Paper 2022/211

Azeroth: Auditable Zero-knowledge Transactions in Smart Contracts

Abstract

With the rapid growth of the blockchain market, privacy and security issues for digital assets are becoming more important. In the most widely used public blockchains such as Bitcoin and Ethereum, all activities on user accounts are publicly disclosed, which violates privacy regulations such as EU GDPR. Encryption of accounts and transactions may protect privacy, but it also raises issues of validity and transparency: encrypted information alone cannot verify the validity of a transaction and makes it difficult to meet anti-money laundering regulations, i.e. auditability. In this paper, we propose $$, an auditable zero-knowledge transfer framework. $$ connects a zero-knowledge proof to an encrypted transaction, enabling it to check its validation while protecting its privacy. $$ also allows authorized auditors to audit transactions. $$ is designed as a smart contract for flexible deployment on existing blockchains. %According to the result of our experiment, the proof generation time is about $$, and the asset transferring time is only $$, which is practically usable. We implement the $$ smart contract, execute it on various platforms including an Ethereum testnet blockchain, and measure the time to show the practicality of our proposal. The end-to-end latency of a privacy-preserving transfer takes about $$. In particular, the client's transaction generation time with a proof only takes about $$. The security of $$ is proven under the cryptographic assumptions.