Dark DAOs and Private Coordination

Sarah Allen

Flashbots, IC3

Assumptions About Private Keys

• Must be kept secret to be secure
• Assumed to be held by one person (or entity)
• Any signature is assumed to be created by the owner
• Anything singed is assumed to be signed with the owner’s consent

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Assumption: private keys are exclusively held and used by their owner

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Private Key = Identity

What if an owner could share or rent the right to sign with their key?

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Private Key = Identity

+ Encumbrance

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Encumbrance

• A secret key can be generated in a trusted execution environment (TEE)
• The key then continues to live in the TEE
• The TEE can be used to apply complex policies to the use of that private key

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Source: Mahimna Kelkar

Private Keys Assumptions in the Presence of TEEs

• Must be kept secret to be secure
• Assumed to be held by one person (or entity)
• Any signature is assumed to be created by the owner
• Anything singed is signed with the owner’s consent

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The single-entity address-ownership (SEAO) assumption is broken by encumbrance.

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This has wide ranging implications.

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Dark DAO

• “A Dark DAO is a decentralized cartel that buys on-chain votes opaquely (“in the dark”).”
• Potentially nobody (not even the creator) can determine:
• The total number of participants
• The total amount pledged
• The precise logic of the Dark DAO

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Source: Mahimna Kelkar

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Liquefaction

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Liquefaction

• An encumbered wallet platform
• Allows users to attach rich, multi-user policies to accounts
• Enables the credentials and assets of a single end-user address to be freely rented, shared, or pooled
• Accomplishes these things privately with no direct on-chain traces

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Broadly, it enables the transfer of things thought to be non-transferable

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What is Impacted by Liquefaction?

• Private DAOs
• Quadratic voting and quadratic funding
• Soulbound tokens
• Rights to airdrops and activity-based rewards
• Dusting attacks
• Locked tokens
• Onchain/offchain transacting
• Multisigs
• Allow lists

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See more in the upcoming Liquefaction paper

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What can you do in settings where you do not want undetected encumbrance?

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How CK Works

• A Proof of Complete Knowledge (CK) shows fully unencumbered knowledge of a secret
• It does this by proving that the key has been leaked over an insecure channel
• Can be done with a TEE or ASIC

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Source: Mahimna Kelkar

Where is this taking us?

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State of Encumbrance

• Encumbrance in TEEs breaks assumptions underlying blockchain systems
• Additional measures (like CK) must be added in systems that want to ensure signer = account owner = a single individual/entity
• The most practical implementation of CK relies on TEEs

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Undetectable encumbrance is already practical.

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The defense against undetectable encumbrance will likely rely on TEEs.

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What’s Next

• Crowdsource a more complete list of systems that rely on assumptions broken by encumbrance
• Spread awareness that signer may /= account owner in current systems; design to either accept or take measures against this
• For those wishing to take measures against this, adopt CK
• Focus community effort on deep research on TEEs to develop an open TEE for our open systems

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Check out the materials from TEE.salon

Find these post at writings.flashbots.net

Follow project TTEE and get involved on https://collective.flashbots.net

Resource List

• On-Chain Vote Buying and the Rise of Dark DAOs (11)
• DAO Decentralization: Voting-Bloc Entropy, Bribery, and Dark DAOs (13)
• DAO Decentralization and Dark DAO Github repository (14, 15)
• Dark DAO Lite demo (15)
• DAOs Must Confront Dark DAOs — Or Fall Under Their Shadow (13, 14, 15)
• Liquefaction paper (coming soon)
• Liquefaction Github repository (coming soon)
• Complete Knowledge: Preventing Encumbrance of Cryptographic Secrets (20)
• Zero Trust Execution Environments (26)
• ZTEE - Trustless Supply Chains (26)

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I will share these slides on https://x.com/sarahalle_ (@sarahalle_)

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Thank you!

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