How the crypto business removed privacy from the equation
Privacy is a difficult subject. Few people would dispute that privacy is unimportant. It's typically more entertaining to discuss contentious issues. As a result, the limited arguments against privacy make it rather tedious to argue and simple to take for granted. "Saying that you don't care about privacy because you have nothing to conceal is like arguing that you don't care about free speech because you have nothing to say," Edward Snowden famously stated. But what if your privacy isn't a top priority? What if your privacy is jeopardized? What if everything you do is always monitored? You could fight back. Unfortunately, this is the state of the bitcoin business, and there aren't enough individuals fighting to protect privacy.
Privacy vs. transparency
Most civilizations have physical cash as legal tender, so what is the physical cash equivalent in a digital society? Satoshi Nakamoto appeared to have found an easy solution to that question, and a multi-trillion dollar market has sprung up around it. Unfortunately, Satoshi's initial concept fell short in at least one aspect, and that is privacy.
Private legal tender exists. When someone trades coins or banknotes (also known as "bills" in the United States and Canada) for an item or service, only the two people involved are aware of the transaction. If the item or service is confined to particular age groups, identification is required. Furthermore, if you offer a $10 note to the lady at the farmer's market, she won't be able to check up how much money you have in your bank account.
Transactions on the Bitcoin blockchain, on the other hand, are completely visible. This implies that transaction amounts, frequency, and balances are all visible to the general public. The Bitcoin white paper barely devotes a half-page on privacy, with recommended workarounds that don't always operate as intended, particularly for second generation account-based blockchains like Ethereum.
There are user instructions on how to gain greater privacy with Bitcoin, but they are highly technical and typically advocate utilizing technologies that can be hazardous to users. There are a few blockchain networks that have been constructed with privacy as the default, but the majority do not allow more advanced programmability, such as smart contracts, which enable novel use cases including business logic in decentralized finance (DeFi).
Leaving privacy at the door
Why has the blockchain community failed to make privacy a top priority? For one thing, privacy has been pushed aside in favor of three other priorities: security, decentralization, and scalability. Nobody can dispute that these three elements aren't vital. But do they have to be mutually incompatible when it comes to privacy?
Another reason privacy has not been addressed is that it is extremely difficult to ensure. Historically, privacy methods like zero-knowledge proofs have been sluggish and inefficient, and scaling them up is difficult. But just because privacy is difficult doesn't mean it shouldn't be a concern. The final reason is most likely the most worrying. There is a widespread misconception in the media that crypto transactions are entirely anonymous. No, they are not. This implies that many people have been utilizing cryptocurrency under the mistaken belief that their transactions are private. The absence of anonymity grows as blockchain network research tools get more advanced. So, when does privacy become essential enough to be prioritized?
Privacy for Finance
"WTF is PriFi?" questioned a buddy of mine who has been working full-time in the crypto business since 2015. PriFi, or "Privacy Finance," is the crypto industry's acknowledgment that we messed up big time on privacy. We botched up so horribly that, 12 years into the growth of this sector, we're only now getting to the stage where privacy is essential enough to need its own hashtag. So, where do we go from here in order to provide more privacy that protects regular crypto users while also achieving the digital privacy equal of cash?
Education is the first step. Privacy is getting more difficult to achieve as society gets more digital. The first step is to educate the media on the distinctions between secrecy and privacy. Secrecy is defined as not wanting people to know about anything. Privacy is not wanting the entire world to know about something. Secrecy is a luxury. Privacy is a fundamental human right.
The next stage is to make privacy more accessible. Obtaining privacy in cryptography should not necessitate clumsy workarounds, dubious methods, or a thorough understanding of sophisticated encryption. Optional privacy should be available on blockchain networks, including smart contract platforms, with the click of a button.
The final stage is to protect one's privacy. The topic of privacy is timely. The latest infrastructure bill in the United States includes a provision to expand section 6050I of the tax code, which compels individual counterparties to gather personal information about each other for cash transactions over $10,000, to cryptocurrencies. Coin Center, a pro-crypto nonprofit advocacy and research organization, is prepared to contest the constitutionality of this crypto move.
We can protect our rights without being irresponsible, and retain rational privacy on our own terms, armed with good information, a simple user experience, and determination to make privacy a priority for crypto.