Pengekrukka - Hackathon

Pengekrukka (tongue in cheek name roughly translating to "Moneypot") is a Proof of Concept solution demonstrating an anonymous and decoupled transfer mechanism between the welfare state and an individual. It's implemented as part of a hackathon arranged by Norwegian Central Bank. The aim of the hackathon was to explore different opportunities, pitfalls and challenges offered by blockchain-based digital currency.

Utilizing Verifiable Credentials (VC's) and Zero Knowledge Proofs (ZKP's) we're demonstrating how a government server can issue money to a citizen entitled to financial support for a specific service. In our case, this is financial support for buying glasses, e.g. due to low income or similar. This example is however completely arbitrary. Our ZKP implementation is heavily based on Tornado Cash. If your goal is to learn more on how to implement this part of the system, we recommend you to check out their repo.

We've attempted to show the flow of the system in the below sequence diagram. In short, the citizen receives a VC from the doctor claiming that s/he needs glasses. The citizen then provides this to the government, along with an assumed ID-VC and gets a government backed VC with a secret that, crucially, only a specific optician can use to redeem the allotted money. This made possible through Asymmetric Encryption, encrypting the secret with the opticians public key.

Most of our solution is off-chain. Smart contracts on the blockchain is simply used as a way to ensure that money is transferred where it is supposed to, in a trustless manner; the actors in this system need minimal to no information about each other, but can still trust that everything works as it should.

sequenceDiagram
    actor Doctor
    actor Citizen
    participant Optician 
    participant Pengekrukka 
    participant Tornado as Tornado-contract
    
    Note left of Citizen: citizen-ID-VC from government issuer 
    Citizen ->> Doctor : I can't see (citizen-VC)
    Doctor -->> Citizen : VC documenting bad eyesight, signed by doctor

    Citizen ->> Pengekrukka : VC from doctor + citizen-ID-VC
    Pengekrukka ->> Pengekrukka: Calculating entitled support
    Pengekrukka ->> Tornado: Adding funds to the contract
    Tornado -->> Pengekrukka: "note" needed to redeem the funds
    Pengekrukka ->> Pengekrukka: Encrypted "note" with _opticians_ public key
    Pengekrukka ->> Citizen : Support-VC with 1) claim of entitlement and 2) encrypted note

    Citizen ->> Optician: Support-VC
    Optician ->> Optician: Decrypts Tornado-note 
    Optician ->> Tornado: Decrypted note 
    Tornado -->> Optician: Funds redeemed from contract
    Optician -->> Citizen: Gets glasses :)

Known Weaknesses

issuer of VC's not cryptographically validated (trivial to implement)
have to choose service supplier (i.e. optician) beforehand
a pure tornado cash implementation would lend itself to money laundring
anonymity is only as good as the anonymity set (i.e. the number of people using the system)
- 1 deposit and 1 withdrawal creates a 1-1 mapping between the deposit and the withdrawal
anonymity is based on same amount in and out for all deposits and withdrawals. This creates a constraint on the system
probably lots more :)

// TODO fix this(fill envs automatically)

Local Development

Start a local blockchain with yarn contracts start
Extract ERC20 address and Tornado address from DeployLocal.json into env.development

Testing

Strive towards adding tests when writing new features
Share code between tests when possible, but not at the cost of clarity
Run tests with yarn <package> test

Working With Packages

Every package is located under ./packages. The monorepo is configured with Yarn Workspaces. The setup intends you to interact with the packages from root level. To run a command in a package, simply run yarn <package> <command>, e.g. yarn contracts test.

Adding a New Package

add a folder under ./packages
add ./packages/<YOUR-PACKAGE>/package.json-file with {"name": "@pengekrukka/<YOUR-PACKAGE>", "version": "0.0.1", "private": true}
add "<YOUR-PACKAGE>": "yarn workspace @pengekrukka/<YOUR-PACKAGE>" under "scripts" in (root) ./package.json.

Environment

Local development expects a .env.development-file at the root level. Use .env.example as a reference.