Exec summary of “Privacy Is a Feature, Not a Product” by Ryan Gentry

This is a summary of Privacy Is a Feature, Not a Product by Ryan Gentry published on 24 September 2019.

Executive summary

• Dominant layer-1 networks (such as Bitcoin) offer enough privacy for most people and due to network effects would dominate over privacy-focused networks
• A key drawback of using privacy-native blockchains is the price risk associated with holding native assets of such chains

Monero

• Monero, dubbed as the gold standard of blockchain privacy, has seen its asset’s price lag the market in 2019 and has not managed to attract large amounts of funding and developer resources
• Less than 5% of Dark Web uses Monero. Bitcoin remains the preferred currency for those who require privacy the most

Zcash

• Zcash is an established 3-year old privacy-focused chain on which privacy is optional. However, only 5% of ZEC in existence is stored in private wallets, while 95% is stored in completely transparent wallets.
• Zcash price performance in 2019 has lagged the overall market

Weaknesses of privacy-native chains

• Blockchains as any other piece of software is a subject to bugs and vulnerabilities. The more private a blockchain is, the higher the likelihood that exploitation of such weaknesses goes unnoticed. This increases the risks associated with holding privacy blockchain assets. When a bug has been discovered in Zcash code, the Zcash Foundation admitted that it’s impossible to know fully whether this bug has been exploited or not
• Private transactions require additional resources over less private ones, resulting in increased costs associated with making the prior
• Due to the open source nature of blockchain development, privacy can be copied with relative ease, which enabled Tezos to copy some of Zcash’s core functionality

Privacy-enhancing Bitcoin and Ethereum protocols as the likely winner

• Ryan argues that although privacy-native chains are probably an overkill for most people, there are other ways to increase privacy without a need to be exposed to price volatility of another crypto asset, such as CoinJoins for Bitcoin which has recently surged in popularity, and Hopper, Heiswap, Tornado, Aztec Protocol for Ethereum
• Chainalysis, one of the most prominent blockchain analytics company that includes the FBI, DEA, and IRS as customers, confirmed they are “unable to follow the trail of coins as they move through mixing services.”
• Privacy chains and solutions are subject to privacy attacks whereby if a large share of transactions on the network belong to a single party, it makes it easier for that party to de-anonimyse the other transactions on the same network over the same time frame. It is generally more costly to attack a network with a larger market cap, daily transaction count and transaction fees. Ryan estimates that it is already either equally or more expensive to attack privacy-enhanced transactions on Bitcoin and Ethereum than transactions Monero