Ethereum Is Going to Bat for Privacy Protocols

The default of regular chains to date has been radical transparency. Yet with threats like crypto wrench attacks and mass surveillance on the rise, this lack of privacy is increasingly impractical for the real world.

Fortunately for the Ethereum ecosystem, Ethereum devs are currently running a privacy blitz across every possible surface area here, from streamlining UX around privacy ops to blocking IP leaks with private reads.

Of these new obfuscation pillars, I think the most interesting to me personally is frame transactions + keyed nonces because of the possibilities this combo poses for Ethereum's app layer privacy protocols.

For instance, consider how privacy protocols like RAILGUN work today. When you want to transact privately, you can't pay gas from inside a shielded pool, so you submit through a broadcaster, which is a third party who posts the transaction onchain on your behalf.

The catch though is that broadcasters can watch your swap pairs, your trade amounts, your slippage, etc., and thus they can censor you, preempt your transactions, and so forth.

Frame transactions via EIP-8141 can address this thorn in how they break transactions down into composable frames, i.e. contract calls that can validate identity, sponsor gas, and execute multiple actions within one atomic transaction flow.

That said, and among other things, EIP-8141 will let users attach a paymaster contract in a verification frame to cover gas onchain and submit directly to the mempool themselves, thereby bypassing broadcasters altogether. Plus, researchers are already exploring encrypted frame transactions, which would hide transaction parameters like calldata until after block ordering is locked.

However, another woe here is that privacy protocols often route through one shared sender address to break the trail between transactions and individual wallets. These hubs become chokepoints with standard sequential nonces (i.e. transaction ordering counters), since this approach means one transaction landing makes other pending withdrawals stale.

Keyed nonces as proposed in EIP-8250 are a fix for this, as they'll replace the single global nonce format with a structure that lets a single sender manage many separate nonce tracks at once, paving the way for concurrent trustless activity around privacy projects like RAILGUN. Also, having flexible nonces like this opens up 1) using different keys for different contexts, so the nonce system itself can stop being a linkability threat, and 2) possibilities for privacy-optimized state.

This is all just to say that frame transactions and keyed nonces are examples of the brand new legos that Ethereum devs are crafting to weave privacy deeper into Ethereum's core fabric and, in extension, to treat private transactions more like a prime option. The transparent-by-default era isn't over yet, sure, but the scaffolding to transcend it is going up now.