one else knows who sent you the money and when you send money to somebody the whole world doesn't know right and in crypto it's like pseudo anonymous a lot of the times especially if you're an institution everybody knows oh yeah Binance moved this much from this wallet to that wallet right? So this is not a desirable property, but if you try to build privacy, you generally go to jail and just recently we kind of got a reprieve from this which was cool, but we expect it to just continue, right? Um demand is bigger than ever, but the rules are

getting worse, right? Like as an example, I mean you guys know tornado cashache, the tornado cash developers went to jail, then they got out. Meanwhile, Zcash, which is probably the most popular privacy project alongside Canton in crypto, uh you can't get it in South Korea, you can't get it in the UAE, and next year you won't be able to get it at all essentially in Europe because it's all banned, right? So, uh but we'd like to have the privacy, right? So, we've made some attempts at trying to create compliance. So, I'm going to talk about those. So, currently the one way to sort of know who sent you the money, the best approximation we have is two things. One is the Satoshi test and the other one is the viewing key. So what's the Satoshi test? How many of you guys have had to do Satoshi

tests? Okay, it's about half the crowd, right? So you guys know what the process is. Uh you go to a website, you want to deposit some funds, they want to verify that the address that the money's coming from actually belongs to you. So they do a Satoshi test. So they say, "All right, send us, you know, exactly 1 2 3.5 Satoshi's from this particular address." But then you want to do it from a bunch of different addresses because you got a crypto all over the place and you got to repeat this process. Now, how easy is this process to fool? It's trivial to fool. In fact, this was the cornerstone of um the lawsuit against Binance because what was happening there is they would take somebody that got KYC and that person was totally clean and passed all the sum whatnot and then they

were dealing with you know a bad actor and then they would say all right so what's your address sir and then the good actor would call the bad actor and be like what's our address right provide that address to the exchange and now the exchange would be like okay we on a Satoshi test from that address. No problem. I just call up my bad actor. They do the Satoshi test. So Satoshi tests are completely broken, right? Not only is the process broken because it requires communication. You have to do one address at a time. It's tribbally fooled. There's no identity data attached to that actual Satoshi test.

Like who sent the Satoshi? You don't know. It's some other wallet, right? Pseudonymous. There's no payload. That's what I mean. And it's broken by quantum. And it also breaks the privacy. Now once you've been Satoshi tested once for that address, those people know probably it's you. So what else are you doing with that address? What other deposits are you sending and receiving? Right? So no privacy. Um now uh the other one is the the viewing key. So what's the viewing key? Well, if you try to use privacy and then you try to be compliant, everybody's answer is we got viewing keys. whether they're user controlled or they're controlled by a system. The viewing keys, what that does is you're revealing like what's happening inside that privacy engine and you could ultimately tie it back to

Satoshi test. And now you have a broken thing with another broken thing and it's even worse, right? So you don't want to reveal your stuff forever. But even if you do this, you still have an answer. Who sent the money? It's all trust me bro accounting. So what kind of financial system in the world uses trust me bro accounting? only crypto. That that's it, right? So, if we were to magically somehow fix these two problems and make a compliant and also private system was super easy to use, we'd be in Nirvana of sorts, right? So, I'm going to posit that we built that and that's called American Fortress. It's a payment that is simple, private, safe, and carries its own proof

without viewing keys. So, I'm going to explain to you guys how it works. Um, and we'll go from there. So, first of all, we have a couple new primitives that have never really been done in crypto. And when you put these two primitives together, you get something super magical, right? So, the first one's called send to name. This is a universal stealth address system. So, in our system, you have a username. Like my username is Miho. That fortress name I can publish on Instagram and just say send me crypto with any compatible wallet, which is also American Fortress wallet, which you can get the beta at our website already, but it'll also be a bunch of other wallets. We're building a MetaMask snap, for example. So we expect that a lot of the industry will have this extra feature and initially it feels like ENS like you you bought a

name or you got a free name and now you can just uh receive money but it's actually not that simple. What happens is there is a stealth address computed between the two counterparties. So if uh Josh over here is sending me money that'll go to address A. If some other user sending me money that'll go to address B. And it's always unique between the users. No one knows what the addresses are except the recipient and the sender. And the recipient and the sender only know their own address space. So we call this public names, private transactions because you can just uh give out some of your name and just receive all the crypto and no one knows how much you received even you're using transparent to transaction uh transparent to transparent transactions on a public chain. So that's cool. But I

haven't actually proved to you the second problem. The second problem is who sent the money, right? So this is a another new primitive that we created called a zero knowledge proof of seed providence jokingly called the zk pulpski because pos is the first four letters of my last name and I'm mihow pluski but you can just call me mihow. So what does this se what does proof do? Well you have a seed right and then there is a derivation through some hardened steps to create your chain addresses. And I'm not I don't have the time to like go super into the super geeky math. I did come up with a lot of this stuff. We have 16 patents in this space. What this does is let you prove that you own this address without revealing your seed. So in our system,

we have a similar mechanism for how the names the sentame. So when you're a user, not only you sending to someone, that's someone who's receiving money from you. So in our UI, you get non-stop Alice sent to Bob. Every single transaction is like private PayPal for all of crypto. Once you have those two primitives, now you can get really crazy. Now you can do some really magical things. So the first magical thing we're doing is called Safe Send. Safe send is like Zcash for all of crypto. We're deploying it to all chains. So imagine you just have the same privacy whatever chain you want to use. So at launch we got Salana and Bitcoin and uh Ethereum and Arbitum and Zerog and um a lot of chains that are you know fairly popular and uh it's the

same uh mechanism, right? But why is it different than say why doesn't it have the same problem of you need viewing keys? Well, because our safe send that confidentiality pool enforces that zero knowledge proof of seed provenence. So what you have is even though you're sending from Alice to Bob and you're Alice in the privacy pool, Bob has cryptographic proof that you sent the money with no viewing keys. So it's cryptographically the same. So now every recipient already knows who sent the money, right? But there's more. Now it's great in your in your log. It says, "Oh yeah, Alice sent me money. That's cool.

But who is Alice?" Right? Remember the original problem I paused is who sent the money, right? So we have a fix for that. We are partnering with one of the biggest KYC providers on Earth. can't name them yet until October 12th, but look for the press release from American Fortress and the big KYC provider that all of you have already used. Um, but in our system, you as a user can go on the wallet or inside the SDK inside another wallet using our tech, obtain cryptographic credentials of who you are and those become yours. And now because of this primitive where Alice is talking to Bob, we by the way have also the ability to in an encrypted chat communicate between the two parties. So not only know who sent the money, but

you can talk to them and you can prove who you are to them. Um, so oh wait, whoops. Well, they're up there already. I'm sorry. It's Sumsub. Um, so we're doing a release with Sumsub where you'll be able to share your cryptographic credentials with who you choose. Now, why is that cool? Well, what happens now is anytime you share your credentials with someone, they know that you sent the money, but not just it was Alice, it's like Mihow, Mihow from Wyoming, you know. Um, and you can choose like what level of disclosure you do. You can say, "Oh, I'm just Mihow from Wyoming or and here's my driver's license or my password." I can say, "I'm over 18 and I'm just a resident of the United States and otherwise I'm anonymous." So, there is blinded claims in that as well. So

this is the first postquantum decentralized version of sumsub you can get on earth. Um so now you have uh the ability to have perfect KYC wallet to wallet right so um and you can reveal there's a third party proof tech we have on top of this where you can prove to third parties what happened that your wallet's not lying. Okay so um this is sort of magical because like why am I the first guy telling you this and I'll give you a little bonus because I see I have four minutes. I got through all that in 12 minutes. So, I'm happy. So, I'll give you even more more value that zero knowledge proof of providence um creates compliant privacy. But there is another thing that it does. It can

make all of crypto quantum proof your existing addresses. Remember the thing I just described? There is a zero knowledge proof that proves that you own an address. So, that's equivalent to signing ECDSA. It's just a different way of doing it. It just so happens that our way is already quantum proof. So now you don't need to migrate addresses at all. The chain just adds this extra proof and now magically everything works. So why am I the first person telling you this? I just like, you know, gave you six things that are like really sort of, you know, private PayPal for all the crypto with compliance and chat and sums, all these things together and quantum proof.

Oh wait, wait. There's one more thing it does. I almost forgot. If you can prove that one address is yours, you can prove that any number of addresses are yours. So now we can have DeFi that doesn't commit moneyaundering at all because the DeFi can enforce the proof that takes 250 milliseconds to verify and you can prove that your change address, your source of funds address, and your destination address are all yours even though if they're on different chains. So why am I the first person telling you this? Well, I've been working on this problem for four years.

Uh and because it's privacy, it was a sort of secret project and you know I didn't want to go to jail. Um but a year ago privacy broke through and we really really you know got a lot more traction you know years ago we started working on how to get this thing to work faster and there was some research already done by other people in this space and they were quantum researchers and they published a paper uh about four years ago that did that zero knowledge proof of providence for purposes of of quantum tech. Now we started along the same time but we wanted to get it for compliance and all these other things that that we're doing. The problem was when they did it it took 35 minutes to compute one proof.

So obviously if you had to wait and that was on a pretty beefy server. So like on a phone that would be hours right just to compute the single zero knowledge proof. And uh we got it to work in 3 seconds and uh the next version is subsecond. So now your phone can just always compute these proofs and therefore prove to other people who you are without revealing your privacy at all. And that's it. I'm Miha from American Fortress and that is the missing primitive. How to get compliant privacy on public blockchains.