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PR4DLT

Privacy-Preserving Regulatory Technologies for Distributed Ledger Technologies

PR4DLT aims to address the question of how regulators can efficiently cope with distributed-ledger-based assets and their underlying technologies. It covers research in the area of privacy-preserving regulatory technologies in the context of distributed ledgers to derive the appropriate theoretical and technical foundations for their practical application.

Motivation

The rise of cryptocurrencies and their underlying distributed ledger technologies (DLT), commonly referred to as blockchains, has captured the interest of diverse communities, science and market alike. Decentralized cryptocurrencies, such as Bitcoin, are increasingly perceived as viable alternatives to classical payment methods. Such developments introduce new regulatory compliance requirements for financial institutions, businesses, individuals and the public sector. The underlying technologies themselves may currently render it difficult, if not infeasible, to implement certain regulatory requirements.

Preliminary Findings

We performed fundamental and applied research in the area of privacy-preserving technologies and regulatory challenges in the context of distributed ledgers. Through this we were able to further highlight potential regulatory obstacles that are a byproduct of the underlying technologies e.g., permanent blockchain forks which may not only double the assets currently in existence, but also introduce various security risks and side channels for gathering additional information.

We identified new potential building blocks for privacy preserving regulatory technologies in this domain i.e., smart contracts, to automatically enforce certain rules, functional credentials, to anonymously prove possession of a set of attributes, anonymous multi-hop locks, for atomic swaps and publicly verifiable distributed random number generation protocols, which form a basic building block for the underlying consensus systems and also serve as a useful resource for drawing samples in probabilistic cryptographic proofs or other types of audits.

We were also able to implement and present the first basic building blocks for future regulatory technologies as a Proof-of-Concept.

Further Information

This project is funded by the FFG.

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