If you research blockchain and its benefits, you may know that transparency has long been one of the most important features that crypto advocators usually discuss. Through an explorer or scan tool, everyone can easily track their transactions history or other users' portfolios. It is a super convenient tool. However, what if I don't want to show my wallet balance? What if I don't want everyone to know everything about my transactions to avoid front-running? Too much information about a wallet is being revealed redundantly. And ALEO vision will be solved this problem.

1. Problem of public blockchain data

Everyone knows how greedy the Web2 data service is. Everyone knows that Google and Facebook take, store, track and finally sell our personal data.

That is why blockchain has eliminated the intermediary and published all of the wallet data. However, this leads to another problem:

- Blockchains, or Public networks, such as Bitcoin and Ethereum, have opened a world where everything you or other entities do is transparent by default. Everyone can have access to blockchain data through an explorer. Thanks to explorer, you can track a whale's portfolio, on-chain data, or even track whether the DEV team is minting more tokens than their tokenomic. You will receive lots of benefits if you know how to use an explorer wisely. However, the whale doesn't receive anything from its own wallet's tracking explorer. Strangers can learn about top whale personal activities and make a profit from them. Besides, they may not willing to share it, but sadly they have no choice. => Everyone needs their privacy.

- MEV: MEV stands for Miner Extractable Value. All transactions submitted by the users on Ethereum in the pending status will stay in the mempool. You can imagine it as a clinic waiting room, where everyone waits for their turn. However, different from the clinic waiting, miners can see all transactions in the mempool and choose the transaction which pays the highest gas fee to execute. Therefore, if a miner finds a pending transaction that may affect the token price, they can submit their own order buying that token with the higher gas fee. The miner's order will be executed before the large transaction. Miner will receive the profit, while the whale will receive less token since the price has slightly increased. => The transactions are revealed too much information, which affects the user's money

- Front-running: This is the same with MEV. Through a node or RPC service such as Infura, Alchemy, ... everyone can have access to the blockchain's real-time data, which means they can also see pending transactions in the mempool. They will use a bot to scan, and if they find a large buying transaction, they can pay a higher gas fee to front-run the transaction => The consequence will be bad and the real user of the network will be affected

=> Thanks to blockchains, we can eliminate the intermediary in trading, finance or data monopolizers (Facebook, Instagram). However, we will need another solution to solve the blockchain data exploiter, which directly affects our assets. This is the Aleo mission.

2) Aleo solution: " Privacy by default " : How will Aleo solve this problem?

Firstly, Aleo will use zk proof. If you know about the zkrollup, you will know what the zero-knowledge proof is. 

“ A zero-knowledge proof is a cryptographic protocol where one party (the prover) proves to another party (the verifier) that something is true without revealing how it is true. “ 

( If you want to know more about zero knowledge and its example, I recommend you to read this article: https://101blockchains.com/zero-knowledge-proof-example/ )

So, the first question is why do Aleo choose Zero Knowledge cryptography to solve the blockchain data problem?

• Zero-knowledge can hide the transactions information: Now, thanks to the prover ( the ones who make the zkproof in Aleo architecture ) and the verifier ( the ones who verify the zkproof ). Moreover, the Aleo architecture will prevent front-running as well as MEV by using “shield transactions” and “zkCloud”

• In Defi, DAOs, DEX or lending dapp will need transparent data to execute. They will need data to make sure that the assets which are used to trade or lend stay in the user's wallet. However, thanks to Aleo architecture, Dapp providers now will not know about the user’s wallet balance or transaction history when the users approve the connection. They will just need a zkproof to show that the users own that asset to trade on the protocol or deposit into it => Privacy and Composability

  ( I will have another post discussing Aleo architecture in the near future )

The second question: How will Aleo use zero-knowledge cryptography?

Aleo uses zero-knowledge cryptography to achieve both privacy and programmability. Aleo has founded a system called ZEXE, which stands for Zero-Knowledge EXEcution.
In short, this is what Zexe does:

• User submits a transaction.
• The transaction is transferred " out of the chain " and executed state transition off-chain by a validator
• Then the prover will make a proof for that transaction
• The proof is bundled into an on-chain transaction while the verifier starts to verify the proof
• If the verifier says that the proof is valid, the transaction is finalized and the block is made

This system gives us strong privacy guarantees since the transactions contain only the proof, not the inputs that generated it. Everyone will only know that the transaction is valid without learning more about the transaction data. And like Ethereum, ZEXE can support smart contracts using AVM.

Now, I will show you an example with A PRIVATE DEX:

With a DEX, the target will be made the users become anonymous. Nobody will know whether you trade or not. They will know that there is a transaction, but who makes it? NOBODY knows. Aleo will hide all details about the transaction, even which DEX you use. As I have said above, the transaction will be executed off-chain based on the exchange rate. Your wallet balance will change anonymously. You will need to prove to the DEX that you have enough of that token in your wallet to complete the transaction. You can show the smart contract an on-chain proof ( this will be done automatically ) of a prior transaction to show that you have a sufficient balance to trade. The DEX will not know about either your balance or your transaction history

3. Conclusion

That is Aleo's mission and how they will do it.

" A network that establishes opt-out privacy by default, in which transactions are automatically fully private, but allows users to selectively decide what to make public to ensure we can still build a powerful and performant decentralized system atop the protocol. "

Disclaimer: I have written this post based on my own knowledge about Aleo. I may misunderstand the team idea or Aleo architecture. Always read and refer to this source to know more and 100% exactly about Aleo:

By hasaki || Coffee Crypto

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