Title:             Zether: Towards Privacy in a Smart Contract World
Authors:           Benedikt Bünz; Shashank Agrawal; Mahdi Zamani; Dan Boneh
Key words:         confidential transactions, smart contracts, anonymity

Abstract:
Blockchain-based smart contract platforms like Ethereum have become quite
popular as a way to remove trust and add transparency to distributed
applications. While different types of important applications can be easily
built on such platforms, there does not seem to be an easy way to add a
meaningful level of privacy to them.

In this paper, we propose Zether, a fully-decentralized, confidential payment
mechanism that is compatible with Ethereum and other smart contract platforms.
We take an account-based approach similar to Ethereum for efficiency and
usability. We design a new smart contract that keeps the account balances
encrypted and exposes methods to deposit, transfer and withdraw funds to/from
accounts through cryptographic proofs.

We describe techniques to protect Zether against replay attacks and
front-running situations. We also develop a mechanism to enable
interoperability with arbitrary smart contracts. This helps to make several
popular applications like auctions, payment channels, voting, etc.
confidential.

As a part of our protocol, we propose \Sigma-Bullets, an improvement of the
existing zero-knowledge proof system, Bulletproofs. \Sigma-Bullets make
Bulletproofs more inter-operable with Sigma protocols, which is of general
interest.

We implement Zether as an Ethereum smart contract and show the practicality of
our design by measuring the amount of gas used by the Zether contract. A
Zether confidential transaction currently costs about 0.014 ETH or
approximately $1.51 (as of early Feb, 2019). We discuss how small changes to
Ethereum, which are already being discussed independently of Zether, would
drastically reduce this cost.