Privacy Pools use zero-knowledge proofs to demonstrate that payments in anonymous transactions are unrelated to illegal conduct, like North Korea’s $625 million breach of Axie Infinity.
This past weekend, Privacy Pools, an open-source research project and fork of the currency mixer Tornado Cash, was put on the testnet of the layer two scaling system Optimism.
Privacy Pools, like Tornado Cash, enable users to conduct anonymous transactions. However, Privacy Pools distinguishes itself from Tornado Cash by using zero-knowledge proofs to demonstrate that funds in anonymous transactions are unrelated to illegal activities.
In August 2022, the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) blacklisted Tornado Cash, a popular privacy tool on the Ethereum blockchain those pools transactions to mask senders and receivers, for its participation in North Korea’s money-laundering efforts. In the same week, Alexey Pertsev, the web developer for Tornado Cash, was arrested.
Tornado Cash has generated $7.87 million in deposits and $5.97 million in withdrawals each week in 2023, putting it “on course to anonymize $250M in 2023,” according to a tweet by Privacy Pools creator Ameen Soleimani.
Private Pools perform in areas where Tornado Cash failed: It enables users to demonstrate that their funds are not the result of illegal behavior, such as North Korea’s $625 million hack of play-to-earn gaming company Axie Infinity.
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