My Take on Decentralized Government on the Aleo Blockchain

In this article, I will give my views on the prospects for the Aleo blockchain and its possible successors.

Aleo is a PoS blockchain that ensures complete anonymity of transactions. The main feature of the blockchain is the ability to create private applications using the native Leo programming language. Thus, if we make an analogy with public blockchains, Aleo is as different from Zcash as Ethereum is from Bitcoin.

I have never used Bitcoin, although I have been actively using all the popular EVM blockchains for two years now. Obviously, the idea of programmable self-executable contracts has noticeably advanced the web3 direction (thanks to Vitalik Buterin). And if you used Zcash, Monero, or Tornado Cash, you know that Aleo can do with them what Ethereum did with Bitcoin, Litecoin, and the like.

The advent of smart contracts has opened up a huge amount of possibilities for users. Now we can build our own DAOs, create Multisig safes, create ERC-20 tokens, and ERC-721 (NFTs), develop decentralized exchanges, and so on. Let's think about how Aleo can impact the private blockchain sphere.

A little commentary on anonymization

In public blockchains, it is still possible to anonymize your identity, but you have to resort to complicated manipulations to do it: to anonymize via Tornado Cash, you have to wait for time, and you risk being blacklisted by the US and all the legally regulated exchanges.

In the case of Aleo, you won't have to worry about that, because no one sees your transactions, and in case your address is blacklisted, you can calmly transfer funds to a new one without the risk of being deanonymized.

Private DAOs

Now that DAOs are built in a private ecosystem, users can choose their degree of anonymity. They can also undergo KYC if required by DAO rules or if there is such a desire. It is possible to organize DAOs with partial anonymity, where, for example, only performers have to undergo KYC, while ordinary users can remain anonymous. It is important to understand that Aleo provides an opportunity for de-anonymization if you have such a desire: you can provide your transaction history.

In the case of DAO anonymization, there will be no possibility to track the bona fides of voting participants, who, for example, can buy DAO tokens shortly before the vote. Of course, it's possible to think of some workarounds: for example, preliminary snapshot, but the such procedure can be initiated only by the user himself. That is, the user himself must provide data about his balance, independently initiating the transaction.

There is an opportunity to hide the intermediate results of the vote, thereby creating an incentive for the holders to keep as many tokens as possible. At the same time, it will be impossible to trace whales, which may have a weight of 51% or more. In public blockchains, though, whales can simply participate in votes via alt-accounts, so there won't be much change.

Private DEXs.

Aleo could give birth to a fundamentally new structure — private decentralized exchanges. The user will be able to purchase tokens absolutely anonymously, and the exchange can decide for itself whether to disclose its list of accounts that provide liquidity. Whether to disclose the volume of trades, the amount of liquidity, and so on. Of course, the most transparent exchanges will be trusted by users and have demand.

However, this opens the possibility for hackers - in the case of a hack, as was recently the case with GALA, the hacker can avoid all possible sanctions. In the case of public blockchains, hackers' accounts are usually blocked by Circle and Tether, thereby preventing them from taking, often, half of all liquidity.

So...

Aleo will be a brand new ecosystem where everyone can choose their degree of anonymity. And as we know for sure, anonymity opens up opportunities for both bad and good people. But I firmly believe in the laws of karma and that decentralization promotes the greatest honesty and that privatization serves only as a catalyst.