Problem Summary: Cryptocurrency mixers face a significant challenge: when they inadvertently mix funds from legitimate users with those from bad actors, all participants risk having their addresses banned due to guilt-by-association. This issue undermines the trust and utility of mixers for privacy protection.
Proposed Solution: Implement an associative set-based proof of exclusion system. This system categorizes addresses based on transaction history, allowing mixers to generate a proof that legitimate funds are not mixed with those from malicious sources. This approach aims to protect innocent users from being unfairly penalized, while maintaining privacy and enhancing regulatory compliance.
Expected Outcome: The solution is expected to safeguard innocent users from association with illicit activities in mixers, balancing privacy with regulatory needs.