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The crypto industry messed up with privacy

5 min reading

It is vital to safeguard people's privacy as it is a sensitive aspect in everybody's day-to-day life. It is crucial to put forward necessary measures to protect one's privacy which based on the recent reports crypto failed to execute.

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Data protection is a complex issue. Some would argue that confidentiality is not important. In general, it is more interesting to talk about controversial matters. So, the limited argument against secrecy actually makes it a bit tedious to discuss and easy to take for granted. As Edward Snowden put it, “Arguing that you don't care about privacy because you have nothing to hide is the same as saying that you don't care about freedom of expression because you have nothing to say.

But what if your privacy isn't a priority? What if your privacy is not guaranteed? What if everything you do is always monitored?

You can fight.

Unfortunately, this is actually the state of the cryptocurrency industry and there aren't enough people struggling to protect confidentiality.

When I first read the Bitcoin (BTC) White Paper in 2011, I fell in love with the vision of a peer-to-peer electronic money system. Most societies have physical cash - legal tender - so what is the physical equivalent of cash in a digital society? Satoshi Nakamoto seems to have found an elegant answer to this question, and multi-trillion-dollar markets are springing up all around him. Unfortunately, Satoshi's original idea failed in at least one area and that was secrecy.

Legitimate tenders are private. When someone exchanges a coin or bill (also known as an "account" in the United States and Canada) for goods or services, the transaction is known only to the two parties involved. Identification is required if the product or service is restricted to a specific age group (brewing is not for everyone). Also, if you give a woman 10 dollars at the local farmer's market, she won't be able to ask you how much is left in your bank account.

However, transactions on the Bitcoin blockchain are very transparent. This means the amount, frequency and balance of transactions are open to everyone. The Bitcoin White Paper only devotes half a page to the subject of data protection with suggested solutions that don't always work as intended, especially for second generation blockchain based accounts like Ethereum.

There are user guides on how to achieve more privacy with Bitcoin, but these are very complex and usually recommend using tools that can be dangerous for users. There are also several blockchain networks designed with standard data protection in mind, but most of them do not support more complex programmability such as smart contracts that enable new applications with business logic in decentralized finance (DeFi).

Why has the blockchain community failed to make privacy a top priority? On the one hand, confidentiality takes precedence over the other three priorities: security, decentralization and scalability. No one will argue that these three components are also unimportant. But should they be mutually exclusive?

Another reason confidentiality is not a priority is that it is very difficult to ensure it. In the past, secrecy tools like evidence without evidence were slow and ineffective, and scaling it was hard work. But just because privacy is hard, does that mean it shouldn't be a priority?

The last reason is perhaps the most worrying. There is a myth in the media that crypto transactions are completely anonymous. You are not. This means that many people are actively using cryptocurrencies under the illusion that their transactions are private. As tools for analysing blockchain networks become more complex, the lack of anonymity increases. When did data protection become important enough to be a priority?

A friend of mine, who has been working full-time in the crypto industry since 2015, recently asked me: "Is WTF a PriFi?" We screwed it up so badly that after 12 years of developing the industry, we've just gotten to the point where privacy is important enough to have our own hashtag.

So where do we go from here to create more privacy, protect everyday cryptocurrency users, and achieve cash equivalent digital privacy? These are the steps which would help dismantle this issue:

  • The first step is more education. As society becomes more and more digital, it becomes increasingly difficult to achieve secrecy. It begins by educating the media about the difference between secrecy and secrecy. Secrecy does not mean that someone has to know something. Secrecy doesn't want the whole world to know. The secret is privilege. Data protection is correct.
  • The next step is to simplify privacy. Achieving crypto privacy should not require complex solutions, ingenious tools, or deep experience with complex cryptography. Blockchain networks, including smart contract platforms, should provide optional data protection that is as simple as the click of a button.
  • The final step is to protect privacy. Data protection is a topical issue. The latest US infrastructure law contains an expansion clause in Section 6050I of the Tax Code, which requires that individual counterparties in monetary transactions of more than US$10,000 collect personal data about each other and apply it to cryptocurrencies. Coin Center, a pro-crypto non-profit research and advocacy group, is preparing to question the constitutionality of these crypto changes. You can go here too.

 Armed with the right education, intuitive user experience, and motivation to make data protection a priority for cryptocurrencies, we can protect our rights without being ruthless and maintain adequate data protection on our own terms.

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