Level: MA
Responsible Person: Syed Muhammad Yasir
Keywords: Blockchain Privacy, Layer 2 Solutions, Polygon, Confidential Transactions, Zero-Knowledge Proofs, Scalability, Decentralized Applications

The inherent transparency of public blockchains, while fostering trust and immutability, presents a privacy challenge, hindering widespread adoption for financial transactions and sensitive data management. While Layer 2 (L2) solutions like Polygon offer promising scalability improvements, maintaining user privacy within these systems remains an open question. This topic delves into enabling privacy-preserving transactions on L2 blockchains, focusing on two potential approaches: confidential transactions (CTs) and zero-knowledge proofs (ZKPs). We explore how these techniques, like Zcash's CTs [1] and zk-SNARKs [2], can be integrated with different L2 architectures like Optimistic Rollups [2] and zk-Rollups, analyzing their effectiveness in preserving transaction details while maintaining scalability benefits. This research involves evaluating technical feasibility, performance impact, and potential trade-offs. Through theoretical analysis, simulations, and potentially real-world implementations, we aim to demonstrate the viability of privacy-preserving L2 transactions. This endeavor contributes to a future where blockchain technology empowers users with both scalability and privacy, fostering broader adoption and unlocking new use cases for decentralized applications.

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