Veil: Breaking Traceability

This week’s token highlight is Veil, an emerging privacy protocol on Base that lets you fund your wallet without revealing the source of these funds. You can now claim your share of +10,000 Veil in Fluidkey.

At a high level, Veil functions like most shielded pools. Users can deposit their funds into Veil’s pool from wallet A, wait for some time, and then withdraw funds to wallet B without linking wallets A and B.

Where Veil is different, is that it leverages onchain attestations via EAS to screen who can deposit in the pool. Currently, it supports Coinbase’s Onchain Verification as well as Binance’s BAB token. This allows Veil to verify that a user is an approved customer of either of these exchanges without having access to any personal data.

This approach enables Veil to remain fully self-custodial and privacy preserving while ensuring only vetted participants can join pools. Veil is part of a new generation of shielded pools that have been built post-Tornado Cash with safeguards to prevent their use for illicit activities.

If you are interested in learning more about shielded pools and their compliance trade-offs, this paper co-authored by Vitalik Buterin is a good place to start. Other noteworthy pools to look at on the EVM include Railgun and Privacy Pools.

So how does a shielded pool like Veil compare to stealth address technology like the one found in Fluidkey?

We think these two technologies are complementary and will ultimately be combined to enable seamless flows on public EVM chains with the best possible privacy levels.

Stealth addresses are great to manage funds with better privacy across EVM chains, any operation a normal wallet can do can be done with stealth addresses without any extra steps - swaps, lending and borrowing, interacting with any smart contract. On the other hand, shielded pools can add another layer of privacy on top of this to break the traceability of funds when necessary.

Vitalik’s vision of privacy in What I would love to see in a wallet captures this well.

We’re excited to see Veil innovate and push for more privacy options on Base!

Note that none of our highlights are financial advice. The value of any of the tokens highlighted may go to zero.

See you next week!