An Auditable Confidentiality Protocol for Blockchain Transactions

Blockchain exposes all users’ transaction data to the public, including account balances, asset holdings, trading history, etc. Such data exposure leads to potential security and personal privacy risks that restrict blockchain from broader adoption. Although some existing projects focus on single-chain confidential payment, no existing cross-chain system supports private transactions yet, which is incompatible with privacy regulations such as GDPR. Also, current confidential payment systems require users to pay high extra fees. However, a private and anonymous protocol encrypting all transaction data raises concerns about malicious and illegal activities since the protocol is difficult to audit. We need to balance privacy and auditability in blockchain. We propose an auditable and affordable protocol for cross-chain and single-chain transactions. This protocol leverages zero-knowledge proofs to encrypt transactions and perform validation without disclosing sensitive users’ data. To meet regulations, each auditor from an auditing committee will have an encrypted secret share of the transaction data. Auditors may view the private transaction data only if a majority of the committee agrees to decrypt the data. We employ a ZK-rollup scheme by processing multiple transactions in batches, which reduces private transaction costs to 90% lower compared with solutions without ZK-rollup. We implemented the proposed scheme using Zokrates and Solidity and evaluated the protocol on the Ethereum test network, and the total one-to-one private transactions cost only 5 seconds. We also proved the security of the protocol utilizing the standard real/ideal world paradigm.