Why Privacy Is Needed For The Blockchain Revolution
Privacy is a fundamental right in the modern world, necessary to protect us from both governments and criminals. The web is moving fast towards making https encryption mandatory for this very reason, since it protects our online activities from eavesdropping and interference.
Yet, when it comes to our financial liberation through blockchain technology and cryptocurrency this is seldom a discussed topic. In fact, the by far biggest, most spread, and most well-known cryptocurrency, Bitcoin, is the very opposite of private with its open ledger.
This needs to change, and luckily for us, there are solutions through other blockchains which feature strong privacy – which can even save Bitcoin.
“No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.” – Article 12, UN Universal Declaration of Human Rights
“This Regulation protects fundamental rights and freedoms of natural persons and in particular their right to the protection of personal data.” Article 1, 2. EU’s General Data Privacy Regulation
Both the UN and EU define privacy as a basic human right. Through the internet and the web, we have liberated the information domain. We can write, read and exchange information without thinking about national borders and thought police.
This has triggered multiple democratic revolutions, but also allowed every one of us to pursue interests without fear of ridicule, material impact, or physical harm.
Financial information, who or how you have transacted and which assets you have, is just as important personal information as your health history and how you vote. It needs to be kept private and only shared when and how you want it to.
Bitcoin solved the fundamental problem of storing assets and transacting beyond the reach of governments and criminals through a new, global banking system.
However, it only solved part of the problem: how to do this in a trustless and permissionless way. Not private, not at scale, and not with the decentralized logic needed to create an alternative financial system. All of which is essential to free us financially.
My vision, and what’s possible already today, is for our blockchain systems to allow every one of us to live as global citizens. We can interact and transact above the futile borders of nation-states, choosing who we want to interact with and how without anyone telling us what we can or can’t do.
In addition, we also have our lives as residents in a specific geographic location, paying taxes and following local regulations, but that’s only part of our existence.
Just like the elite and politicians for centuries have lived above the rules and regulations of the common people, so can we. The main purpose of the blockchain revolution is not tax avoidance and hiding assets, but for you as an individual to be sovereign and in control of your own information and financial assets in accordance with the UN and EU rights.
Bitcoin dominates the current narrative and has by far the biggest reach of all cryptocurrencies. Many big companies and institutions now either have or are about to invest in Bitcoin.
It’s often described by its proponents as the very catalyst and tool which will take us to the vision I just outlined, but as previously stated it simply doesn’t have the functionality to do so. It also can’t evolve to do so, since a core feature of Bitcoin itself is an extreme resistance to change.
So what can be done? One blockchain, Tezos, has all of the features and characteristics in place to be this foundational layer which underpins a decentralized, permissionless, global financial system with optional privacy.
It already works like this, hosting some of the most popular decentralized applications in existence in addition to a vibrant DeFi ecosystem, allowing people all over the world to interact without thinking about borders.
Optional privacy means that by default it uses pseudonymity, just like Bitcoin, for accounts and transactions. But, as anyone who has experience in InfoSec or GDPR knows, pseudonymity is not anonymity.
For anonymity, Tezos uses something called Zero-Knowledge Proofs, which allows users to interact with smart contracts in a way that only they know what information they store on the blockchain.
Anyone else can verify that it’s correct, but not see the content. This is why it’s called Zero-Knowledge proofs. For some applications, we do want an open ledger, to publicly be able to verify information. Other times we do not, and optional privacy gives us both of these options.
With the smart contract functionality on Tezos it’s possible to create representations of other assets, for example, US dollars or Bitcoin. Something that is already available. So, while the narrative of Bitcoin is easy to explain, it can’t fulfill its promise on its native chain.
But Bitcoin on Tezos actually can, so if you’re a die-hard Bitcoiner, please look into this to be able to use your Bitcoin as electronic cash as envisioned by Satoshi Nakamoto, or look into the native asset of Tezos, XTZ, which in addition to being the networks native form of currency also gives you a direct stake in the network and its future.