Silent Compliance VM
The Silent Compliance VM ensures the Ghost Layer balances privacy and compliance, enabling selective de-anonymization of malicious actors while preserving decentralization and user confidentiality.
What is Silent Compliance VM?
The Silent Compliance VM is a Multi-Party Computation (MPC) system that facilitates threshold decryption of a user’s activity within the Ghost Layer. It relies on a whitelisted group of elected participants, forming a decentralized structure to collaborate with third parties when legally required. This fights illicit activity lawfully while upholding the protocol’s ethos of anonymity, transparency, and practicality.
How Does It Ensure Compliance?
Integrated into the Ghost Layer, the Silent Compliance VM allows selective decryption of a target user’s account state upon a verified third-party request, contingent on consensus from an external jury (the Silent Compliance Committee). This:
Prevents bad actors from exploiting the system by making their actions traceable.
Maintains a secure, privacy-preserving ecosystem for legitimate users.
Creates an institution-friendly, compliant framework alongside a blocklist of sanctioned users and an allowlist (Silent ID).
The VM renders the Ghost Layer unattractive to malicious users, as their data can be publicly revealed, nullifying any incentive to misuse it.
The Duality of Confidentiality
What is the “Duality of Confidentiality?”
Confidentiality is neutral—it protects data, secures users, and serves institutions and law-abiding citizens. However, privacy tools also attract bad actors alongside good users, mirroring the dual nature of tools like cars or guns. The Silent Compliance VM resolves this by enabling the protocol to revoke privacy for malicious users, rendering it useless to them while preserving it for others.
Is This a New Solution?
This concept echoes Web2 VPNs, which survived bad actor exploitation by maintaining IP logs. VPNs can trace original IPs upon verified external requests, effectively undoing their privacy services. The Silent Compliance VM adapts this principle for a decentralized context.
Does the Ghost Layer Track Users?
The Ghost Layer, built on Ethereum, is a decentralized, non-custodial ledger. Per FinCEN’s 2019 guidance, non-custodial, self-executing code (e.g., mixing functions) doesn’t classify as a Money Service Business (MSB) under the Bank Secrecy Act (BSA). Thus, it isn’t obligated to collect IDs, monitor transactions, or file Suspicious Activity Reports (SARs)—it doesn’t track users. However, even if exempt from BSA requirements, the Ghost Layer must comply with sanctions laws and prevent “significant malicious cyber-enabled activities.” The Silent Compliance VM, paired with Silent ID and a blocklist, ensures sanctioned entities and bad actors cannot abuse the system.
Technical Implementation
The Silent Compliance VM leverages MPC to enable non-voluntary de-anonymization in a decentralized way, avoiding reliance on a single authority. It operates through the Silent Compliance Committee, a subDAO of reputable members:
Encryption: Committee members collaboratively generate a public key to encrypt transaction details (e.g., sender, recipient, amount).
Decryption: Members compute partial decryption shares, aggregated by the subDAO to reveal data once a threshold is met.
Key Generation: A modified, non-interactive Joint-Feldman Distributed Key Generation (DKG) process uses zero-knowledge proofs and smart contracts to create shares for decryption.
This enhances compliance with legal mandates while preserving user anonymity for non-targeted participants. The next section explores the cryptography behind this implementation.
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