DeFi
Why the Railgun Project co-founder spoke to the federal government – and what’s next for crypto privacy – DL News
- Global law enforcement is cracking down on privacy protocols.
- While Tornado Cash developers fight in court, a co-founder of the Railgun project is trying to educate federal agents.
- However, it’s a tough sell.
The way Alan Scott tells it, he thought he was being scammed.
As co-founder of the Railgun Project, a group that educates and contributes code to the Railgun privacy protocol, he is accustomed to skepticism from federal agents.
So when an invitation to speak at the Virtual Currency Symposium – which Scott describes as the largest international conference for law enforcement looking to catch crypto bad guys – darkened his inbox, he thought it was a scam.
“It’s not every day that someone from the FBI writes you and says, ‘Hello, we’d like you to speak at our conference,'” Scott said. DL News in an exclusive interview.
The invitation turned out to be genuine.
In late August, Scott took the stage in Milwakue after the FBI deputy director’s keynote speech to tell people charged with monitoring privacy protocols like his that — contrary to popular belief — these tools are not just for criminals.
It’s a hard sell.
Authorities have spent recent years cracking down on privacy protocols and crypto mixers.
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In April, the Justice Department arrested two co-founders of Samurai walleta Bitcoin wallet with a built-in crypto mixer.
A Dutch court sentenced Tornado Cash developer Alexey Pertsev laundered $2.2 billion in illicit assets in May, and the European Union is considering doing so. to forbid crypto mixers and privacy tokens.
But Scott is leading a campaign to convince law enforcement, politicians and the general public that privacy tools can make honest users safer.
Vitalik’s favorite privacy tool
Railgun has largely gone unnoticed since its 2021 debut.
But in recent months, Ethereum co-founder Vitalik Buterin has used Railgun several times and promoted the protocol on to his 5.3 million followers.
The attention paid to this case has had an effect. On May 27, the protocol recorded its highest weekly volume ever. $47 million.
Railgun sets itself apart from similar projects, such as Tornado Cash, with its Proof of Innocence feature, designed to prevent bad actors from using it.
This allows users to create cryptographic proof that shows that the money they put into the protocol did not come from wallets associated with stolen funds or illicit activity, while keeping the origin of the money secret .
The idea is that if honest Railgun users generate this evidence, bad actors attempting to launder crypto through the protocol will be the only ones without it, allowing crypto exchanges and law enforcement to take it. identify.
Currently, Proof of Innocence only reports crypto addresses that the Office of Foreign Assets Control has placed on its sanctions list, but Scott said Railgun contributors wanted to change that.
Contributors are working on a secure way to allow law enforcement and crypto security experts to update the list of bad actors in real time, even if the addresses are not yet on the official list. OFAC.
“What if law enforcement around the world could help? Scott said.
Scott’s main contribution to Railgun is to research as well as facilitate communication and collaboration with other projects.
In recent months, he has championed the Railgun Protocol and other privacy protocols — explaining to everyone from casual memecoin traders to the FBI why so many people value privacy.
“Overwhelmingly, the response is pretty positive,” Scott said.
Privacy protocols under siege
While Scott is busy chatting with federal agents, anonymity advocates are absolutely alarmed at how privacy is being threatened.
They point to Pertsev’s conviction as well as the US Department of Justice loading two other Tornado Cash developers for running a scheme that allowed criminals to launder more than $1 billion in illicit funds.
Privacy advocates say these developers are unfairly penalized by others who use the tools they created to commit crimes.
“It definitely creates a negative privacy bias,” Scott said. “There’s even a slight chill around privacy, because people are like, ‘I don’t want to go to jail for writing code.’
Such disincentives include developers choosing not to write and release privacy-related code, thereby stifling innovation.
Another example of this deterrent effect is traffic to Wikipedia articles containing keywords tracked by the Department of Homeland Security. abandoned following revelations about NSA surveillance in 2013.
However, Scott said, he’s not very worried about Railgun facing the same fate as Tornado Cash.
“I think it’s a shame that these guys are in prison,” he said, adding that “a lot of people develop their private lives without having problems.”
He pointed to long-standing crypto privacy projects like Aztec and Zcash, among others, which do not face the same issues as Tornado Cash.
Privacy Nuances
There are also signs that authorities are starting to recognize the nuances around cryptocurrency privacy.
“We believe there is a difference between obfuscation services and anonymity-enhancing services that support privacy,” Brian Nelson, Treasury Undersecretary for Terrorism and Financial Intelligence. said at the recent Consensus Crypto Conference.
Nelson said he understands the desire for privacy in the context of public blockchains and that Treasury wants to work with the crypto industry to identify and collaborate on tools that can improve privacy.
Nelson’s comments, while positive, mean that Scott and other privacy advocates like him will likely have a busy time ahead of them.
Tim Craig is a DeFi correspondent at DL News. Do you have any advice? Send him an email to tim@dlnews.com.