VeilAudit: Breaking the Deadlock Between Privacy and Accountability Across Blockchains

TL;DR

VeilAudit tackles the core challenge of reconciling user privacy with regulatory accountability in cross-chain blockchain systems. It introduces Auditor-Only Linkability (AOL) enabled by Linkable Audit Tags that pair a zk-SNARK ownership proof with a Public-key Encryption with Equality Test ciphertext, allowing auditors to link anonymous behavior across chains without revealing identities. A threshold decryption governance layer enables controlled identity reveal under due process, preserving privacy by default while delivering accountability when legally warranted. The authors provide a formal security analysis, a practical multi-chain prototype spanning EVM and Cosmos-based chains, and an end-to-end evaluation showing modest on-chain overhead and scalable off-chain auditing, making cross-chain reputation and compliant DeFi more feasible. VeilAudit thus lays the groundwork for a trustworthy pseudonymous economy with portable behavioral credentials across heterogeneous blockchains.

Abstract

Cross chain interoperability in blockchain systems exposes a fundamental tension between user privacy and regulatory accountability. Existing solutions enforce an all or nothing choice between full anonymity and mandatory identity disclosure, which limits adoption in regulated financial settings. We present VeilAudit, a cross chain auditing framework that introduces Auditor Only Linkability, which allows auditors to link transaction behaviors that originate from the same anonymous entity without learning its identity. VeilAudit achieves this with a user generated Linkable Audit Tag that embeds a zero knowledge proof to attest to its validity without exposing the user master wallet address, and with a special ciphertext that only designated auditors can test for linkage. To balance privacy and compliance, VeilAudit also supports threshold gated identity revelation under due process. VeilAudit further provides a mechanism for building reputation in pseudonymous environments, which enables applications such as cross chain credit scoring based on verifiable behavioral history. We formalize the security guarantees and develop a prototype that spans multiple EVM chains. Our evaluation shows that the framework is practical for today multichain environments.

Figures (4)

• Figure 1: System Overview of VeilAudit.
• Figure 2: AOL accuracy and throughput.
• Figure 3: On-chain throughput under 500 ms blocks.
• Figure 4: End-to-end latency under 500 ms blocks.