Privacy Pools Panel - Tsu_Kareta, Mesquka, Carlo Chialastri, Andrea Togni | Web3Privacy Now

[Music] uh I will give a SM small introduction while we are here uh well PG will put the uh slide uh on that so privacy pools is kind of the latest big thing that happened within the Privacy landscape in terms of how many attention were brought to the subject it is the research paper that has been uh written down by Amin sumani vitalic ban yob Maas nler Fabian Shar and it's interesting that within it's kind of is a part of problem we want to approach because it led to a certain Twitter Wars like my privacy is better than yours I know about privacy more than you which is interesting interesting that different like Zuko from zikes attack vitalic or I mean a me was attacking Zuko back and it went into some sort uh let's get more Twitter followers story instead of kind of carefully listening to each other arguments and it's interesting that if you follow up the case and you saw the interview that happened with the Zuko vitalic they kind of found the Common Ground pretty quickly and they were not bunch of fud Around The View on privacy and what's important here we brought not just privacy practical players who are fostering and moving privacy forward and also supporting our event but also um the legal attorneys who are kind of like um are on another side of the of the spectrum but they know how to protect the market and how to make a dialogue in between The Regulators the potential uh use cases that happen in the future between dealing with the government um they could uh comment on compliance in different Manner and also Monero is the big uh old school uh privacy player that has their own approach to the game which is interesting because um uh Andre is a teacher a philosopher so we could also think much more broadly from the context what what what we game do we play here and specifically what privacy pools matters as as some sort uh what will be the next implications of privacy and also I would like uh Alan to moderate a bit um that's kind of like a you're you're the boss now but I was interesting by watching the video just give give you some text on that is like um uh who decid side uh this freedom of Association like what it is and how it works for different countries and people from the different contexts because it's a bit vague what proof of Innocence stands for partially as a meme partially as a working solution and also like uh is it a really working solution to sex uh tax paranoias that are just the listing privacy coins just because they're afraid of the future legal implications yeah um can you guys hear me okay cool um all good questions uh but let's start with a bit of intro uh from everybody uh we'll start down at the end if you could just you know state your name uh and what you do and uh that'd be great yeah um hello everybody can you hear me yeah uh I'm a teacher as uh M said I teach history and philosophy and I started as a um um I have a PhD in philosophy in the philosophy of mind and philosophy of per perception then I started working on orone economics libertarianism and I become very interested in gold silver Bitcoin Monero privacy tornado cash so on and so forth and um actually I think that the um privacy privacy pool paper is very very interesting uh from a technical side uh but also from a philosophical side because uh to me if I have um there is a lot to unpack in that paper but um if there is one thing that um clearly emerges from that paper uh in my opinion uh is that how it is important to adopt some kind of philosophical approach uh uh to war privacy and basically the main point for me is about the relationship between a theoretical Universal uh nonarbitrary notion of privacy on the one end and the Practical side of privacy that is the understanding of privacy as a um something that needs to live in the real world uh privacy as a spectrum right and um my main point my uh my main concern with uh with the Privacy pool uh approach is that uh it is too much tilted toward the Practical side and it leaves the theoretical side the universal side a little bit on the side so basically um um the authors of the paper calls the um calls priv the Privacy pool approach and a neutral approach an approach that is compatible with uh the Privacy policies of different governments of different jurisdictions of different on different corporations like blockchain surveillance companies and uh they call that a neutral approach uh which I think is a bit of misleading because uh the right World in this case is to me relativism it is a relativistic approach coupled with the authority principle basically from a theoretical perspective the authors um abandon any attempt to Define def privacy in a universal way in a non-arbitrary way and they just say well whatever government decides about privacy whatever definition they give about privacy whatever value judgment they give about privacy whether it is good or bad we accept it and privacy pool is compatible with uh uh uh with all different kinds of uh of approaches and to me it's a bit problematic this kind of approach and I want to give you just a little a little analogy of course even with liberty for example not only with privacy but also with Liberty we can distinguish between a theoretical definition of Liberty and its practical implementation we can be more free or less free for example Elon Musk can be we can say that Elon Musk enjoys more freedom than a slave under the Roman Empire it is a spectrum right but every time that we see a liberty violation our instinct is to combat it is to fight it is to say that uh the violation of Liberty is something that is wrong our first in instinct is not to collaborate r with people that violate Liberty it is to fight it and to me the same is true also for privacy uh of course from a practical perspective privacy is um a matter of degree um there is a spectrum we can protect we can we can protect our privacy uh in a good way in a bad way it is a spectrum it is a matter of degree but when privacy is violated to me when surveillance becomes the norm our Instinct should be to fight surveillance not to find a sort of equilibrium with people that violate Sur violate surveillance the paper the title of the Privacy Pap is very revealing in my opinion it is uh it states in the title that the authors seek look for uh a practical equilibrium with regulators and even with people who uh uh deny privacy in our day in our everyday life and again this is this is problematic because the question becomes well where is the line where is the line of the compromise and basically even the authors in the paper propose some use of privacy pools that are kind of problematic for the for a privacy perspective for example they say not me they say that if a bank uh uh want to uh force a customer to disclose all all of his transaction history well this is fine uh and privacy pool is compatible with that with the kind of approach they say that if governments want to force a proof of person who on the people uh so that the um the people can use blockchains only through proof of person like for example a government idea well privacy pool is compatible with that and so this is a very slippery slope is and it is kind of uh kind of dangerous and um I think that again I'm not saying that um the work by the authors is uh is bad or something not at all I think that all advances from from the technical perspective are are great the advanc the advancements in zero knowledge proofs in association sets and soft are great for example Association sets are better than ukis that that Monero has from from some perspective so the technical side is very important but I really really think that this technical side must be coupled with a universal notion of privacy with with a non arbitary notion of privacy and with a notion of privacy that does not depend on on the um uh on the wishes of politicians Regulators blockchain surveillance companies something that is universal uh the previous speaker talked about privacy is a human right I would say natural right if privacy is a natural right it doesn't depend on the arbitrary definition provided by politicians I don't really like that definition for a VAR of reason we can adopt even other approaches for example we can say that privacy is an a priority condition for Liberty and for property and if it is a priority it means that it is universal there are a lot of ways to do that but we really need to start also a discussion on the theoretical side of privacy and not just on the implementation side because otherwise the slippery slop uh is going to kind of kill us and we end up with cases like tornado cash so all right um I'm on the complete opposite side of the spectrum um I'm I'm in the realm of um implementing and making things you know Real World um making sure people can actually use things and not just uh think about them um so I guess my name's Kai forgot to mention that um and I'm a contributor to ra gun no sorry I was disrupted hi I'm Carlo kastri I'm a loyal I'm uh part of ur. I'm an atome contributor I'm in web3 since 2020 when I founded NF Italia the first Italian Community about 1050s and web three I seeing the Privacy paper is really interesting I understand and I agree that we have to balance two really important things in one hand the privacy of the people we have to stop the transaction history of each wallet in some point and and in other hand in the other hand we have to not facilitate not make easy the the life of the scammer scammers and bed actors in the paper the the prospector solution in my opinion have a problem they prospected a third party third part company that have the power to say which wallet is clean and which wallet is suspicious this a consequence in real life because error happens and in this situation we don't have a way for for say for say that there there is an error in this uh in this Mark in my opinion this solution isn't isn't good in real life for a a limitation of our freedom we have we need a an act by The Authority not by a a company then my opinion for have this situ this solution good and clean this company had to be the first to be regulated the people have to to know how the algorithmic works and where you can say if something not good is happening what's your opinion about this I want I want to know yeah so um hey everybody I'm Alan uh the guy with the mustache up there I'm one of the real gun contributors um and I I think I'm on the uh pragmatic side of things uh my background is in finance um and I I thought that so you know I first heard about this whole like type of um you call it proof of Innocence uh this uh ZK compliance mechanism whatever you want to talk about it as um I first saw it in January um uh there's a team out in Turkey uh working on it pretty aggressively called chainway uh so shout out to those dudes uh they're really uh really bright cryptographers and um I thought it was a really interesting and compelling um new way to take and disclose things to people right we have to think about this system system as an interactable like a way that we can interact with other individuals in an ecosystem and uh the only way uh speaking from like my background in finance like you have to do due diligence on counterparties right you have to know where the money is coming from you are a regulated entity if you work for a bank and you're taking cash down on a uh some sort of securitized loan right you have to at least in the United States verify that that money didn't come from a malicious actor as prescribed by the government like that's a fact of business right that's the pragmatic real you know reality that we live in right and so if I were to take in uh $5 $10,000 $100,000 from somebody one of the steps that I would take is I have to take and verify that they're not uh receiving money or using money from uh the ofac list right the office of foreign asset controls in the United States stipulates that I can't take cash as a regulated entity from somebody on that nauy list right and so what I thought was really neat about this is you have these privacy systems like rail gun uh you know tornado cash Monero zcash for example um and all of them have this thing called a vew key right and these were always really touted as this way for you to take and like demonstrate that you're not a bad actor see here's my viewkey look at my transaction history here you can see all the things that I've done and I'm not a bad actor uh but this kind of deats the [ __ ] purpose of a of a privacy protocol if I have to dox to you every time that I need to do due diligence uh as a as a counterparty to you right so this isn't a good solution to practical Finance as it exists in the real world and so if we want adoption from people who are in the real world right Banks um and um you know individuals who choose to adhere to certain regulations within the state nation states that they live in they have to have these abilities to comply right but they also have to have privacy right I mean privacy we all know I won't bore anybody here we all know and care about privacy that's why we're sitting in this room right we have to have that right so we have to have these tools available to us that allow us to demonstrate uh that we meet certain requirements of other counterparties whatever that may be so for example if I want to prove that I'm not one of the people that just took and stole hundred million from uh protocol X I could demonstrably do that with this zero knowledge proof I could do this in a completely privacy preserving way and also you can know mathematically and be very certain that I'm not that person right so I've always viewed this not as like a um I I agree with you right I don't think um any sort of company for example like chainalysis or tum Labs right or uh I could rifle them all off for you guys but I don't think they should be the Arbiters of truth right uh but I think we can have a lot of like practical like uh lists of Bad actors right I think globally people stealing [ __ ] on chain is considered to be a bad thing right um and since we you know at least in the ethereum and evm world uh we live on a public Ledger this is auditable on chain and we can start to ask questions about this right and so I see this kind of like ZK compliance mechanism this sort of zero knowledge proving um if you will this proof that I don't have bad funds however you define that as my counterparty is a really interesting Dynamic uh that I think is very seldom appreciated because I think it in the ultimate truth right in the philosophy of things right uh privacy should be a binary and I could I could choose how I you know and I can just tell you to go [ __ ] yourself right but I think in the real world right if I need to get a mortgage or I want to buy a car or I want to get a lease or something like this uh where there is practical due diligence associated with the the finances um we have to really consider like can crypto become that Rail and can it do it uh without like doxing people and currently the mechanisms don't exist um now like full disclosure I mean you know rail gun contributors have been working on this kind of thing for um n months now how long has it been about something like that uh so where you could take and make these arbitrary statements about your balances and transaction history uh but uh so I'm I'm on the I guess I'm on the four side of this um I think it's a really brilliant thing uh but I I agree with you guys that the tact is is very very critical um and I think that will certainly break some eggs uh along the way I don't think it'll be perfect uh right out of the gate but uh neither was crypto we had to iterate on it for the last uh I don't know 12 years yeah um um to be sure I I I didn't say that the theoretical uh perspective and the Practical perspective are mutually excl exclusive not at all they definitely go together they definitely go together and my question is then from a practical perspective how do how do we decide who is good and and uh who is bad because of course if there is a Public Authority who does that well which public authorities because the examples are always the usual examples like North North Korea is a dictator ship and this bad I mean like likes to talk about Iran on on Twitter for for abusive reasons but what about the Italian government uh mola started this conference by saying that they Italian government maybe this is the Italian police that doesn't want me to say something but mola started the conference by saying that corruption is wi spread in Italy which is true and what about the US government uh how many deaths are caused by the US government worldwide per year uh is the US government causing more deaths per year than North Korea yes or no I think that the answer is watching I think the US government's great yeah no absolutely absolutely I love I love them yeah Al Al everything and if it is a a a private company that becomes an asp an association set provider uh well then as claudo said before it becomes even more problematic but in the real world practically speaking the paper was written by a guy from CH analysis in the real world and this is deeply problematic because uh if we think about these BS companies blockchain surance companies well what is their business model they um write a close Source software software that cannot be verified by anyone they sell it for profit they sell it for profit to law enforcement agency that use this software to put people in jail even in some cases like tornado cash or um also um please look also to the Bitcoin f mixer which is another case pretty remarkable uh in this regard so they use this software to put to put people in jail and this software is based on shaky heuristics to say the list uh in the Roman Sterling of case in theit Bitcoin fog mixer case in court chalis stated in court that basically their software is not peer reviewed at the academic level but a lot of chalis scientists are working on it so basically don't verify just trust us our software works and of course it is close s so nobody can can see what what the software is doing uh and in in the same in the same in the same document chalis itself says that it doesn't collect stats about false positive and false negative and this is the state-ofthe-art uh these are firms that um again sell close Source software uh for money to put people in jail based on this software that basically nobody can and the paper was written by it sounds like that you and I I agree with you on this too by the way um that you question having for-profit companies uh develop and maintain these accumulators right no I'm not question I mean I'm a Libertarian and I love profits but no I mean to say like these for-profit companies being the Arbiter of truth right that they are the ones dictating who's good and who's bad right and and so I think that like that's a very fair criticism of like that architecture uh which by the way I can't like speak to I didn't I didn't write that paper they didn't ask me uh I wasn't cited in that paper in any way um but uh these accumulators can be arbitrary in nature um and so these can be dictated by the counterparty so for example um what matters to me right um I want to prove you and I need to do a transaction on chain right um and I want to you know myself I want to you know uh at least verify that you're not the harmony Bridge hacker and uh I'm not about to receive a million dollars from you and uh it's it's tainted funds in my opinion personally right um I can actually have an accumulator of addresses that I've dictated as a single entity uh or we can abstract this out to uh a bank or a DA or um a broader uh audience of people right a nation state can have an accumulator right the beautiful thing about these kind of uh architectures is that they're uh they recursive in nature and so you can make this statement across a lot of different lists um and so I I agree I don't think that like we should have a for-profit company being the global Arbiter of truth that sounds like some uh World coin uh tenf foil hat type [ __ ] that I'm not interested in either but um I I do think that like there's Merit in it um Beyond if we if we put that part of it aside right um I I think that um I don't know I guess I would love to hear your thoughts on it Kai I mean I you know you've been awfully quiet over there yeah um I mean like I see the the most difficult thing is figuring out like um well like this there is a sort of like rare in between like things that are clearly like people would be fine with and clearly people are not fine with or at least the V majority of people I'm not fine with or fine with um this this the care are in between um but I guess like it really does boil down to um like the solution that's being proposed um has functionality around like which lists and all that you end up using which accumulators um and so I think it just it it boils down to um figuring out how you handle it your area um it seems to me that the the proposed uh Way Forward at the moment is to have um a kind of optionality around which lists and that would sort of denote um with that particular user what um what like things they're comfortable with um I think I mean in in reality I think a lot of the time it's going to depend on geographically where the user is um because I'm not sure like a large majority of um you know regular people are willing to risk going to jail because they use the tool um you know it's that's not something that people generally tend to do on a day-to-day basis um and this brings us to the the issue of freedom of disassociation I think that's I mean it's a cool stuff to have this new Option from a technical side definitely it is a new thing that uh we can do with uh with blockchains but then uh we should ask ourself um what is the purpose of of blockchains uh because basically of course blockchains uh were born like a monetary system like right and um uh freedom of this Association is not not a feature uh uh which is common in monetary instruments for example gold and silver uh which were money for thousand of year do not have this kind of Technology the technology to offer freedom of this Association so at least we can say that it is not a necessary feature of money because gold silver even physical cash works pretty well without it and um on the other side this thing about this Association uh and uh and the ability to San people and to prevent people from using a tool because otherwise uh they can go in jail and because otherwise uh and to prevent people from some geographical area uh to uh to use money is typical of the Fiat system this is this is one of the one of the basic features of the Fiat system which is based on the pr that authorities of some kind can can can exclude people from the uh Financial world and from the monetary system okay so so here again um uh here what is at stake it is uh our soul in the sense that it is what we want to build actually what kind of monetary system we want to build maybe we don't want to build a monetary system maybe uh maybe we we want to use blockchain for something different but here we need a serious reflection about uh the possible uses and imp and and implications of of these Technologies because we are in in Uncharted water here Waters here so uh um definitely uh looking forward to see what happens yeah very curious what you think as a lawyer of this sort of thing right it's not a prescribed so like vew keys for example uh aren't like uh a legally prescribed or accepted thing right uh so whenever you use a privacy system you could give out your view keys and people see this as a way to uh satisfy uh some sort of like legal obligation to someone right um I'm wondering what your thoughts are are on the um I mean the General State of privacy in the global perspective right I mean I think a we we have a definite problem uh with what people are using um tornado cach was really prolific in the Privacy space um the the Netherlands arrested a guy and didn't charge him for nine months uh the United States just uh arrested two developers I'm wondering like do you see like uh not not legal advice uh but do you you know I'm wondering what your thoughts are like broadly of like what developers are doing to try to iterate to give people tools um that allow them to to use these kind of I allow is probably a wrong word but like Empower them to use them and feel comfortable that like uh they're not going to go to jail in my regulary dream world The Authority had to regulate to make the difference in what is decentralized and what it isn't this two different types of approach are regulated and then there is a lot of confusion about the responsibility of developers in one platform full decentralized my opinion called them to be responsibility for the developers and then the respons responsibility to be just if there is if there are frauds or criminal actions if this was the the question yeah I mean I guess like I'm more Curious like you know what do you think you know it sounds like that you're um you're generally against uh what's going on in this paper it sounds like um Fair yeah I'm Wonder I'm generally I I generally think this Tech is interesting but um I I guess I haven't really gotten your hot take on it like what what are you what are your thoughts on like people building tools this like the so to me this question no or to no no to me to me me well uh well actually um from a regulatory perspective uh what I think is uh uh the way forward is to uh push as much decentralization as possible uh this is the key word this is the key features in order to avoid the prosecution by uh by public authorities if you read the indictment by uh on against tornado cash developers it is full of accusations of basical centralization so we the developers built the AI that helped people to use tornado cash they have a dow they have a token H they use the Rel layers and I don't think that these kind of uh accusations are are on point uh I think that tornado cach developers are not guilty at all of money laundering just because uh tornado cach is a non-custodial non-custodial tool so it is the user that actually chooses to use this tool and eventually to under their money or to to commit crime but the all this point of centralization a token relay and so on and so forth can be uses as excuses by authorities in order to make an example out of this project um so the way forward to me is to decentralize as much as possible of course practically speaking it's pretty hard to do uh because of course centralization has a lot of advantages uh for example with regard to um profit for example centralization is uh with centralized project is way easier uh to uh make profits and therefore to Foster projects um but from a regulatory perspective in order to defend ourself against buus accusations as the ones made against the tornado cash developers this centralization uh is the way for example I don't know there is the finsen the financial the financial crimes uh crimes enforce enforcement Network in the US that for example in 2013 uh put out a guidance on the bank bank secrecy act that distinguishes between centralized and decentralized virtual currencies and says pretty clearly that decentralized virtual currencies are not subject uh to the uh BSA to the bank secur Act and um more specifically like money transmitter rules and regulations from Fen right exactly and this is pretty remarkable because actually Monero which is I mean the the coin of illegal uh of the illegal guys actually is one of the few coins that is actually complying with this kind of Regulation and um again it is way more difficult to attack a project if it is really really decentralized of course it is possible it is possible I'm not saying at all that it is impossible but it is well more difficult it it involves more cost for Regulators to uh go after decentralized projects yeah do you do you see I'm curious what you guys what you three think do you see these tools this this ZK compliance mechanism like this I see it as like a um uh a s step uh away from vew keys so I generally see this kind of tool as something that's positive but I'm wondering what your thoughts are I've actually had people um I've had chats with folks in the Monero Community who say this was a a Stone best left unturned right we shouldn't have even started down this path but I'm curious what your guys's thoughts are yeah actually I mean Yuki is a kind of controversial topic and uh it it kind of it is kind of similar to the compliance tool in tornado cache basically you reveal your old transaction history and um again from a regulatory perspective I'm not an I'm not the expert here so I ask you from a regulatory perspective um basically uh giving The View key of of your old transaction history is a pretty strong step even stronger maybe than what happens in privacy pool when you just prove that you are part of a broader set of people and uh you are not proving your old transaction history you're not reling necessarily your own transaction history so actually you have more effort in some respects to uh you can have more effort in some respect to uh give up your privacy in tornado cash Maybe maybe Monero then then it happens in then it happens in privacy pool of course I think that maybe from the regulatory perspective the the real problem is that all these tool are voluntary and given that they are voluntary it is up to the people to decide whether or not to use few keys to use um the compliance tool internal cach to use privacy pools and uh the fact that they are volun uh means that basically they don't have uh full control by default of uh what's going on on these blockchains so um uh but I want to hear the opinion of the legal expert this is really a good question the problem is what is the purpose of the the blockchain if it is a Financial Freedom is a a thing is is adjust of strument of payment that have a lot of also just in this uh in this situation is another question I like to think it like a Financial Freedom for this I talk about the the impossibility of the limit of the freedom but probably isn't the right solution then I agree with you yeah I think to me uh sort of asso Association STS or Association steps are just objectively an improvement over vs right um because realistically the output that you want from whatever process you using using whatever technology um is just like a binary yes or no right like can I deal with you um right and like in in the majority of cases um you're going to be working with someone that needs to have that binary yes or no um giving some your vuky is absolutely disastrous to your privacy because I mean they see everything you that done um and you know in the future as well um and it it doesn't even really answer that question to full satisfaction um whereas the output of consociation set is just a yes or a no um there isn't any extra data for them to look at and by definition the output is um like exactly what they well I I almost got hooked off of the stage uh I think we're at time but I'd love to hear some closing thoughts from everybody um in regards to this topic um I'll go first if that's okay I think what's really important here is that we have these kind of discussions uh where people don't necessarily agree uh on a topic uh I find it all too frequent that I go to a conference and I sit on a stage with somebody who wants to just like parot and Echo the exact same thing that I said uh and I find that exhausting um and and I found this to be a very fruitful uh conversation um so I want to thank you guys for uh for for disagreeing I think this is great but yeah anybody have any any final thoughts before we uh let's get down yeah I just want to thanks the organizers for the wonderful job they've done and uh just want to say that it has been a really pleasure to be here and to have the opportunity to discuss with you on these topics you are way more expert than me on the technical side and and on the actual inner workings on on the stuff so uh sorry if I said stupid things and uh uh it is it really really really was a pleasure to be here thanks um I guess like uh just sort of close this so on all the stuff that that we're building there it's all good to uh you know try and build some random full Tech but it doesn't really matter if I can't use it I mean I I I'm here being in crypto for a while I'd love to be able to like you know use it I I try to use it as much as possible in in my da I'd like to be able to solely use it but there's just too many barriers to that right now um and to me it's just how do I just remove those barriers and I got to make sure that me personally the stuff that I'm like you know designing and all and um I like everyone else that's here building things um to keep that in mind you know it's the stuff that's actually like compatible with just a regular person that you know to pay their bills with it or um just use it in da their Liv well pleas mine thank you guys for the invite for all thanks [Applause] [Music] guys