Ensuring that traceability mechanisms in blockchain systems respect user privacy by balancing accountability with pseudonymity is a critical best practice. This approach allows for the verification and tracking of transactions to prevent illicit activities while protecting individual identities. A notable example is the SeDe framework, which introduces selective de-anonymization to balance privacy preservation with regulatory compliance. SeDe enables the de-anonymization of illicit transactions through the collaborative efforts of multiple entities, ensuring that no single party has unilateral control over the process. This method maintains user anonymity under normal circumstances but allows for accountability when necessary, thereby achieving a balance between privacy and traceability.
