Proof of Innocence

Proof of innocence is a method that lets a user of a privacy tool show that their funds are not linked to a set of known illicit deposits, such as proceeds of hacks or sanctioned addresses, while keeping the rest of their transaction history private. It typically uses zero-knowledge proofs: the user proves that their withdrawal comes from a group of deposits that excludes flagged ones, without revealing which deposit is theirs. The idea gained attention after US sanctions on a major Ethereum mixer in 2022 and was developed in research on "privacy pools" co-authored by Ethereum co-founder Vitalik Buterin in 2023. Supporters see it as a bridge between privacy and anti-money laundering expectations; critics note that it depends on who maintains the lists and that regulators have not formally accepted it as a compliance standard. Also see coin mixer and OFAC sanctions.