Just because the U.S. bans something, doesn’t mean it should stop existing, says Privacy Pools developer Ameen Soleimani. 

Over the weekend, a demo of Privacy Pools v0 was launched on Layer 2 blockchain Optimism. The open source project anonymizes transactions on the network using zero-knowledge proofs.

The project is backed by MolochDAO, who gave the first developer grants to Tornado Cash – the coin mixing protocol that has been sanctioned by the Office of Foreign Assets Control (OFAC), and its creator, Alexey Pertsev, has been in prison for six months on money laundering charges.

MolochDAO has donated 200 ETH to a campaign to free Pertsev, and is now releasing a new coin mixer which it describes as the “sequel to Tornado Cash.”

Unlike its predecessor, Privacy Pools will actually allow users to prove that their funds are not associated with criminal activity. They can do this by voluntarily removing themselves from anonymity sets that contain stolen or laundered funds, without sacrificing their privacy.

“This design aims to be a crypto-native solution that allows the community to defend against hackers abusing the anonymity sets of honest users without requiring blanket regulation or sacrificing on crypto ideals,” said Soleimani on Github.

Privacy Pools utilizes zero-knowledge proofs to do this, expanding on Ethereum creator Vitalik Buterin’s idea to use them to prove user deposits are not part of a particular subset of deposits. Essentially, as more users pull out of subsets linked to bad actors, regulators will be able to isolate illicit funds.  

“This is an opportunity to prove the ingenuity of the crypto community to self-regulate and to showcase the awesome power of zero-knowledge proofs,” said Soleimani.