Privacy-Preserving Smart Contracts for Permissioned Blockchains: A zk-SNARK-Based Recipe Part-1
Aldenio Burgos, Eduardo Alchieri
TL;DR
The paper addresses privacy in transparent blockchains and the limitations of existing approaches by proposing a zk-SNARK-based privacy solution for smart contracts on permissioned networks. It supports both fungible and nonfungible tokens, adopts a $UTXO$-based model to enable parallelism, and introduces delegated transactions to realize atomic Delivery vs Payment ($DvP$) workflows. The work outlines a concrete privacy-preserving architecture and a DvP use case, highlighting how zero-knowledge proofs can secure complex interactions while maintaining decentralization. This approach aims to deliver scalable, interoperable privacy for the Finternet across multi-chain environments, reducing reliance on trusted intermediaries while preserving privacy guarantees.
Abstract
The Bitcoin white paper introduced blockchain technology, enabling trustful transactions without intermediaries. Smart contracts emerged with Ethereum and blockchains expanded beyond cryptocurrency, applying to auctions, crowdfunding and electronic voting. However, blockchain's transparency raised privacy concerns and initial anonymity measures proved ineffective. Smart contract privacy solutions employed zero-knowledge proofs, homomorphic encryption and trusted execution environments. These approaches have practical drawbacks, such as limited functionality, high computation times and trust on third parties requirements, being not fully decentralized. This work proposes a solution utilizing zk-SNARKs to provide privacy in smart contracts and blockchains. The solution supports both fungible and nonfungible tokens. Additionally, the proposal includes a new type of transactions, called delegated transactions, which enable use cases like Delivery vs Payment (DvP).