Although the modern internet connects us like never before, one thing younger generations have not really experienced is a sense of true privacy. Even older generations have forgotten what life was like before all our thoughts and actions were tracked.
Web3 envisions an open, untrusted, and unauthorized Internet where users can interact peer-to-peer without relinquishing control over ownership, privacy, or trust in intermediaries.
Block chains are among the most important tools that form the basis of the vision. It eliminates the need for trusted third parties and helps establish a direct relationship between users and service providers, rules for sharing registration on immutable ledgers and even store direct interactions between them. Blockchain is also fundamentally recreating the structures and balances of power in data ownership.
With blockchains, people can now bypass central websites and costly intermediaries and interact directly with each other using end-to-end encryption. People can purchase assets such as homes or artwork, access public resources, and participate in high-level decisions. In addition, controlling and managing these processes is much easier through the use of a decentralized platform where third parties cannot access the data unless the participants agree to activate it.
This is the theory.
The truth about blockchain privacy
In fact, today’s blockchain is considered an “alias”, where users are identified by an alphanumeric string known as a public key. However, the associations between transaction activity and metadata often undermine the alias. This renders one of the most important proposed benefits of blockchain useless and exposes potentially sensitive information to all network participants.
We may not know who Satoshi Nakamoto is, but we can trace the transactions associated with their addresses. Blockchain investigators, including CipherTrace and Elliptic, regularly use the digital ledger to track financial activity on the blockchain.
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Recently, a seemingly unrelated phenomenon has been observed in the growing world of blockchain-based markets, where transactions visible to miners are “on top”.
Although this isn’t so much about privacy at first glance, this type of attack happens when a miner is able to read the plain text transactions sent to the chain and put their own transactions in front of the users, getting the best deals and leaving others with the least value. The Maximum Extractable Value (MEV) indicates how much value miners can suck out of the system by getting ahead – a value that users would otherwise get.
Since January 2020, miners have extracted hundreds of millions of US dollars from Ethereum users. This is clearly a real problem that the industry must address.
This raises the question: Where are the blockchain teams that provide real privacy?
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As now, privacy implementation has not been given the necessary or due priority. Instead, the blockchain community has chosen other priorities — in particular, addressing the scalability, speed, and cost challenges that have held back blockchain from mass adoption.
Web3 privacy solution already exists
It’s not just willful negligence, of course. There is a good technical reason why web applications today cannot run on existing blockchain architectures. Since all participants are currently forced to perform all transactions again to check the state of their public ledger, each service on the blockchain effectively shares one finite global computational resource.
Another reason not to prioritize privacy is that it is very difficult to guarantee it. Historically, privacy tools have been slow and ineffective, and it is difficult to make them more scalable. But just because privacy is difficult to implement, that doesn’t mean it shouldn’t be given priority.
The first step is to facilitate privacy for the user. Achieving privacy in cryptography should not require clumsy solutions, shady tools, or deep expertise in complex cryptography. Blockchain networks, including smart contract platforms, should support optional privacy that operates easily with the click of a button.
Blockchain technology is ready to answer these calls with security measures that ensure maximum privacy with social responsibility.
Zero-knowledge proofs (ZKPs) and secure multiparty computing (sMPC) are two technologies that could revolutionize the way we perceive online privacy and help us take back control of the personalities we create online.