The problem ShadowKey solves

Reduced Privacy: When an address is reused for multiple transactions, it becomes easier for third parties to track and analyze transaction patterns associated with that address. This compromises the privacy of both the sender and receiver, as their transaction history can be inferred from the publicly available blockchain data.

Linkability: Reusing addresses enables outside parties to link multiple transactions to a single user or entity. By analyzing transaction flows and patterns, adversaries can gain insights into the financial activities of individuals or organizations, potentially leading to identity disclosure or targeted attacks.

Impact on Fungibility: Fungibility refers to the interchangeability of units within a currency system. Address reusability can impact fungibility by introducing tainted coins-coins associated with undesirable activities or histories. This can lead to discrimination against certain coins and undermine the fungibility of the entire currency system.

Challenges we ran into

Implementing cryptography methods for private data exchange.
Trying to concentrate while also chatting with nice people around the venue :)