Vitalik Buterin backs Nocturne Labs with a privacy focus on Ethereum

Ethereum-focused startup Nocturne Labs, which aims to create private accounts in the ecosystem, closed a $6 million seed round. It was led by Bain Capital Crypto and Polychain Capital.

1/ We’re excited to announce our $6M seed round co-led by @BainCapCrypto & @polychain with participation from @VitalikButerin and other members of the Ethereum community.

This round will fund the deployment and continued development of private accounts on Ethereum. pic.twitter.com/ve25yJp6iI

— Nocturne (@nocturne_xyz) October 25, 2023

The round was also backed by Vitalik Buterin, co-founder of the second-largest cryptocurrency, Bankless Ventures, Hack VC, and Robot Ventures.

Nocturne is developing a protocol that will enable anonymous transactions on the Ethereum network.

The solution is expected to launch on the mainnet in November. In the future, support for L2-solutions will be added.

«Users will have internal accounts in Nocturne, where receiving and spending funds occurs anonymously (not all tied to the same address). Owners of such accounts will be able to deposit or receive payments. Then they will be able to prove with ZKP-technology that the assets belong to them, and apply them to other transactions such as payments, trading and staking», — explained The Block co-founder of the startup Luke Tchang.

A Nocturne representative noted that existing alternatives such as mixers, blockchain networks, or other platforms like Aztec Connect lack user-friendliness and interoperability.

«If you could have something like a normal Ethereum account, but with asset confidentiality, it would offer a path to broader adoption», — explained the Nocturne spokesman.

Nocturne believes that everyone should be able to receive salaries without disclosing incomes, make purchases without revealing spending habits, and store assets without showing their total value.

According to Tchang, the protocol employs a “balanced approach” to comply with regulatory requirements.

«We begin with a two-stage permissioned-deposit process, which includes filtering illegal deposits using TRM and other data-analytics providers. The tools we are building to filter deposits will allow a gradual transition to a more permissive approach — a proof of innocence», — he explained.

In August 2022 the OFAC was added to the sanctions list the site of the popular Ethereum mixer Tornado Cash, through which, according to the agency, criminals laundered more than $7 billion in cryptocurrency. Over $455 million of this is linked to the North Korean Lazarus Group.

Earlier this year, Vitalik Buterin named privacy as Ethereum’s “biggest remaining problem” and proposed a solution.

In September, the co-founder of the second-largest cryptocurrency became a co-author of a study on Privacy Pools — a privacy-protocol that meets regulatory requirements and could serve as an alternative to Tornado Cash.