Paper 2023/1152

Haze: A Compliant Privacy Mixer

Abstract

Blockchains enable mutually distrustful parties to perform financial operations in a trustless, decentralized, publicly-verifiable environment. Blockchains typically offer little privacy, and thus motivated the construction of privacy mixers, a solution to make funds untraceable. Privacy mixers concern regulators due to their increasing use by bad actors to illegally conceal the origin of funds. Consequently, Tornado Cash, the largest privacy mixer to date is sanctioned by large portions of the Ethereum network. In this work, we present Haze, a compliant privacy mixer. Haze guarantees users' privacy together with compliance, i.e., funds can be withdrawn as long as they were deposited from a non-banned address, without revealing any information on the matching deposit. We empirically evaluate our solution in a proof-of-concept system, demonstrating gas consumption for each deposit and withdrawal that is comparable to Tornado Cash for compliant users, and there is an optional feature for non-compliant funds to be released from the mixer to some predetermined entity. To the best of our knowledge, our solution is the first to guarantee compliance and privacy on the blockchain (on-chain) that is implemented via a smart contract. Finally, we introduce an alternative compliant privacy mixer protocol that supports de-anonymization of non-compliant users, at the cost of increased trust in the banned-addresses maintainer, which is realized in the two-server model.