Although the modern internet connects us like never before, younger generations have never really experienced the feeling of real privacy. Even older generations have forgotten what life was like before our every thought and action was haunted.
Web3 provides an open, trusted, permissionless Internet where users can interact peer-to-peer without relinquishing ownership control, privacy, or reliance on intermediaries.
Blockchains are one of the most important tools underlying this vision. They eliminate the need for trusted third parties and help create a direct relationship between users and service providers by recording rules of engagement in immutable ledgers and even storing direct interactions between them. The structures and power relations in data ownership are also fundamentally reconfigured by blockchains.
With blockchains, individuals can now bypass centralized websites and costly intermediaries and interact directly with each other using end-to-end encryption. People can buy assets like houses or works of art, access public resources, and participate in high-level decisions. Additionally, controlling and managing these processes is much easier when using a decentralized platform where third parties cannot gain access to data unless participants agree to allow it.
That’s the theory.
The Reality of Blockchain Privacy
In reality, today’s blockchains are “pseudonymous,” where users are identified by an alphanumeric string of characters known as a public key. However, associations between activity in a transaction and metadata can often undermine pseudonymity. This renders one of the main proposed benefits of blockchain useless, potentially exposing sensitive information to all participants on a network.
We may not know who Satoshi Nakamoto is, but we can track the transactions associated with their addresses. Blockchain forensics firms, including CipherTrace and Elliptic, regularly use the digital ledger to track financial activity on the blockchain.
Related: Web 3.0 needs more users, not more investors
A seemingly unrelated phenomenon has recently been observed in the ever-expanding world of blockchain-based markets, where trades visible to miners are becoming the subject of “front-running”.
While at first glance this doesn’t have much to do with privacy, this type of attack occurs when a miner is able to read the plaintext transactions submitted on-chain and insert their own transactions in front of the users to get the best deals to get and leave the rest of us with less value. Maximum Extractable Value (MEV) refers to the amount of value miners can suck out of the system by front-running – value that users would otherwise receive.
Since January 2020, miners have extracted Hundreds of millions of dollars worth of Ethereum users. This is clearly a real issue that the industry needs to address.
This begs the question: where are the blockchain layers that provide true privacy?
As things stand at present, the implementation of data protection is not given the necessary or deserved priority. Instead, the blockchain community chose other priorities — specifically, addressing the scalability, speed, and cost challenges that have kept blockchain from mass adoption.
Web3’s solution for data protection already exists
Not just intentional negligence, of course. There is a good technical reason why web applications today cannot run on existing blockchain architectures. Because all participants are currently forced to re-execute all transactions to check the health of their ledger, each service on a blockchain effectively uses a single, finite, global computing resource.
Another reason privacy has not been prioritized is that it is very difficult to guarantee. Historically, data protection tools have been slow and inefficient, and making them more scalable is hard work. But just because privacy is difficult to implement doesn’t mean it shouldn’t be a priority.
The first step is to make privacy easier for the user. Achieving privacy in crypto shouldn’t require cumbersome workarounds, shady tools, or deep expertise in complex crypto. Blockchain networks, including smart contract platforms, should support optional privacy that works as easy as clicking a button.
Blockchain technology is ready to answer these calls with security measures that guarantee the highest level of privacy with social responsibility.
Zero-knowledge proofs (ZKPs) and secure multi-party computation (sMPC) are two technologies that can revolutionize the way we perceive privacy online and help us take back control of the personas we create online.
Related: The crypto industry has royally screwed up privacy
Both solutions will allow the internet to become a place where our sensitive data will only be published with our consent. However, each solution has its own disadvantages.
Kinks in blockchain privacy
While ZKPs allow for basic transfers, they do not allow for multi-user interactions. And while sMPC allows multiple users, it can be prohibitively slow on its own. The obvious answer is to couple the two technologies together to smooth out the pitfalls and create a fast, secure, and highly private framework from which to stage Web3 projects.
Perhaps the right way to look at Internet privacy today is that we’re finally at the bottom of a huge traffic jam. The goal — a better form of privacy that puts the user in control — was never in doubt, but there were other fish to fry.
The congestion was caused by an understandable focus on solving scalability, speed and cost, leaving too little energy and investment to improve data protection. But that is past.
This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Adam Gagol is a co-founder of Web3 venture studio Cardinal Cryptography and Aleph Zero, a Swiss organization that offers a scalable privacy-enhancing smart contract infrastructure suitable for enterprise applications. Adam earned a Ph.D. in mathematics for his work on applications of probabilistic methods in combinatorics. In the blockchain space, Adam’s accomplishments with Cardinal Cryptography include the development of Aleph Zero’s consensus protocol, which was peer-reviewed by the Association for Computing Machinery in 2019.
