Blind Signatures: Top Privacy-Preserving Use Cases & Applications

In a world where our lives are online, privacy has never been more important.

 

Despite the decentralized nature of Web3 and crypto ecosystem, blockchain-based transactions may not be as anonymous as they seem.

Because blockchains are public ledgers, every transaction is duly recorded on a database that anyone can access — with on-chain sleuths and analytics firms connecting the dots.

But in recent years, cutting-edge cryptography has emerged to ensure payments can remain completely private: blind signatures.

What Are Blind Signatures?

Blind signatures were championed by David Chaum — and back in 1998, he championed this technology as a way of delivering untraceable payments to the masses.

Chaum raised fears that digital, automated payments can allow outsiders to gather an alarming amount of information about our lives — from commuting habits to the medicines we buy, and from where we go to the political contributions we make.

He envisioned a world where third parties would be unable to determine who was making a payment, the transaction’s value, and when it was finalized.

 

This is achieved by allowing a user to obtain a signature from a signer on a message — all while ensuring the signer cannot see its contents. Even if this information was exposed later on, the signer wouldn’t have a clue what it was — or who it belongs to. 

As we’re about to find out, privacy-focused DeFi projects have already been embracing this approach.

Digital Cash and Anonymous Transactions

Bitcoin launched in January 2009 — and about five years later, Monero burst onto the scene. The privacy coin was driven by concerns that wallet addresses on existing blockchains could be linked to real-world identities.

Monero’s goal is to obfuscate all transaction details — and the project says its users are granted anonymity by default. 

The first step is to use stealth addresses, which means a new one is created every time someone sends XMR (Monero’s cryptocurrency).

This is where “ring signatures” come in. The transaction then goes through a group of people (a ring.) Only one of them will be tasked with signing the transaction — and the others will act as decoys.

The amount being sent is also obfuscated or blurred, to prevent jigsaw identification from being a problem. If a very precise amount of crypto went from A to B in quick succession — 658.2 XMR, for example — this might give outsiders a line of inquiry.

A few analogies have been established for ring signatures over the years. One of them has been dubbed “The White House Dilemma.” While a leak may come from the West Wing, a large group of people means it’s impossible to know who is responsible.

There can be compelling, legitimate use cases for privacy coins like Monero. You may wish to make donations to politically sensitive causes — or live in an authoritarian state where everyday transactions are monitored. Concealing your wealth can also reduce visibility to would-be hackers.

But inevitably, Monero’s existence still causes unease among law enforcement agencies. Back in 2020, America’s Internal Revenue Service offered up to $625,000 for anyone who can crack the project’s cryptography. Malicious actors who target victims with ransomware are increasingly demanding payment in XMR over BTC too, and there are concerns this privacy coin could be used to facilitate money laundering or the financing of terrorism. 

Authentication and Anonymity

There are applications beyond digital cash. Right now, old-fashioned passwords create inherent security risks. Not only do some users create logins that are easy to guess — abc123, anyone? — but centralized platforms are at risk of being hacked, with private information such as passwords and email addresses making their way to the dark market. This can be especially problematic if the same login details are used across multiple sites.

Two-factor authentication is an encouraging step in the right direction, but there are still downsides. This can involve the use of biometric data such as fingerprints and facial scans — and while it may be more secure to a point, potential workarounds and privacy concerns remain.

As early as 2013, technical papers were advocating the use of blind signatures as a secure alternative to conventional passwords. It was argued at the time that they could eliminate the risk of guessing attacks. And in 2019, Facebook — now known as Meta — announced it was exploring whether partially blind signatures (where some common information is explicitly included) could help fight fraud. At the time, the tech giant said anonymized logging could mean developers who connect to the network via APIs would need to collect less information.

Anonymous Voting Systems

This brings us to another area where blind signatures are breaking new ground: anonymous voting systems. Chaum even alluded to this in his initial paper, writing: 

“Consider the problem faced by a trustee who wishes to hold an election by secret ballot, but the electors are unable to meet to drop their ballots into a single hat. Each elector is very concerned about keeping his or her vote secret from the trustee, and each elector also demands the ability to verify that their vote is counted.” 

Concerns about paper ballots, and voter fraud, have lingered for years. It’s especially problematic in countries that lack free and fair elections — and prohibit outside observers from monitoring proceedings. Constituents may also be worried that they could face retribution unless they vote a certain way. But equally, electronic voting conjures fears that machines could be susceptible to hacking — or users could be coerced by others.

With decentralized autonomous organizations on the rise, blind signatures could allow anyone to cast votes — all while ensuring they remain private. They can prove someone is eligible to participate while ensuring their voting intention is concealed. The prospect of “a practical secret voting scheme for large-scale elections,” harnessing such technology, was first raised in 1992.

One project that has been exploring this in detail is Follow My Vote, which says the entire process of casting a ballot can take under five minutes.

While this can ramp up faith in the democratic process, one unavoidable issue is that authoritarian regimes may be reluctant to adopt such infrastructure in the first place.

 

There’s plenty of food for thought — and exciting applications to explore. 

 

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