varreddor | Edge

quick crash course on mixers and obfuscation in crypto what is a mixer? a mixer is what it sounds like: it mixes funds a bunch of users deposit funds, mix them in a pool, and then people withdraw from that pool example: assume you have 7,500 of ShitcoinX on your account charles.sol, but you accidentally doxed your charles.sol account to degens on social media now, everyone knows your real-life identity is tied to charles.sol and that you have 7.5k of this shitcoin (this is actually pretty bad because now they can also see everything you have EVER done onchain dating back forever but let's focus on one nightmare scenario at a time) in many cases, you do not want this unwanted attention from the whole world any more than you want the whole world knowing your private messages so what you can do is put 7.5 of your shitcoin into the mixer > charles.sol has deposited 7.5k shitcoinX into MixerCash some time after, you make a new account, say derplet.sol, and then you send 7.5k of shitcoinX to derplet.sol what the outside world sees is: > MixerCash has sent 7.5k of shitcoinX to derplet.sol so in summary: > charles.sol deposited 7.5k shitcoinX into MixerCash > *some time passes* > MixerCash has sent 7.5k shitcoinX into derplet.sol now I hope you have noticed a few problems here i) everyone now knows that charles.sol uses a mixer (this can be used against you by CEXes or feds, particularly if criminals have used this mixer before) ii) it is super easy to suspect that derplet.sol is actually charles.sol so how do you solve these? for i) you're pretty much shit out of luck. this is a problem with all blockchains today including bitcoin because the ledgers are all transparent the best you can do is prove via zk that you didn't commit crime and that you are compliant (tornado cash allows for this for example), which helps with feds but nothing else only real solution is using an encrypted ledger like zcash which hides your balances and history to begin with ok how about ii)? well this is where you can make a lot of improvements via some basic operational skills (call it "opsec") - if you deposit 7.5k but take out 4.3k, then it is harder to link that derplet.sol is charles.sol - however, the above is only true if there are many other people also using MixerCash! for example, assume you're looking at MixerCash on the block explorer: MixerCash > charles.sol deposited 7.5k > derplet.sol took out 4.3k it's still very easy to tell! so you need i) many other people using the same protocol, ii) you need everyone to use uniform amounts that are not specific, iii) you need the timing to be random, if you withdraw 1 second after you deposit, you have just given your tracer a lot of information so basically: MixerCash > charles.sol deposited 5k > retardio.sol deposited 5k > james.sol deposited 5k > mertardio.sol deposited 5k *50,000 other similar transactions over 3 months > someguy.sol withdrew 1k > derplet.sol withdrew 1k now, it is much harder to link that derplet.sol was indeed charles.sol (though still possible, especially with some OP computers) the possible set of people who charles.sol could've been above is called the anonymity set. but there are still quite a few problems here, namely that you are reliant on other people using the protocol consistently and reliably. importantly, "the other people" can actually just be feds adding fake transactions here to give you the illusion of security and the real anonymity set could be 100x smaller so then you have something like monero, which works kind of like the above but is an improvement since every single transaction done onchain introduces obfuscation, basically mandatory mixing always for example, monero hides each real input among 15 decoy inputs taken from previous outputs on the chain however, you are still leaking information and you need a lot high velocity usage to probabilistically hide amongst the crowd (you are also vulnerable to quantum attacks later on) the most robust solution is what we have all known since the internet: encryption you need to encrypt and vanish the entire data, probabilistically hiding things always exposes you at some point and this is what zcash does, it encrypts everything so you can not tell sender, receiver, metadata, amount, it is all invisible and this is why it's considered the gold standard in privacy you can also encrypt everything and then use FHE to compute on the encrypted data to do operations next I'll talk about FHE, MPC, ZK, TEEs and how they differ