To solve the dilemma of anonymous transactions, Bitcoin and preceding alternative cryptocurrencies have attempted to use transaction mixers or ring signatures. However, there are a number of drawbacks to these proposed solutions. For one, a malicious or compromised member of a mixer or ring signature can break privacy. Furthermore, the anonymity set is a key metric to understanding how private a currency is. Privacy in formerly proposed solutions is limited by the size of the mixing cycle or ring signature. Each mixing cycle or ring signature is controlled by the number of transactions per cycle, which is transitively limited by the block size of the currency. Thus, the anonymity set in previous attempts at privacy tends to only be a few hundred transactions.
The Sigma Protocol uses a 3-move structure (commitment, challenge and response) that allows a prover to convince a verifier that a statement is true. Sigma improves over the previously used Zerocoin Protocol to solve 2 major drawbacks. First, it does not rely on a trusted setup of initial parameters in any way, where a “setup ceremony” is required to get things started. Secondly, it greatly reduces the on-chain proof size which enables greater scalability. In addition to these 2 improvements, the cryptographic assumptions are much easier to audit.
While the Sigma Protocol provides privacy for the sender, the NIX fully custom Commitment Key Pack scheme for Pedersen Anonymous Deposits provides complete sender and receiver privacy in one transaction. This scheme enables full Zero-Knowledge proof transaction privacy between both sender and receiver, known as the 2-Way Ghosting mechanism via Ghost Keys and Ghost Key QR codes.
Read the technical paper for Commitment Key Packs here.
Tor is a software that enables the ability to conceal user location and usage from outside monitoring entities. When using Tor, a user’s networking is routed through thousands of different network relays to scramble initial internet traffic resulting in a secure system for networking. Tor will be a default networking tool enabled in the NIX Platform.