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Untrace Wallet Whitepaper

Privacy by Default, Traceability Under Your Control

Version 1.0 — June 2025

Abstract

Untrace Wallet is a next-generation privacy wallet that enables users to transact on public blockchains with full privacy by default while providing granular observability and control over transaction exposure. Unlike existing solutions, Untrace introduces disposable in/out wallets, privacy exposure tracking per asset, and refresh mechanisms to maintain unlinkability over time.

The system reuses proven shielded contract technology where applicable and extends it with wallet-layer intelligence and user-centric privacy orchestration.

1. Introduction

1.1 The Privacy Problem

Public blockchains like Ethereum and Bitcoin offer transparency as a feature, but this transparency comes at a significant cost to user privacy. Every transaction, balance, and interaction is permanently recorded and publicly viewable, creating a complete financial history that can be:

  • Analyzed by chain surveillance companies
  • Used for targeted attacks or social engineering
  • Exploited for front-running or MEV extraction
  • Linked to real-world identities through exchange KYC

1.2 Our Solution

Untrace Wallet addresses these challenges by implementing:

  • Privacy by Default: All assets are shielded upon deposit
  • Disposable Wallets: Fresh addresses for every interaction
  • Privacy Scoring: Real-time visibility into your exposure level
  • Selective Disclosure: Prove ownership without revealing balances
  • Refresh Mechanism: Restore anonymity after partial exposure

2. Core Architecture

2.1 Shielded Pool Integration

Untrace leverages existing shielded pool infrastructure (similar to Tornado Cash, Railgun) but adds a critical wallet-layer abstraction that manages:

  • Automatic deposit routing
  • Note management and encryption
  • Withdrawal optimization for privacy preservation

2.2 Disposable Wallet System

Each external interaction generates a fresh wallet address:

→ Disposable Wallet A → DeFi Protocol
→ Disposable Wallet B → NFT Marketplace
→ Disposable Wallet C → DEX Trade

These wallets are:

  • Cryptographically unlinkable to the main identity
  • Automatically funded from the shielded pool
  • Disposed after use with funds returning to the pool

2.3 Privacy Exposure Score

Each asset maintains a Privacy Exposure Score (PES) from 0-100:

  • 0-20: Fully Shielded (no on-chain visibility)
  • 21-50: Minimal Exposure (limited linkability)
  • 51-80: Partial Exposure (some patterns visible)
  • 81-100: Exposed (full transaction history visible)

3. Technical Implementation

3.1 Cryptographic Primitives

Untrace employs:

  • zk-SNARKs: For proving ownership without revealing amounts
  • Pedersen Commitments: For hiding transaction values
  • Nullifier Scheme: For preventing double-spending while maintaining privacy

3.2 Note Structure

Note = {
  amount: encrypted(value),
  asset: token_address,
  nullifier: hash(secret, index),
  commitment: pedersen(amount, secret)
}

3.3 Refresh Protocol

When privacy exposure exceeds threshold:

  1. Withdraw to fresh disposable wallet
  2. Wait for anonymity set to grow
  3. Re-deposit to new shielded position
  4. Old notes are nullified

4. User Experience

4.1 Privacy Dashboard

The Untrace dashboard provides:

  • Per-asset privacy scores with historical trends
  • Recommended actions to improve privacy
  • One-click refresh for exposed assets
  • Selective disclosure certificate generation

4.2 Transaction Flow

  1. User initiates transaction
  2. Untrace selects optimal privacy strategy
  3. Disposable wallet is generated
  4. Funds flow through shielded pool
  5. Transaction executes
  6. Remaining funds return to pool
  7. Privacy score updates

5. Security Considerations

5.1 Threat Model

Untrace protects against:

  • Chain analysis and surveillance
  • Front-running and sandwich attacks
  • Balance and activity correlation
  • Timing analysis attacks

5.2 Limitations

  • Shielded pool liquidity affects anonymity set size
  • Some protocol interactions require partial exposure
  • Regulatory compliance may require selective disclosure

6. Roadmap

Phase 1: Foundation (Q3 2025)

  • Core wallet infrastructure
  • Ethereum mainnet support
  • Basic privacy scoring

Phase 2: Expansion (Q4 2025)

  • Multi-chain support (Arbitrum, Optimism, Base)
  • Advanced privacy analytics
  • Mobile application

Phase 3: Ecosystem (Q1 2026)

  • SDK for protocol integrations
  • Institutional features
  • Governance token launch

7. Conclusion

Untrace Wallet represents a paradigm shift in how users interact with public blockchains. By making privacy the default while maintaining user control over disclosure, we enable a future where financial sovereignty and privacy coexist with the benefits of decentralized finance.

For technical inquiries: research@untrace.io

For partnerships: partners@untrace.io