Blockchain Privacy, But Not for Everyone

The Stellar team has officially unveiled a new privacy solution for transactions, developed by engineers at Nethermind.

It enables asset transfers on the Stellar network while concealing the details of the payment from outside observers. Block explorers will show that a transaction took place, but they won’t reveal who the actual sender was or who ultimately received the funds.

If you’re familiar with Silent Payments in Bitcoin, the concept here is essentially the same. In short:

• The recipient publishes a "meta-address".
• Each sender uses that meta-address to generate a unique, one-time address for the transfer.
• The recipient can access and spend the funds from that address at any time.
• Crucially, there is no visible link between the published meta-address and the actual receiving address - outsiders cannot tell that the funds were intended for the owner of the meta-address.

It sounds compelling. And it could very well boost interest in both XLM and USDC on Stellar. (Both assets are available for exchange at the best rates on rabbit.io.)

However, there’s an important caveat.

This form of privacy is positioned much like the zkProof-based solutions currently being developed on other mainstream blockchains:

• ordinary users cannot determine address ownership,
• but regulators can, when necessary.

Wait!

• On fully transparent blockchains, every transaction we make is visible to regulators - but their transactions are equally visible to us.
• On fully private blockchains, the state can hide its spending from us, and we can hide ours from the state.

That symmetry is consistent.

Here, however, we’re being asked to undress in front of someone who has no intention of doing the same.

We’ve already lived through this model in the traditional banking system. Why would we want to recreate it on-chain?