March 27, 2023

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Data Privacy Protection in DeFi Protocols. (arXiv:2211.16082v1 [cs.CR])

With the development of decentralized finance (DeFi), the inherent
limitations caused by the blockchain system have come to the surface. Because
recorded data on the blockchain is available to system participants, DeFi
protocols may not collect the private data of users. Otherwise, the information
leakage may result in serious financial losses or cause legal issues.
Therefore, DeFi protocols could hardly offer different users customized
solutions, and the capital utilization is limited. To address this challenge in
DeFi, we propose a solution, which is a trustful protocol that allows users to
provide personal private data to DeFi protocols without worrying that such
information would be disclosed. By implementing asymmetric encryption,
zero-knowledge proof, and homomorphic encryption, we ensure that users’ data
will not be controlled by any centralized authorities and avoid potential
financial losses or legal disputes due to information leakage. We further
discuss the application scenarios of financial data privacy protection in
public blockchain DeFi ecosystems and cross-border financial applications, such
as credit aggregation.