Railgun is a privacy-preserving protocol that allows users to engage in DeFi anonymously.
The project is designed to protect both the user’s private information and the digital asset involved in the transaction from anyone following the transaction. It achieves this through zk-SNARK cryptography as part of the Railgun smart contract. The Railgun privacy system allows users to retain custody of their private keys and full control over their assets.
How is Railgun different from mixers?
Mixers are a form of privacy protocol that hides a user’s transactions on a blockchain. Typically, they work by creating a pool of tokens from various sources and acting as a middleman for the final transaction. By scrambling funds from different wallets, tracking the original tokens becomes difficult.
Railgun is different from mixers for several reasons. Railgun can maintain a private balance in the Railgun wallet and is not limited to sending tokens from A to B. More importantly, Railgun does not mix multiple wallet funds, but completely removes identifying information from transactions, without ever take custody of a user’s digital assets. .
Private balances are a very important part of the Railgun protocol. Users can continue to add funds to their Railgun account from a publicly available wallet address. When they do, the transaction will be recorded on the blockchain along with the sender’s address. However, once their funds enter the Railgun protocol, they can protect their balance. Any further transactions a user makes with these funds will be private and anonymous.
Since transactions after shielding do not record the wallet address, it is impossible to know what assets the user has transferred or spent. The user might also have received tokens privately from other Railgun addresses. There is no way to know what is left in the user’s wallet. This adds a layer of anonymity to the entire protocol, as accounts on Railgun can potentially hold any amount of any digital asset that has been added to the protocol from any source.
Railgun Private Balances establish the confidentiality of user transactions with other Railgun accounts. Relayers ensure that this confidentiality is maintained when interacting with external protocols.
The relay network transfers transactions on behalf of Railgun users and pays their gas charges. This is what allows Railgun accounts to interact with smart contracts and DeFi protocols anonymously, as recorded transactions show gas fees paid by a relay rather than the user, cutting all links to their wallet address.
Relays cannot see the content of transactions they facilitate, including user addresses. They are incentivized by receiving fees for performing transactions on behalf of users. Relays set their rates and the tokens they are willing to accept to perform the service. Users select the relay they want to use, which helps control the incentive structure.
The Railgun Privacy Protocol code supports the private holding, transfer, purchase, sale, and trading of NFTs within the Railgun system, with front-end integration coming soon. In addition, Railgun allows the possibility of private auctions, transactions and transfers of NFTs. Similar to coins and tokens traded in the Railgun system, NFT transactions within the Railgun system are non-custodial, so users retain full control over their digital assets.
NFT Private Auctions may be conducted when NFT IDs are revealed, but their owners and the accounts bidding on them, as well as the price of their bids, may remain anonymous. This has additional implications for airdrops and DAOs, as airdrop recipients do not have to be revealed. For DAOs, it can further make it easier for members to demonstrate their membership through NFTs or other token ownership without having to dox their identity or stake size.
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