The case for Privacy-enhanced Proof of Stake

Navcoin
3 min readJun 12, 2023

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Although privacy has been one of the founding ideals in the crypto industry, it has become one of the most ostracized features in recent years. Centralized exchanges have continuously removed privacy coins from their listings, governments have specifically targeted and prohibited Privacy Finance (PriFi) projects, and even software developers face legal consequences for creating anonymizing software. In spite of it all, we have decided to follow through with our promise: bringing you widely and easily accessible privacy technology.

This year, the Navcoin blockchain is going through a milestone update: Privacy-enhanced Proof of Stake (PePoS). In addition to the inherent advantages of traditional PoS over PoW, such as reduced energy consumption, lower entry barriers, and increased decentralization, PePoS goes a step further by prioritizing privacy. Let’s dig deeper into the implications of this development.

No Metadata Leakage

Until recently, privacy-focused projects looking to utilize PoS as a consensus mechanism had to depend on dual systems that involved both private and public coins. This was because there was no established protocol for staking private coins, resulting in the use of the public coin for staking purposes. However, while this approach appears to address privacy challenges, it negatively impacts privacy, particularly concerning metadata leakage.

While transactions may be somehow anonymized or encrypted, metadata can still be used to track and identify the parties involved in a transaction, and to infer sensitive information about individuals and their activities. For example, metadata can be used to identify patterns of behavior, such as regular transactions to a particular address or at certain times of the day. This information can then be used to build a profile of an individual’s activities, which can be used for malicious purposes.

Moving towards a mandatory-privacy approach will address these concerns, as it will significantly increase the difficulty of side channel pattern recognition attacks and greatly enhance the practical anonymity set.

Staker Confidentiality

Stakers rejoice — having a single coin for the ecosystem does not render staking obsolete. We introduce a PoS implementation that seamlessly integrates with confidential schemes utilizing Pedersen Commitments to conceal transaction amounts. Our set-up combines a range proof and a set membership proof, where the set elements consist of Pedersen Commitments. What this means is that staking becomes hyper-anonymized: neither the amount nor the staker’s identity are disclosed. In addition to that, different blocks staked by the same user are un-linkable and appear to be staked by unrelated entities.

Not to brag, but as far as we know this is one of the first developments of this kind in privacy-crypto history.

What does this mean for the future of Navcoin?

Improved Network Resilience

Enhanced confidentiality means users can enjoy greater protection and security. In some cases, participation in the crypto market can pose a significant threat to individuals’ safety, especially in regions where governments have outright banned such participation. However, by leveraging PePoS, which provides the highest level of anonymity in staking, users can confidently participate in the network without the fear of being tracked or doxxed. And the more users feel confident to participate, the stronger and more resilient the network becomes.

Censorship Resistance

The bad news is, governments don’t like anonymizing decentralized software. The good news is, we don’t particularly care.

Despite the growing hostility towards privacy tech within the regulatory environment, there have been concerns raised by some community members regarding the survival of privacy coins and whether or not we should maintain a dual system for compliance purposes. Yet a dual system is just another backdoor for transaction tracking.

Our existence does not depend on unjust laws. We are a tool for private transactions, and as long as there is a demand for privacy, we will continue to exist. Navcoin’s infrastructure will always be accessible, as it is not dependent on any platform, and we are committed to continue building in that spirit. That’s the beauty of decentralization.

At the end of the day, the question remains: why would anyone choose public over private staking, even if privacy isn’t their main concern? Anonymity stands as a limited resource, extracted from users and often sold back to them at a premium. With the many advantages and low entry barrier that PePoS offers, it becomes increasingly difficult to ignore its appeal. So why settle for anything less?

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Navcoin

Fast, cheap and private. Cryptocurrency for everyone.