Azeroth: Auditable Zero-Knowledge Transactions in Smart Contracts

With the rapid growth of the blockchain market, privacy and security issues for digital assets are becoming more important. In the most widely used public blockchains, such as Bitcoin and Ethereum, all activities on user accounts are publicly disclosed, which violates privacy regulations such as EU GDPR. Encryption of accounts and transactions may protect privacy, but it also raises issues of validity and transparency. While encrypted information can protect privacy, it cannot alone verify the validity of a transaction. Additionally, encryption makes it difficult to meet anti-money laundering regulations, such as auditability. In this paper, we propose Azeroth, an auditable zero-knowledge transfer framework. Azeroth connects a zero-knowledge proof to an encrypted transaction, enabling it to check its validation while protecting its privacy. Azeroth also allows authorized auditors to audit transactions. Azeroth is designed as a smart contract for flexible deployment on existing blockchains. We implement the Azeroth smart contract, and execute it on various platforms including an Ethereum testnet blockchain, and measure the time to show the practicality of our proposal. The end-to-end latency of a privacy-preserving transfer takes about 4.4s. In particular, the client's transaction generation time with a proof only takes about 0.9s. The security of Azeroth is proven under the cryptographic assumptions.