Anonymous Transaction System in Public Blockchain with Proof of Funds Origin Trustworthiness

Anonymous Transaction System in Public Blockchain with Proof of Funds Origin Trustworthiness

Vasilyev M.D. (ITMO, St. Petersburg, Russia)
Struchkov I.V. (ITMO, St. Petersburg, Russia)

Abstract

The development is described of decentralized financial systems based on distributed ledger technologies and blockchain technologies allows creating trusted systems that are resistant to external attacks and manipulation. In public blockchain networks, each user’s transactions are publicly available, which limits the possibility of their use for financial settlements. The solution to this problem is to use decentralized protocols for anonymous transactions. The disadvantage of existing protocols is that honest users do not have the opportunity to dissociate themselves from criminal financial activities. One of the ways to solve this problem is to use association sets, the implementation of which is discussed in this article. Zero-knowledge proofs, association sets based on Merkle trees with Poseidon hash function. A system of anonymous transactions in a public blockchain has been designed and implemented with the ability to prove the good faith of the origin of funds. The system is based on the concept of association sets and uses zero-knowledge proofs to provide cryptographic guarantees. Arithmetic circuits in the Circom 2.0 language are implemented to generate proofs of membership in an association set, along with smart contracts in the Solidity language. A decentralized governance system based on participant voting has been developed. A comparative analysis with the existing solution showed that the cost of deposit transactions in the developed protocol is lower than in the original one, which is explained by the use of a more optimal Poseidon hashing function. When making withdrawals, the cost of transactions increases due to the additional verification of the association set root signature and of a zero-knowledge proof covering two Merkle trees. The developed system can be used to comply with regulatory requirements while maintaining the anonymity of users of distributed ledgers.

Keywords

blockchain; transaction anonymization; association sets; anonymity; Merkle tree; zero-knowledge proofs; smart contract.

Edition

Proceedings of the Institute for System Programming, vol. 38, issue 6, part 1, 2026, pp. 299-310

ISSN 2220-6426 (Online), ISSN 2079-8156 (Print).

DOI: 10.15514/ISPRAS-2026-38(6)-19

For citation

Vasilyev M.D., Struchkov I.V. Anonymous Transaction System in Public Blockchain with Proof of Funds Origin Trustworthiness. Proceedings of the Institute for System Programming, vol. 38, issue 6, part 1, 2026, pp. 299-310 DOI: 10.15514/ISPRAS-2026-38(6)-19.

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