Liquefaction: Privately Liquefying Blockchain Assets

TL;DR

Liquefaction demonstrates how trusted execution environments can be used to privately encumber private keys, enabling sharing and pooling of assets, which challenges traditional security assumptions in cryptocurrency systems.

Contribution

The paper introduces Liquefaction, a TEE-based platform that systemically breaks the assumption of private key control, enabling private, multi-user policies and asset sharing in cryptocurrency.

Findings

Enables private sharing and pooling of crypto assets.

Undermines security models of tokens, DAOs, and voting.

Proposes countermeasures using existing TEE tools.

Abstract

Inherent in the world of cryptocurrency systems and their security models is the notion that private keys, and thus assets, are controlled by individuals or individual entities. We present Liquefaction, a wallet platform that demonstrates the dangerous fragility of this foundational assumption by systemically breaking it. Liquefaction uses trusted execution environments (TEEs) to encumber private keys, i.e., attach rich, multi-user policies to their use. In this way, it enables the cryptocurrency credentials and assets of a single end-user address to be freely rented, shared, or pooled. It accomplishes these things privately, with no direct on-chain traces. Liquefaction demonstrates the sweeping consequences of TEE-based key encumbrance for the cryptocurrency landscape. Liquefaction can undermine the security and economic models of many applications and resources, such as locked tokens, DAO voting, airdrops, loyalty points, soulbound tokens, and quadratic voting. It can do so with no on-chain and minimal off-chain visibility. Conversely, we also discuss beneficial applications of Liquefaction, such as privacy-preserving, cost-efficient DAOs and a countermeasure to dusting attacks. Importantly, we describe an existing TEE-based tool that applications can use as a countermeasure to Liquefaction. Our work prompts a wholesale rethinking of existing models and enforcement of key and asset ownership in the cryptocurrency ecosystem.