Sacred enables the user to deposit funds into a mixer with one address, and redeem it with a different address breaking the on-chain link and obscuring the record on the blockchain from observers. This is possible thanks to zero-knowledge proofs.
A detailed explanation of anonymity set:
For every deposit type (i.e., 1 WETH, 10 WETH, etc.) within Sacred, there is a Sacred Box that manages a set (collection) of all active user deposits of that denomination, from oldest to newest. In other words, an Anonymity Set is a group of entities with the same attributes, making them indistinguishable from each other in the context of an attacker. Tokens going into each respective Sacred Box contribute to and become part of the anonymity set. For withdrawals to be considered private, wait for at least 5-10 layers of deposits on top of the deposit to achieve maximal privacy.
As such, the anonymity set’s effectiveness depends on:
- The total amount of deposits
- The volume of transactions
A vital incentive mechanism that supports larger anonymity sets is Incognito Mining. This incentive increases the level of privacy in each Sacred Box as it incentivizes users to put their liquidity into Sacred. Remember, the more deposits there are, the more depth within Anonymity Set and the stronger the Privacy Indicator (level).