In the near future, anyone will be able to send BTC, ETH, and thousands of other cryptocurrencies to another party without going through a financial institution [Nakamoto, 2008; Buterin et al., 2014]. However, for those who value privacy, these cryptocurrencies will still come with a significant tradeoff. Transactions will continue to be recorded on public ledgers, displaying transaction amounts and inscribing the virtual identities of their senders and receivers. Given the choice, we strongly believe that very few people will willingly disclose their crypto financials to the entire world.
The inherent lack of privacy in cryptonetworks will remain a real and present threat to the entire crypto space.
Existing solutions like Monero, Zcash, and Grin introduced their own version of cryptocurrencies that focus on privacy, based on CryptoNote, Zerocash [Sasson et al., 2014], and Mimblewimble [Jedusor, 2016], respectively.**
Chameleon will take a different approach, grounded in the idea that people won’t want an entirely new cryptocurrency with privacy. What they will truly want is privacy for their existing cryptocurrencies: a “privacy mode” for any cryptocurrency.
The Chameleon Network will be designed so that users won’t have to choose between their favorite cryptocurrencies and privacy coins. They will be able to have both. Users will be able to hold any cryptocurrency and still use it confidentially whenever they desire. Privacy will be ubiquitous, inclusive, and accessible.
The Chameleon Network will act as a privacy hub, interoperable with other cryptonetworks through shielding and unshielding processes. These processes will allow cryptocurrencies like BTC and ETH to go private and then return to their original form.
Initially, Chameleon will propose a solution to shield any cryptocurrency, such as BTC, ETH, and USDT. Essentially, any cryptocurrency will be able to become a privacy coin. Both shielding and unshielding will be carried out via a decentralized group of trustless custodians. Once shielded, transactions will become confidential and untraceable. To ensure privacy, Chameleon will employ linkable ring signatures, homomorphic commitment schemes, and zero-knowledge range proofs.
Secondly, Chameleon will present a solution for scaling out a privacy-focused cryptonetwork by implementing sharding on privacy transactions, along with a new consensus model based on proof-of-stake, pBFT, and BLS. Transaction throughput will scale linearly with the number of shards.
At launch, with 8 shards active, Chameleon Network will aim to achieve a throughput of 100 TPS. Once fully deployed with 64 shards, it will be capable of handling up to 800 TPS – a significantly higher throughput than most other privacy blockchains, which usually handle less than 10 TPS.
This approach will be inspired by Incognito’s architecture, which has demonstrated similar scalability and performance.
Chameleon Network will launch its mainnet as a privacy-protecting, high-performance cryptonetwork, delivering “privacy mode” for other cryptonetworks like Bitcoin and Ethereum. Based on Incognito’s stats from February 2020, Incognito had 8 shards, powered by over 1,000 validators, and had confidentially processed over $1.4M worth of crypto across 74 different currencies like BTC, ETH, and USDT. Chameleon Network will aspire to achieve similar milestones and extend these capabilities even further.