The RAILGUN on-chain privacy protocol is set to introduce a new tool known as "Private Proof of Innocence" (PPOI). This tool is designed to enable users in the DeFi (Decentralized Finance) space to maintain their anonymity while simultaneously proving that they have not engaged with malicious actors.

PPOI leverages zero-knowledge (zk) technology to allow users to cryptographically demonstrate the legitimacy of their tokens without disclosing any information about their account balances or viewing keys. The goal is to provide a way for users to prove that their balances are not associated with known malicious transactions without revealing personal information.

According to data from DeFiLlama, RAILGUN is currently one of the largest privacy protocols in the DeFi ecosystem, boasting a total value locked (TVL) of $32.6 million, making it the second-largest after Tornado Cash.

With PPOI, users can utilize zk technology to demonstrate that their balances are not linked to problematic transactions while safeguarding their privacy. As Alan Scott, a contributor to RAILGUN, explained, this approach allows users to provide anonymity to others without exposing themselves or any other participants.

The concept underlying PPOI is not entirely new; Vitalik Buterin had previously co-authored a paper on Privacy Pools, exploring ways in which a blockchain could maintain privacy while adhering to regulatory requirements. PPOI, however, brings this vision to fruition at the protocol level.

PPOI utilizes a data source to assess the origin of transactions from public addresses, identifying potentially suspicious sources like hacks or exploits. Users do not directly engage with this source. Instead, it generates an exclusion list of shields based on its analysis.

Shields not on the exclusion list or pending a decision are added to a PPOI accumulator, which also records transaction data. An accumulator summarizes values into a single root, demonstrating membership in the set without revealing specific values, especially in zk proofs, allowing users to prove transaction legality and legitimacy.

Funds in the PPOI accumulator are encrypted, ensuring only senders and receivers can confirm inclusion, preventing external access. Since the receiver of unshielded funds is public knowledge, anyone can verify their legitimacy within the PPOI accumulator.