Homomorphic Encryption-based Vaults for Anonymous Balances on VM-enabled Blockchains

TL;DR

This paper introduces homomorphic encryption vaults for VM-enabled blockchains that preserve user privacy, support compliance, and enable secure transactions with practical benchmarks.

Contribution

It proposes a novel privacy-preserving wallet protocol using homomorphic encryption and zero-knowledge proofs, with compliance features and compatibility with external tokens.

Findings

Secure transaction verification with zero-knowledge proofs

High-performance benchmarks from proof-of-concept implementation

Compatibility with external tokens like Ether and ERC20

Abstract

In this work, we present homomorphic encryption-based vaults (Haults), a permissioned privacy-preserving smart wallet protocol for VM-enabled blockchains that keeps users' balances confidential, as well as the amounts transacted to other parties. To comply with regulations, we include optional compliance features that allow specific entities (the auditors) to retrieve transaction amounts or execute force transfers when necessary. Our solution uses ElGamal over elliptic curves to encrypt balances, combined with zero-knowledge proofs to verify the correctness of transaction amounts and the integrity of the sender's updated balance, among other security checks. We provide a detailed explanation of the protocol, including a security discussion and benchmarks from our proof-of-concept implementation, which yield great results. Beyond in-contract issued tokens, we also provide a thorough explanation on how our solution can be compatible with external ones (e.g., Ether or any ERC20).