Key crypto industry figures see promise in Privacy Pools proposal

A paper proposing a regulatory-friendly mixing protocol on Ethereum ETH +0.36% called Privacy Pools co-authored by Ethereum founder Vitalik Buterin has won support from major crypto industry figures such as the founders of Coinbase, Metamask, and Messari. 

The Privacy Pools protocol would allow users to demonstrate that their funds do not come from unlawful sources without being forced to reveal the full transaction history of those funds. The protocol was designed as an alternative to the mixing protocol Tornado Cash, whose founders have been charged with money laundering and sanctions violations. 

“Privacy Pools has the potential to be the most important tool we have to address regulatory challenges while maintaining privacy on public blockchains,” said Fred Ehrsam, co-founder of Coinbase and Paradigm, on X. The message was reposted by Coinbase co-founder and CEO Brian Armstrong. 

Dan Finlay, co-founder of MetaMask, offered to help the paper’s authors receive grant funding from the MetaMask Grants DAO, and said, “This is probably the shortest path to getting privacy pools wallet support available to the widest set of wallet users.” 

The co-founders of Messari also weighed in. In a post on X, Ryan Selkis called it the “News of the Year” and claimed the researchers “...may have just solved the transaction privacy vs. reg surveillance tension issue for crypto.” 

Some measured criticism

Dan McArdle, Messari’s other co-founder, had a more skeptical view, bringing up the notion that the ideal long-term goal of crypto should be “...a fully private money system that everyone uses, with no easy way to prove tx history. Then an oppressive gov has *a lot* more work to do to financially oppress people.” While Privacy Pools provides a near-term solution we can be “sorta-happy” about, McArdle argues, it’s important to keep the long-term ideal in mind. 

Haseeb Qureshi, managing partner at Dragonfly Capital, also expressed some skepticism that Privacy Pools would be able to avoid the same problems with the justice system that Tornado Cash encountered, given that Tornado had also implemented its own compliance tools.