Vitalik Buterin Among First to Use Privacy Pools, Ethereum’s New Privacy Solution

A new on-chain privacy tool, Privacy Pools, has officially launched on Ethereum, providing users with a way to conduct private transactions while ensuring their funds are not linked to illicit activities. Developed by blockchain infrastructure firm 0xbow.io, the tool builds on previous privacy protocols while incorporating compliance measures to address regulatory concerns.

A Privacy Tool with Guardrails

Privacy Pools functions as a mixnet system that leverages zero-knowledge proofs and an “Association Set Provider” (ASP) to verify that only legitimate funds enter the pool. This innovation allows users to transact privately while demonstrating that their assets are not associated with bad actors, such as hackers or sanctioned entities.

Unlike traditional mixers like Tornado Cash, which faced regulatory scrutiny, Privacy Pools introduce dynamic Association Sets. These sets ensure that transactions are grouped into an anonymous pool but can still be screened for illicit activity. If a transaction is later found to be linked to unlawful sources, it can be removed from the set without affecting other deposits.

If a deposit is flagged, the user has the option to “ragequit,” a function that returns their funds to the original deposit address.

Support from Ethereum’s Key Figures

The project has earned strong backing from Ethereum co-founder Vitalik Buterin, who was among the first to deposit funds into Privacy Pools. Additionally, cryptographers Ameen Soleimani and Zak Cole, along with Chainalysis chief scientist Jacob Illum and academics from the University of Basel, played a key role in shaping the concept.

0xbow.io received investment support from BanklessVC, Number Group, Public Works, and several angel investors. The initiative is part of 0xbow.io’s broader vision to “Make Privacy Normal Again” while maintaining regulatory legitimacy.

A Response to Regulatory Challenges

Privacy tools have faced increasing pressure from regulators due to concerns over their use in money laundering. The most notable case was Tornado Cash, which was sanctioned by the U.S. Treasury’s Office of Foreign Assets Control (OFAC) in 2022 after it was linked to $7 billion in illicit transactions, including those tied to the North Korean state-backed Lazarus Group. However, in early 2025, a U.S. appeals court ruled the sanctions unlawful, leading to Tornado Cash’s removal from OFAC’s blacklist.

0xbow.io aims to differentiate Privacy Pools by ensuring it aligns with compliance expectations while preserving the privacy benefits that decentralized finance (DeFi) users seek.

A Growing Ecosystem

Privacy Pools has already processed over 69 deposits, including at least one from Buterin, totaling more than 21 ETH. The system supports deposits and withdrawals of ERC-20 tokens using zero-knowledge proofs and operates on Ethereum as well as Layer 2 networks like Gnosis.

To enhance security, the Privacy Pools code underwent an audit by smart contract security firm Audit Wizard, co-founded by former Apple engineer Joe van Loon. The protocol also draws inspiration from Buterin and his collaborators’ 2023 research paper on privacy-preserving transaction methods.

The Future of On-Chain Privacy

In 2024, illicit blockchain transactions amounted to over $41 billion—0.14% of total on-chain volume, according to Chainalysis. That figure is expected to rise as more criminal-linked addresses are uncovered. The launch of Privacy Pools represents a step toward reintroducing privacy to blockchain users without drawing the same regulatory backlash that previous privacy protocols faced.

“Privacy Pools, our new on-chain privacy product from 0xbow, is how we reclaim privacy from the terrorists,” Soleimani said. “The road to making privacy normal again is long and exciting, and we can’t do it alone.”