Privacy DAO Adds Chainway’s “Proof of Innocence” Feature

A privacy-focused decentralized autonomous organization (DAO) is now offering a “proof of innocence” feature that allows users to show their funds have no connection to particular deposits. Railgun DAO adopted the feature, built by Chainway, this week.

Railgun DAO, which uses zero-knowledge cryptography for enhanced transaction privacy, has partnered with Chainway, a Turkish developer, to introduce a “proof of innocence” feature. One that meets anti-money-laundering and sanctions requirements.

What Is Proof of Innocence?

In August of last year, the US Treasury Department blacklisted Tornado Cash, claiming that the platform helped launder more than $7 billion. 

Tornado Cash is a coin mixer that enables users to make anonymous transactions on the Ethereum blockchain. Coin mixers, also known as tumblers, are tools that allow you to obscure the origin of a cryptocurrency transaction. Put simply, you do this by by mixing it with other funds.

In response, Chainway released its “proof of innocence” tool in January. This tool let users show that their withdrawals from Tornado Cash did not originate from a specified list of deposits. (The users indicate the list of deposits themselves.)

Now, Railgun has integrated a new feature that enables its users to create proof that their transactions do not involve any blacklisted addresses. Because the feature uses zero-knowledge proofs, it still maintains anonymity. The Railgun privacy system also operates on Ethereum, Polygon, Arbitrum, and Binance Smart Chain.

Improved privacy on the blockchain raises serious concerns for law enforcement. Namely, while the new tools might provide a much-needed layer of personal privacy, bad actors can and do use them to facilitate and hide illegal activity. 

“Proof of Innocence,” in theory, enables users to prove their innocence without disclosing their identity.

Crackdown on Crypto Mixers

Zero-knowledge proofs can help maintain privacy by enabling users to prove transactional data without disclosing additional information. They can assist law enforcement in detecting illicit activity without compromising the privacy of legitimate users.

Law enforcement agencies have been upping their action against crypto-related illicit finance, including crypto mixers. Last year the US government sanctioned Blender, a mixer used by North Korea’s Lazarus Group to launder cash.

But the bad actors have simply changed tack. Observers suspect that the entity has since relaunched as the mixer Sinbad to avoid sanctions. Time will tell how effective the stepped-up effort proves in the long haul.