@lfdecentralizedtrust/zeto-contracts 0.2.1 → 0.5.0

package/test/zeto_anon_nullifier_qurrency.ts

@@ -15,14 +15,26 @@
 // limitations under the License.
 
 import { ethers, network } from "hardhat";
-import { ContractTransactionReceipt, Signer, BigNumberish, lock } from "ethers";
+import {
+  ContractTransactionReceipt,
+  Signer,
+  BigNumberish,
+  AbiCoder,
+} from "ethers";
+import crypto from "crypto";
 import { expect } from "chai";
+import { MlKem512 } from "mlkem";
 import {
   loadCircuit,
   Poseidon,
   encodeProof,
-  getKyberCipherText,
+  bytesToBits,
+  newEncryptionNonce,
+  poseidonDecrypt,
+  publicKeyFromSeed,
+  recoverMlKemCiphertextBytes,
 } from "zeto-js";
+import testKeyPair from "zeto-js/lib/testKeypair.js";
 import { groth16 } from "snarkjs";
 import { Merkletree, InMemoryDB, str2Bytes } from "@iden3/js-merkletree";
 import {
@@ -39,7 +51,8 @@ import {
   loadProvingKeys,
   prepareDepositProof,
   prepareNullifierWithdrawProof,
-  randomBytesAsDigitArray,
+  encodeToBytesForDeposit,
+  encodeToBytesForWithdraw,
 } from "./utils";
 import { deployZeto } from "./lib/deploy";
 
@@ -95,277 +108,326 @@ describe("Zeto based fungible token with anonymity using nullifiers with Kyber e
     ));
   });
 
-  it("onchain SMT root should be equal to the offchain SMT root", async function () {
-    const root = await smtAlice.root();
-    const onchainRoot = await zeto.getRoot();
-    expect(onchainRoot).to.equal(0n);
-    expect(root.string()).to.equal(onchainRoot.toString());
-  });
-
-  it("(batch) mint to Alice and batch transfer 10 UTXOs honestly to Bob & Charlie then withdraw should succeed", async function () {
-    this.timeout(600000);
-
-    // first mint the tokens for batch testing
-    const inputUtxos = [];
-    const nullifiers = [];
-    for (let i = 0; i < 10; i++) {
-      // mint 10 utxos
-      const _utxo = newUTXO(1, Alice);
-      nullifiers.push(newNullifier(_utxo, Alice));
-      inputUtxos.push(_utxo);
-    }
-    const mintResult = await doMint(zeto, deployer, inputUtxos);
-
-    const mintEvents = parseUTXOEvents(zeto, mintResult);
-    const mintedHashes = mintEvents[0].outputs;
-    for (let i = 0; i < mintedHashes.length; i++) {
-      if (mintedHashes[i] !== 0) {
-        await smtAlice.add(mintedHashes[i], mintedHashes[i]);
-        await smtBob.add(mintedHashes[i], mintedHashes[i]);
+  describe("batch transfer", function () {
+    it("onchain SMT root should be equal to the offchain SMT root", async function () {
+      const root = await smtAlice.root();
+      const onchainRoot = await zeto.getRoot();
+      expect(onchainRoot).to.equal(0n);
+      expect(root.string()).to.equal(onchainRoot.toString());
+    });
+
+    it("(batch) mint to Alice and batch transfer 10 UTXOs honestly to Bob & Charlie then withdraw should succeed", async function () {
+      this.timeout(600000);
+
+      // first mint the tokens for batch testing
+      const inputUtxos = [];
+      const nullifiers = [];
+      for (let i = 0; i < 10; i++) {
+        // mint 10 utxos
+        const _utxo = newUTXO(1, Alice);
+        nullifiers.push(newNullifier(_utxo, Alice));
+        inputUtxos.push(_utxo);
       }
-    }
-    // Alice generates inclusion proofs for the UTXOs to be spent
-    let root = await smtAlice.root();
-    const mtps = [];
-    for (let i = 0; i < inputUtxos.length; i++) {
-      const p = await smtAlice.generateCircomVerifierProof(
-        inputUtxos[i].hash,
-        root,
+      const mintResult = await doMint(zeto, deployer, inputUtxos);
+
+      const mintEvents = parseUTXOEvents(zeto, mintResult);
+      const mintedHashes = mintEvents[0].outputs;
+      for (let i = 0; i < mintedHashes.length; i++) {
+        if (mintedHashes[i] !== 0) {
+          await smtAlice.add(mintedHashes[i], mintedHashes[i]);
+          await smtBob.add(mintedHashes[i], mintedHashes[i]);
+        }
+      }
+      // Alice generates inclusion proofs for the UTXOs to be spent
+      let root = await smtAlice.root();
+      const mtps = [];
+      for (let i = 0; i < inputUtxos.length; i++) {
+        const p = await smtAlice.generateCircomVerifierProof(
+          inputUtxos[i].hash,
+          root,
+        );
+        mtps.push(p.siblings.map((s) => s.bigInt()));
+      }
+      const aliceUTXOsToBeWithdrawn = [
+        newUTXO(1, Alice),
+        newUTXO(1, Alice),
+        newUTXO(1, Alice),
+      ];
+      // Alice proposes the output UTXOs, 1 utxo to bob, 1 utxo to charlie and 3 utxos to alice
+      const _bOut1 = newUTXO(6, Bob);
+      const _bOut2 = newUTXO(1, Charlie);
+
+      const outputUtxos = [_bOut1, _bOut2, ...aliceUTXOsToBeWithdrawn];
+      const outputOwners = [Bob, Charlie, Alice, Alice, Alice];
+      const inflatedOutputUtxos = [...outputUtxos];
+      const inflatedOutputOwners = [...outputOwners];
+      for (let i = 0; i < 10 - outputUtxos.length; i++) {
+        inflatedOutputUtxos.push(ZERO_UTXO);
+        inflatedOutputOwners.push(Bob);
+      }
+      // Alice transfers her UTXOs to Bob
+      const result = await doTransfer(
+        Alice,
+        inputUtxos,
+        nullifiers,
+        inflatedOutputUtxos,
+        root.bigInt(),
+        mtps,
+        inflatedOutputOwners,
       );
-      mtps.push(p.siblings.map((s) => s.bigInt()));
-    }
-    const aliceUTXOsToBeWithdrawn = [
-      newUTXO(1, Alice),
-      newUTXO(1, Alice),
-      newUTXO(1, Alice),
-    ];
-    // Alice proposes the output UTXOs, 1 utxo to bob, 1 utxo to charlie and 3 utxos to alice
-    const _bOut1 = newUTXO(6, Bob);
-    const _bOut2 = newUTXO(1, Charlie);
-
-    const outputUtxos = [_bOut1, _bOut2, ...aliceUTXOsToBeWithdrawn];
-    const outputOwners = [Bob, Charlie, Alice, Alice, Alice];
-    const inflatedOutputUtxos = [...outputUtxos];
-    const inflatedOutputOwners = [...outputOwners];
-    for (let i = 0; i < 10 - outputUtxos.length; i++) {
-      inflatedOutputUtxos.push(ZERO_UTXO);
-      inflatedOutputOwners.push(Bob);
-    }
-    // Alice transfers her UTXOs to Bob
-    const result = await doTransfer(
-      Alice,
-      inputUtxos,
-      nullifiers,
-      inflatedOutputUtxos,
-      root.bigInt(),
-      mtps,
-      inflatedOutputOwners,
-    );
 
-    const signerAddress = await Alice.signer.getAddress();
-    const events = parseUTXOEvents(zeto, result.txResult!);
-    expect(events[0].submitter).to.equal(signerAddress);
-    expect(events[0].inputs).to.deep.equal(nullifiers.map((n) => n.hash));
+      const signerAddress = await Alice.signer.getAddress();
+      const events = parseUTXOEvents(zeto, result.txResult!);
+      const event = events[0];
+      expect(event.submitter).to.equal(signerAddress);
+      expect(event.inputs).to.deep.equal(nullifiers.map((n) => n.hash));
+
+      const incomingUTXOs: any = event.outputs;
+      // check the non-empty output hashes are correct
+      for (let i = 0; i < outputUtxos.length; i++) {
+        // Bob uses the information received from Alice to reconstruct the UTXO sent to him
+        const receivedValue = outputUtxos[i].value;
+        const receivedSalt = outputUtxos[i].salt;
+        const hash = Poseidon.poseidon4([
+          BigInt(receivedValue),
+          receivedSalt,
+          outputOwners[i].babyJubPublicKey[0],
+          outputOwners[i].babyJubPublicKey[1],
+        ]);
+        expect(incomingUTXOs[i]).to.equal(hash);
+        await smtAlice.add(incomingUTXOs[i], incomingUTXOs[i]);
+        await smtBob.add(incomingUTXOs[i], incomingUTXOs[i]);
+      }
 
-    const incomingUTXOs: any = events[0].outputs;
-    // check the non-empty output hashes are correct
-    for (let i = 0; i < outputUtxos.length; i++) {
-      // Bob uses the information received from Alice to reconstruct the UTXO sent to him
-      const receivedValue = outputUtxos[i].value;
-      const receivedSalt = outputUtxos[i].salt;
-      const hash = Poseidon.poseidon4([
-        BigInt(receivedValue),
-        receivedSalt,
-        outputOwners[i].babyJubPublicKey[0],
-        outputOwners[i].babyJubPublicKey[1],
-      ]);
-      expect(incomingUTXOs[i]).to.equal(hash);
-      await smtAlice.add(incomingUTXOs[i], incomingUTXOs[i]);
-      await smtBob.add(incomingUTXOs[i], incomingUTXOs[i]);
-    }
+      // mint sufficient balance in Zeto contract address for Alice to withdraw
+      const mintTx = await erc20.connect(deployer).mint(zeto, 3);
+      await mintTx.wait();
+      const startingBalance = await erc20.balanceOf(Alice.ethAddress);
+
+      // Alice generates the nullifiers for the UTXOs to be spent
+      root = await smtAlice.root();
+      const inflatedWithdrawNullifiers = [];
+      const inflatedWithdrawInputs = [];
+      const inflatedWithdrawMTPs = [];
+      for (let i = 0; i < aliceUTXOsToBeWithdrawn.length; i++) {
+        inflatedWithdrawInputs.push(aliceUTXOsToBeWithdrawn[i]);
+        inflatedWithdrawNullifiers.push(
+          newNullifier(aliceUTXOsToBeWithdrawn[i], Alice),
+        );
+        const _withdrawUTXOProof = await smtAlice.generateCircomVerifierProof(
+          aliceUTXOsToBeWithdrawn[i].hash,
+          root,
+        );
+        inflatedWithdrawMTPs.push(
+          _withdrawUTXOProof.siblings.map((s) => s.bigInt()),
+        );
+      }
+      // Alice generates inclusion proofs for the UTXOs to be spent
 
-    // check empty hashes are empty
-    for (let i = outputUtxos.length; i < 10; i++) {
-      expect(incomingUTXOs[i]).to.equal(0);
-    }
+      for (let i = aliceUTXOsToBeWithdrawn.length; i < 10; i++) {
+        inflatedWithdrawInputs.push(ZERO_UTXO);
+        inflatedWithdrawNullifiers.push(ZERO_UTXO);
+        const _zeroProof = await smtAlice.generateCircomVerifierProof(0n, root);
+        inflatedWithdrawMTPs.push(_zeroProof.siblings.map((s) => s.bigInt()));
+      }
 
-    // mint sufficient balance in Zeto contract address for Alice to withdraw
-    const mintTx = await erc20.connect(deployer).mint(zeto, 3);
-    await mintTx.wait();
-    const startingBalance = await erc20.balanceOf(Alice.ethAddress);
-
-    // Alice generates the nullifiers for the UTXOs to be spent
-    root = await smtAlice.root();
-    const inflatedWithdrawNullifiers = [];
-    const inflatedWithdrawInputs = [];
-    const inflatedWithdrawMTPs = [];
-    for (let i = 0; i < aliceUTXOsToBeWithdrawn.length; i++) {
-      inflatedWithdrawInputs.push(aliceUTXOsToBeWithdrawn[i]);
-      inflatedWithdrawNullifiers.push(
-        newNullifier(aliceUTXOsToBeWithdrawn[i], Alice),
+      const {
+        nullifiers: _withdrawNullifiers,
+        outputCommitments: withdrawCommitments,
+        encodedProof: withdrawEncodedProof,
+      } = await prepareNullifierWithdrawProof(
+        Alice,
+        inflatedWithdrawInputs,
+        inflatedWithdrawNullifiers,
+        ZERO_UTXO,
+        root.bigInt(),
+        inflatedWithdrawMTPs,
       );
-      const _withdrawUTXOProof = await smtAlice.generateCircomVerifierProof(
-        aliceUTXOsToBeWithdrawn[i].hash,
+
+      // Alice withdraws her UTXOs to ERC20 tokens
+      const tx = await zeto
+        .connect(Alice.signer)
+        .withdraw(
+          3,
+          _withdrawNullifiers,
+          withdrawCommitments[0],
+          encodeToBytesForWithdraw(root.bigInt(), withdrawEncodedProof),
+          "0x",
+        );
+      await tx.wait();
+
+      // Alice checks her ERC20 balance
+      const endingBalance = await erc20.balanceOf(Alice.ethAddress);
+      expect(endingBalance - startingBalance).to.be.equal(3);
+    }).timeout(60000);
+  });
+
+  describe("transfer with verifications by the receiver and the audit authority", function () {
+    let event: any;
+    let outputUTXOs: UTXO[];
+    let outputOwners: User[];
+
+    it("mint ERC20 tokens to Alice to deposit to Zeto should succeed", async function () {
+      const startingBalance = await erc20.balanceOf(Alice.ethAddress);
+      const tx = await erc20.connect(deployer).mint(Alice.ethAddress, 100);
+      await tx.wait();
+      const endingBalance = await erc20.balanceOf(Alice.ethAddress);
+      expect(endingBalance - startingBalance).to.be.equal(100);
+
+      const tx1 = await erc20.connect(Alice.signer).approve(zeto.target, 100);
+      await tx1.wait();
+
+      utxo100 = newUTXO(100, Alice);
+      const utxo0 = newUTXO(0, Alice);
+      const { outputCommitments, encodedProof } = await prepareDepositProof(
+        Alice,
+        [utxo0, utxo100],
+      );
+      const tx2 = await zeto
+        .connect(Alice.signer)
+        .deposit(
+          100,
+          outputCommitments,
+          encodeToBytesForDeposit(encodedProof),
+          "0x",
+        );
+      await tx2.wait();
+
+      await smtAlice.add(utxo100.hash, utxo100.hash);
+      await smtAlice.add(utxo0.hash, utxo0.hash);
+      await smtBob.add(utxo100.hash, utxo100.hash);
+      await smtBob.add(utxo0.hash, utxo0.hash);
+    });
+
+    it("mint to Alice and transfer UTXOs honestly to Bob should succeed", async function () {
+      const startingBalance = await erc20.balanceOf(Alice.ethAddress);
+      // The authority mints a new UTXO and assigns it to Alice
+      utxo1 = newUTXO(10, Alice);
+      utxo2 = newUTXO(20, Alice);
+      const result1 = await doMint(zeto, deployer, [utxo1, utxo2]);
+
+      // check the private mint activity is not exposed in the ERC20 contract
+      const afterMintBalance = await erc20.balanceOf(Alice.ethAddress);
+      expect(afterMintBalance).to.equal(startingBalance);
+
+      // Alice locally tracks the UTXOs inside the Sparse Merkle Tree
+      // hardhat doesn't have a good way to subscribe to events so we have to parse the Tx result object
+      const mintEvents = parseUTXOEvents(zeto, result1);
+      const [_utxo1, _utxo2] = mintEvents[0].outputs;
+      await smtAlice.add(_utxo1, _utxo1);
+      await smtAlice.add(_utxo2, _utxo2);
+      let root = await smtAlice.root();
+      let onchainRoot = await zeto.getRoot();
+      expect(root.string()).to.equal(onchainRoot.toString());
+      // Bob also locally tracks the UTXOs inside the Sparse Merkle Tree
+      await smtBob.add(_utxo1, _utxo1);
+      await smtBob.add(_utxo2, _utxo2);
+
+      // Alice proposes the output UTXOs for the transfer to Bob
+      const _utxo3 = newUTXO(25, Bob);
+      utxo4 = newUTXO(5, Alice);
+
+      // Alice generates the nullifiers for the UTXOs to be spent
+      const nullifier1 = newNullifier(utxo1, Alice);
+      const nullifier2 = newNullifier(utxo2, Alice);
+
+      // Alice generates inclusion proofs for the UTXOs to be spent
+      const proof1 = await smtAlice.generateCircomVerifierProof(
+        utxo1.hash,
         root,
       );
-      inflatedWithdrawMTPs.push(
-        _withdrawUTXOProof.siblings.map((s) => s.bigInt()),
+      const proof2 = await smtAlice.generateCircomVerifierProof(
+        utxo2.hash,
+        root,
       );
-    }
-    // Alice generates inclusion proofs for the UTXOs to be spent
-
-    for (let i = aliceUTXOsToBeWithdrawn.length; i < 10; i++) {
-      inflatedWithdrawInputs.push(ZERO_UTXO);
-      inflatedWithdrawNullifiers.push(ZERO_UTXO);
-      const _zeroProof = await smtAlice.generateCircomVerifierProof(0n, root);
-      inflatedWithdrawMTPs.push(_zeroProof.siblings.map((s) => s.bigInt()));
-    }
-
-    const {
-      nullifiers: _withdrawNullifiers,
-      outputCommitments: withdrawCommitments,
-      encodedProof: withdrawEncodedProof,
-    } = await prepareNullifierWithdrawProof(
-      Alice,
-      inflatedWithdrawInputs,
-      inflatedWithdrawNullifiers,
-      ZERO_UTXO,
-      root.bigInt(),
-      inflatedWithdrawMTPs,
-    );
-
-    // Alice withdraws her UTXOs to ERC20 tokens
-    const tx = await zeto
-      .connect(Alice.signer)
-      .withdraw(
-        3,
-        _withdrawNullifiers,
-        withdrawCommitments[0],
+      const merkleProofs = [
+        proof1.siblings.map((s) => s.bigInt()),
+        proof2.siblings.map((s) => s.bigInt()),
+      ];
+
+      // Alice transfers her UTXOs to Bob
+      outputUTXOs = [_utxo3, utxo4];
+      outputOwners = [Bob, Alice];
+      const result2 = await doTransfer(
+        Alice,
+        [utxo1, utxo2],
+        [nullifier1, nullifier2],
+        outputUTXOs,
         root.bigInt(),
-        withdrawEncodedProof,
-        "0x",
+        merkleProofs,
+        outputOwners,
       );
-    await tx.wait();
-
-    // Alice checks her ERC20 balance
-    const endingBalance = await erc20.balanceOf(Alice.ethAddress);
-    expect(endingBalance - startingBalance).to.be.equal(3);
-  }).timeout(60000);
-
-  it("mint ERC20 tokens to Alice to deposit to Zeto should succeed", async function () {
-    const startingBalance = await erc20.balanceOf(Alice.ethAddress);
-    const tx = await erc20.connect(deployer).mint(Alice.ethAddress, 100);
-    await tx.wait();
-    const endingBalance = await erc20.balanceOf(Alice.ethAddress);
-    expect(endingBalance - startingBalance).to.be.equal(100);
-
-    const tx1 = await erc20.connect(Alice.signer).approve(zeto.target, 100);
-    await tx1.wait();
-
-    utxo100 = newUTXO(100, Alice);
-    const utxo0 = newUTXO(0, Alice);
-    const { outputCommitments, encodedProof } = await prepareDepositProof(
-      Alice,
-      [utxo0, utxo100],
-    );
-    const tx2 = await zeto
-      .connect(Alice.signer)
-      .deposit(100, outputCommitments, encodedProof, "0x");
-    await tx2.wait();
-
-    await smtAlice.add(utxo100.hash, utxo100.hash);
-    await smtAlice.add(utxo0.hash, utxo0.hash);
-    await smtBob.add(utxo100.hash, utxo100.hash);
-    await smtBob.add(utxo0.hash, utxo0.hash);
-  });
 
-  it("mint to Alice and transfer UTXOs honestly to Bob should succeed", async function () {
-    const startingBalance = await erc20.balanceOf(Alice.ethAddress);
-    // The authority mints a new UTXO and assigns it to Alice
-    utxo1 = newUTXO(10, Alice);
-    utxo2 = newUTXO(20, Alice);
-    const result1 = await doMint(zeto, deployer, [utxo1, utxo2]);
-
-    // check the private mint activity is not exposed in the ERC20 contract
-    const afterMintBalance = await erc20.balanceOf(Alice.ethAddress);
-    expect(afterMintBalance).to.equal(startingBalance);
-
-    // Alice locally tracks the UTXOs inside the Sparse Merkle Tree
-    // hardhat doesn't have a good way to subscribe to events so we have to parse the Tx result object
-    const mintEvents = parseUTXOEvents(zeto, result1);
-    const [_utxo1, _utxo2] = mintEvents[0].outputs;
-    await smtAlice.add(_utxo1, _utxo1);
-    await smtAlice.add(_utxo2, _utxo2);
-    let root = await smtAlice.root();
-    let onchainRoot = await zeto.getRoot();
-    expect(root.string()).to.equal(onchainRoot.toString());
-    // Bob also locally tracks the UTXOs inside the Sparse Merkle Tree
-    await smtBob.add(_utxo1, _utxo1);
-    await smtBob.add(_utxo2, _utxo2);
-
-    // Alice proposes the output UTXOs for the transfer to Bob
-    const _utxo3 = newUTXO(25, Bob);
-    utxo4 = newUTXO(5, Alice);
-
-    // Alice generates the nullifiers for the UTXOs to be spent
-    const nullifier1 = newNullifier(utxo1, Alice);
-    const nullifier2 = newNullifier(utxo2, Alice);
-
-    // Alice generates inclusion proofs for the UTXOs to be spent
-    const proof1 = await smtAlice.generateCircomVerifierProof(utxo1.hash, root);
-    const proof2 = await smtAlice.generateCircomVerifierProof(utxo2.hash, root);
-    const merkleProofs = [
-      proof1.siblings.map((s) => s.bigInt()),
-      proof2.siblings.map((s) => s.bigInt()),
-    ];
-
-    // Alice transfers her UTXOs to Bob
-    const result2 = await doTransfer(
-      Alice,
-      [utxo1, utxo2],
-      [nullifier1, nullifier2],
-      [_utxo3, utxo4],
-      root.bigInt(),
-      merkleProofs,
-      [Bob, Alice],
-    );
+      // check the private transfer activity is not exposed in the ERC20 contract
+      const afterTransferBalance = await erc20.balanceOf(Alice.ethAddress);
+      expect(afterTransferBalance).to.equal(startingBalance);
+
+      // Alice locally tracks the UTXOs inside the Sparse Merkle Tree
+      await smtAlice.add(_utxo3.hash, _utxo3.hash);
+      await smtAlice.add(utxo4.hash, utxo4.hash);
+      root = await smtAlice.root();
+      onchainRoot = await zeto.getRoot();
+      expect(root.string()).to.equal(onchainRoot.toString());
+
+      // Bob locally tracks the UTXOs inside the Sparse Merkle Tree
+      // Bob parses the UTXOs from the onchain event
+      const signerAddress = await Alice.signer.getAddress();
+      const events = parseUTXOEvents(zeto, result2.txResult!);
+      event = events[0];
+      expect(event.submitter).to.equal(signerAddress);
+      expect(event.inputs).to.deep.equal([nullifier1.hash, nullifier2.hash]);
+      expect(event.outputs).to.deep.equal([_utxo3.hash, utxo4.hash]);
+      await smtBob.add(event.outputs[0], event.outputs[0]);
+      await smtBob.add(event.outputs[1], event.outputs[1]);
 
-    // check the private transfer activity is not exposed in the ERC20 contract
-    const afterTransferBalance = await erc20.balanceOf(Alice.ethAddress);
-    expect(afterTransferBalance).to.equal(startingBalance);
-
-    // Alice locally tracks the UTXOs inside the Sparse Merkle Tree
-    await smtAlice.add(_utxo3.hash, _utxo3.hash);
-    await smtAlice.add(utxo4.hash, utxo4.hash);
-    root = await smtAlice.root();
-    onchainRoot = await zeto.getRoot();
-    expect(root.string()).to.equal(onchainRoot.toString());
-
-    // Bob locally tracks the UTXOs inside the Sparse Merkle Tree
-    // Bob parses the UTXOs from the onchain event
-    const signerAddress = await Alice.signer.getAddress();
-    const events = parseUTXOEvents(zeto, result2.txResult!);
-    expect(events[0].submitter).to.equal(signerAddress);
-    expect(events[0].inputs).to.deep.equal([nullifier1.hash, nullifier2.hash]);
-    expect(events[0].outputs).to.deep.equal([_utxo3.hash, utxo4.hash]);
-    await smtBob.add(events[0].outputs[0], events[0].outputs[0]);
-    await smtBob.add(events[0].outputs[1], events[0].outputs[1]);
-
-    // Bob uses the information received from Alice to reconstruct the UTXO sent to him
-    const receivedValue = _utxo3.value!;
-    const receivedSalt = _utxo3.salt;
-    const incomingUTXOs: any = events[0].outputs;
-    const hash = Poseidon.poseidon4([
-      BigInt(receivedValue),
-      receivedSalt,
-      Bob.babyJubPublicKey[0],
-      Bob.babyJubPublicKey[1],
-    ]);
-    expect(incomingUTXOs[0]).to.equal(hash);
-
-    // Bob uses the decrypted values to construct the UTXO received from the transaction
-    utxo3 = newUTXO(receivedValue, Bob, receivedSalt);
-  }).timeout(600000);
+      // Bob uses the information received from Alice to reconstruct the UTXO sent to him
+      const receivedValue = _utxo3.value!;
+      const receivedSalt = _utxo3.salt;
+      const incomingUTXOs: any = event.outputs;
+      const hash = Poseidon.poseidon4([
+        BigInt(receivedValue),
+        receivedSalt,
+        Bob.babyJubPublicKey[0],
+        Bob.babyJubPublicKey[1],
+      ]);
+      expect(incomingUTXOs[0]).to.equal(hash);
+
+      // Bob uses the decrypted values to construct the UTXO received from the transaction
+      utxo3 = newUTXO(receivedValue, Bob, receivedSalt);
+    }).timeout(600000);
+
+    it("The audit authority can decrypt the encrypted values in the transfer event", async function () {
+      // The audit authority can decrypt the encrypted values in the transfer event
+      const encapsulatedSharedSecret = event.encapsulatedSharedSecret;
+      const cBytes = recoverMlKemCiphertextBytes(encapsulatedSharedSecret);
+      // the receiver can decap the ciphertext, and recover the shared secret
+      // using the mlkem ciphertext and the receiver's private key
+      const receiver = new MlKem512();
+      const ssReceiver = await receiver.decap(
+        new Uint8Array(cBytes),
+        new Uint8Array(testKeyPair.sk),
+      );
+      // corresponding to the logic in the circuit "pubkey.circom", we derive the symmetric key
+      // from the shared secret
+      expect(ssReceiver.length).to.equal(32);
+      const recoveredKey = publicKeyFromSeed(ssReceiver);
+
+      const encryptedValues = event.encryptedValues;
+      const encryptionNonce = event.encryptionNonce;
+      expect(encryptedValues.length).to.equal(16);
+
+      let plainText = poseidonDecrypt(
+        encryptedValues,
+        recoveredKey,
+        encryptionNonce,
+        14,
+      );
+      expect(plainText[0]).to.equal(Alice.babyJubPublicKey[0]);
+      expect(plainText[1]).to.equal(Alice.babyJubPublicKey[1]);
+      expect(plainText[2]).to.equal(BigInt(utxo1.value!));
+      expect(plainText[3]).to.equal(utxo1.salt!);
+    });
+  });
 
   // describe("lock() tests", function () {
   //   let lockedUtxo1: UTXO;
@@ -539,7 +601,9 @@ describe("Zeto based fungible token with anonymity using nullifiers with Kyber e
   ) {
     let nullifiers: BigNumberish[];
     let outputCommitments: BigNumberish[];
-    let ciphertext: BigNumberish[];
+    let encryptionNonce: BigNumberish;
+    let outputsCiphertext: BigNumberish[];
+    let encapsulatedSharedSecret: BigNumberish[];
     let encodedProof: any;
     const circuitToUse = lockDelegate
       ? circuitForLocked
@@ -568,14 +632,18 @@ describe("Zeto based fungible token with anonymity using nullifiers with Kyber e
     ) as BigNumberish[];
     outputCommitments = result.outputCommitments;
     encodedProof = result.encodedProof;
-    ciphertext = result.ciphertext;
+    encryptionNonce = result.encryptionNonce;
+    outputsCiphertext = result.outputsCiphertext;
+    encapsulatedSharedSecret = result.encapsulatedSharedSecret;
 
     const txResult = await sendTx(
       signer,
       nullifiers,
       outputCommitments,
       root,
-      ciphertext,
+      encryptionNonce,
+      outputsCiphertext,
+      encapsulatedSharedSecret,
       encodedProof,
       lockDelegate !== undefined,
     );
@@ -595,33 +663,34 @@ describe("Zeto based fungible token with anonymity using nullifiers with Kyber e
     nullifiers: BigNumberish[],
     outputCommitments: BigNumberish[],
     root: BigNumberish,
-    ciphertext: BigNumberish[],
+    encryptionNonce: BigNumberish,
+    outputsCiphertext: BigNumberish[],
+    encapsulatedSharedSecret: BigNumberish[],
     encodedProof: any,
     isLocked: boolean = false,
   ) {
-    const buff = Buffer.alloc(ciphertext.length);
-    for (let i = 0; i < ciphertext.length; i++) {
-      buff.writeUInt8(Number(ciphertext[i]), i);
-    }
-    const ciphertextHex = "0x" + buff.toString("hex");
-
     const startTx = Date.now();
     let tx: any;
+    const proof = encodeToBytes(
+      root,
+      encryptionNonce,
+      outputsCiphertext,
+      encapsulatedSharedSecret,
+      encodedProof,
+    );
     if (!isLocked) {
       tx = await zeto.connect(signer.signer).transfer(
         nullifiers.filter((ic) => ic !== 0n), // trim off empty utxo hashes to check padding logic for batching works
         outputCommitments.filter((oc) => oc !== 0n), // trim off empty utxo hashes to check padding logic for batching works
-        root,
-        ciphertextHex,
-        encodedProof,
+        proof,
         "0x",
       );
     } else {
       tx = await zeto.connect(signer.signer).transferLocked(
         nullifiers.filter((ic) => ic !== 0n), // trim off empty utxo hashes to check padding logic for batching works
+        [],
         outputCommitments.filter((oc) => oc !== 0n), // trim off empty utxo hashes to check padding logic for batching works
-        root,
-        encodedProof,
+        proof,
         "0x",
       );
     }
@@ -662,25 +731,9 @@ async function prepareProof(
     (owner) => owner.babyJubPublicKey,
   ) as BigNumberish[][];
 
-  // TODO: construct the message by generating an AES-256 key (the encryption key is the message)
-  // as part of the KEM protocol. Replace 1 with 1665.
-  const m = [
-    1665, 1665, 0, 1665, 0, 1665, 1665, 0, 1665, 0, 0, 1665, 1665, 1665, 1665,
-    0, 0, 1665, 0, 0, 0, 1665, 1665, 0, 1665, 0, 1665, 0, 0, 1665, 1665, 0, 0,
-    1665, 0, 0, 1665, 1665, 1665, 0, 0, 0, 0, 0, 0, 1665, 0, 0, 1665, 0, 0,
-    1665, 0, 1665, 1665, 0, 1665, 1665, 0, 0, 1665, 1665, 1665, 0, 0, 0, 0, 0,
-    0, 1665, 0, 0, 1665, 1665, 0, 0, 0, 1665, 1665, 0, 1665, 1665, 1665, 1665,
-    0, 1665, 1665, 0, 1665, 1665, 1665, 1665, 0, 1665, 1665, 0, 0, 0, 1665,
-    1665, 0, 1665, 1665, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0,
-    0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0,
-    0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0,
-    0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0,
-    0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0,
-    0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0,
-    0, 0, 0, 0, 0, 0, 0, 0, 0, 0,
-  ];
-
-  const randomness = randomBytesAsDigitArray(32);
+  const randomness = crypto.randomBytes(32);
+  const r = bytesToBits(randomness);
+  const encryptionNonce = newEncryptionNonce();
   const startWitnessCalculation = Date.now();
   const inputObj: any = {
     nullifiers,
@@ -695,22 +748,13 @@ async function prepareProof(
     outputValues,
     outputSalts: outputs.map((output) => output.salt || 0n),
     outputOwnerPublicKeys,
-    randomness,
-    m,
+    randomness: r,
+    encryptionNonce,
   };
   if (lockDelegate) {
     inputObj["lockDelegate"] = ethers.toBigInt(lockDelegate);
   }
 
-  // first call the calculateWitness function which returns
-  // the witness as an object, in order to get the ciphertext
-  const witnessObj = await circuit.calculateWitness(inputObj, true);
-  const circuitName =
-    inputs.length > 2
-      ? "anon_nullifier_qurrency_batch"
-      : "anon_nullifier_qurrency";
-  const ciphertext = getKyberCipherText(witnessObj, circuitName);
-
   const witness = await circuit.calculateWTNSBin(inputObj, true);
   const timeWithnessCalculation = Date.now() - startWitnessCalculation;
 
@@ -721,6 +765,10 @@ async function prepareProof(
   )) as { proof: BigNumberish[]; publicSignals: BigNumberish[] };
   const timeProofGeneration = Date.now() - startProofGeneration;
 
+  const length = outputCommitments.length > 2 ? 64 : 16;
+  const encapsulatedSharedSecret = publicSignals.slice(0, 25);
+  const outputsCiphertext = publicSignals.slice(25, 25 + length);
+
   console.log(
     `Witness calculation time: ${timeWithnessCalculation}ms. Proof generation time: ${timeProofGeneration}ms.`,
   );
@@ -730,10 +778,108 @@ async function prepareProof(
     inputCommitments,
     outputCommitments,
     encodedProof,
-    ciphertext,
+    encryptionNonce,
+    outputsCiphertext,
+    encapsulatedSharedSecret,
   };
 }
 
+function encodeToBytes(
+  root: any,
+  encryptionNonce: any,
+  encryptedValues: any,
+  encapsulatedSharedSecret: any,
+  proof: any,
+) {
+  return new AbiCoder().encode(
+    [
+      "uint256 root",
+      "uint256 encryptionNonce",
+      "uint256[] encryptedValues",
+      "uint256[25] encapsulatedSharedSecret",
+      "tuple(uint256[2] pA, uint256[2][2] pB, uint256[2] pC)",
+    ],
+    [root, encryptionNonce, encryptedValues, encapsulatedSharedSecret, proof],
+  );
+}
+
 module.exports = {
   prepareProof,
 };
+
+describe("encoding test", function () {
+  it("should encode the proof correctly", function () {
+    const proof = encodeToBytes(
+      2185945469173281998543795100239332646380217964035682609677494700854501229435n, // root
+      275390031262136596949503856056006740272n, // encryptionNonce
+      [
+        13715591515004609688233255520139366968347229879226987447392926581641315410365n,
+        12225040792969183937477801836359093706337068545022080407734986798228486880459n,
+        13011843324002630531326495134664720300521666217887617808427836215465667928692n,
+        19856495997717871827317781271670963924363352390548953270211310380014460390334n,
+        10604073410745110687091665574819448938663378994798073962869528739665232014421n,
+        4435178295556424656324960575659262079598790982598728711009699368000570989336n,
+        4933836950213445512336611933470005675174051517599168194217630597808234407822n,
+        4214225226975003066728797596550538286539095487779015468026667054118086708667n,
+        5024576208387901066062709265269626900637589025955141460411534463069531901891n,
+        703973997727387811759298044568434494690485054474094541129706149430879630884n,
+        14507146421329688672993934183526210401463938041762433569084930573959882425326n,
+        14012438595855534325416420918184230363976318221634661889145359708752658755207n,
+        8754932719802650626162524741856226517982355523480941833310179558554675571452n,
+        14352194087842591409364852158942330879045556303811584255462682741598400114507n,
+        930427648599696993608342770250501205956137552217414712238549287557300544904n,
+        21394278059543057034208592185307596281934697437416095108050934185203559222712n,
+      ], // encryptedValues
+      [
+        288126790059318346139824202713129652229348576996464001952408714015513463993n,
+        237407267603824073552608687931930991963999394428366555167539009382905388537n,
+        114764209448275499414271899760871155095571139138912032913196740291197144696n,
+        436995396164250682578369063006271991698559693192849862783563046924655949369n,
+        240591981726723986881909418996515793567853950883197759098846148099856667367n,
+        423589442784611103138623838389086946618384967919367390938087104637737788216n,
+        145462886897996314213326681029317456734837820615410128121849599895343382705n,
+        389932051522827200062535000655062077695415252609124727680940113692289747665n,
+        243675801576408693743852761736871686197324939358886873348705983761231779940n,
+        87939610206601698004485673787337315272887533489281795861381157598783844367n,
+        11014683993036861793302780310552914749438060162054842543618251146378375526n,
+        111614391393324468932660651857272851218377641294817341376507043259517434344n,
+        435707583091444288657484999813927778656294844261499799508340404768617948216n,
+        256449006844324353610179235842731870600460006591548128221647489805788554815n,
+        418634767833052917835192672729088145298440004524459401783387363547257320986n,
+        103610780261386527074710704895000705809005120944489697847370877795317539063n,
+        127627753495450202619315508879418050934338498775659516820680842878935424334n,
+        46384251041970312953604802331459565502839961155990167432349041542488773332n,
+        59279347778101058820051248467497773070279609242238499827597758128700405210n,
+        401076038589967842843270755588760950994197089793842470053926063226777655114n,
+        437055888722697362599388401811652409455332242376917929776279980055423605099n,
+        382219076120208743166804616016001837790918283786525158013655719261656086690n,
+        412218952494890119014684951992443508961594053505588316664570435208291787650n,
+        362621741079924474296483570929701950283961620929630348838376271651154374200n,
+        3987927141671093050828825554766656132900595007161822411291n,
+      ], // encapsulatedSharedSecret
+      [
+        [
+          549287572509790359685716132453355766491815426087194122700979105235739473130n,
+          15298123219329538989607681043913355391761570794419278588736377843648111671159n,
+        ],
+        [
+          [
+            9440038941921968905445133266072988463231863413680655261260818687531566458108n,
+            2207698080461885696867541047133088519732009024182544199097906381032204346428n,
+          ],
+          [
+            6577776031418234473059205922833530313720519798861738979049253341371055729708n,
+            11968330310582097325419116485228879165470205732203147205908830680466052312773n,
+          ],
+        ],
+        [
+          3106716200655790292773114695208727957822992667898408535199502363885960505738n,
+          20085498771862832325662320796990160779029948991590746485323346020588480720567n,
+        ],
+      ], // proof
+    );
+    expect(proof).to.equal(
+      "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",
+    );
+  });
+});