proposing a regulatory-friendly mixing protocol on Ethereum called Privacy Pools co-authored by Ethereum founder Vitalik Buterin has won support from major crypto industry figures such as the founders of Coinbase, Metamask, and Messari.
The Privacy Pools protocol would allow users to demonstrate that their funds do not come from unlawful sources without being forced to reveal the full transaction history of those funds. The protocol was designed as an alternative to the mixing protocol Tornado Cash, whose founders have been“Privacy Pools has the potential to be the most important tool we have to address regulatory challenges while maintaining privacy on public blockchains,” said.
While Privacy Pools provides a near-term solution we can be “sorta-happy” about, McArdle argues, it’s important to keep the long-term ideal in mind.that Privacy Pools would be able to avoid the same problems with the justice system that Tornado Cash encountered, given that Tornado had also implemented its own compliance tools.
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