Division of Regulatory Power: Collaborative Regulation for Privacy-Preserving Blockchains

Abstract

Decentralized anonymous payment schemes may be exploited for illicit activities, such as money laundering, bribery and blackmail. To address this issue, several regulatory friendly decentralized anonymous payment schemes have been proposed. However, most of these solutions lack restrictions on the regulator’s authority, which could potentially result in power abuse and privacy breaches. In this paper, we present a decentralized anonymous payment scheme with collaborative regulation (DAPCR). Unlike existing solutions, DAPCR reduces the risk of power abuse by distributing regulatory authority to two entities: Filter and Supervisor, neither of which can decode transactions to access transaction privacy without the assistance of the other one. Our scheme enjoys three major advantages over others: ① Universality, achieved by using zk-SNARK to extend privacy-preserving transactions for regulation. ② Collab orative regulation, attained by adding the ring signature with controllable linkability to the transaction. ③ Efficient aggregation of payment amounts, achieved through amount tags. As a key technology for realizing collaborative regulation in DAPCR, the ring signature with controllable linkability (CLRS) is proposed, where a user needs to specify a linker and an opener to generate a signature. The linker can extract pseudonyms from signatures and link signatures submitted by the same signer based on pseudonyms, without leaking the signer’s identity. The opener can recover the signer’s identity from a given pseudonym. The experimental results reflect the efficiency of DAPCR. The time overhead for transaction generation is 1231.2 ms, representing an increase of less than 50 % compared to ZETH. Additionally, the time overhead for transaction verification is only 1.2 ms