A Private Smart Wallet with Probabilistic Compliance

TL;DR

This paper introduces a privacy-preserving smart wallet that combines probabilistic compliance mechanisms, efficient performance, and minimal costs to enable private, compliant digital transactions on a blockchain network.

Contribution

It presents a novel invitation-based onboarding, a proof of innocence, and ancestral commitment tracking using bloom filters, enhancing privacy and compliance in digital wallets.

Findings

Private transfers complete within seconds on standard hardware.

On-chain costs are minimal, ensuring affordability.

The system maintains transaction unlinkability and privacy.

Abstract

We propose a privacy-preserving smart wallet with a novel invitation-based private onboarding mechanism. The solution integrates two levels of compliance in concert with an authority party: a proof of innocence mechanism and an ancestral commitment tracking system using bloom filters for probabilistic UTXO chain states. Performance analysis demonstrates practical efficiency: private transfers with compliance checks complete within seconds on a consumer-grade laptop, and overall with proof generation remaining low. On-chain costs stay minimal, ensuring affordability for all operations on Base layer 2 network. The wallet facilitates private contact list management through encrypted data blobs while maintaining transaction unlinkability. Our evaluation validates the approach's viability for privacy-preserving, compliance-aware digital payments with minimized computational and financial overhead.