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Cryptographers’ Track at the RSA Conference

CT-RSA 2021: Topics in Cryptology – CT-RSA 2021 pp 552–576Cite as

Balancing Privacy and Accountability in Blockchain Identity Management

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Part of the book series: Lecture Notes in Computer Science ((LNSC,volume 12704))

Abstract

The lack of privacy in the first generation of cryptocurrencies such as Bitcoin, Ethereum, etc. is a well known problem in cryptocurrency research. To overcome this problem, several new cryptocurrencies were designed to guarantee transaction privacy and anonymity for their users (examples include ZCash, Monero, etc.).

However, the anonymity provided by such systems appears to be fundamentally problematic in current business and legislation settings: banks and other financial institutions must follow rules such as “Know Your Customer” (KYC), “Anti Money Laundering” (AML), etc. It is also well known that the (alleged or real) anonymity guarantees provided by cryptocurrencies have attracted ill-intentioned individuals to this space, who look at cryptocurrencies as a way of facilitating illegal activities (tax-evasion, ransom-ware, trading of illegal substances, etc.).

The fact that current cryptocurrencies do not comply with such regulations can in part explain why traditional financial institutions have so far been very sceptical of the ongoing cryptocurrency and Blockchain revolution.

In this paper, we propose a novel design principle for identity management in Blockchains. The goal of our design is to maintain privacy, while still allowing compliance with current regulations and preventing exploitations of Blockchain technology for purposes which are incompatible with the social good.

Research supported by: the Concordium Blockchain Research Center (COBRA), Aarhus University, Denmark; the Carlsberg Foundation under the Semper Ardens Research Project CF18-112 (BCM); the European Research Council (ERC) under the European Unions’s Horizon 2020 research and innovation programme under grant agreement No. 669255 (MPCPRO); the European Research Council (ERC) under the European Unions’s Horizon 2020 research and innovation programme under grant agreement No. 803096 (SPEC).

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Notes

  1. 1.

    Zcash considers solutions to implement AML and KYC controls [1], however this solution requires trust on a single party.

  2. 2.

    concordium.com.

  3. 3.

    Note that the environment provides all inputs and sees all outputs. It can therefore observe that an account is created right after it instructed an account holder to create an account, and can make the connection between the two. This corresponds to the fact that in a real application an adversary may know that in a long time interval, only one user creates an account, and so the next account that shows up on chain must belong to that user. Of course, our system cannot prevent this - the best we can do is to make sure that the account itself is anonymous. This follows in our model because the ideal adversary - the simulator - will not learn the identity of the holder and will still have to produce account information which are indistinguishable from the real protocol, thus proving that the account information leaks no information about its holder.

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Acknowledgements

The authors would like to thank all members of the Concordium Blockchain Research Center and the Concordium AG for useful feedback, and in particular: Matthias Hall-Andersen, Jesper Buus Nielsen, Torben Pedersen, Daniel Tschudi.

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Authors and Affiliations

  1. Concordium Blockchain Research Center, Aarhus University, Aarhus, Denmark

    Ivan Damgård, Hamidreza Khoshakhlagh, Claudio Orlandi & Luisa Siniscalchi

  2. Indian Institute of Science, Bangalore, Bangalore, India

    Chaya Ganesh

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  1. Ivan Damgård
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Correspondence to Hamidreza Khoshakhlagh .

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  1. ETH Zürich, Zürich, Switzerland

    Kenneth G. Paterson

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Damgård, I., Ganesh, C., Khoshakhlagh, H., Orlandi, C., Siniscalchi, L. (2021). Balancing Privacy and Accountability in Blockchain Identity Management. In: Paterson, K.G. (eds) Topics in Cryptology – CT-RSA 2021. CT-RSA 2021. Lecture Notes in Computer Science(), vol 12704. Springer, Cham. https://doi.org/10.1007/978-3-030-75539-3_23

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  • DOI: https://doi.org/10.1007/978-3-030-75539-3_23

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