DeFi Needs Privacy: Here’s Why
As we understand it, privacy is a relatively new concept.
The idea that people should have a right to privacy has evolved as the development of new technology has given us new expectations — and posed new threats — with regard to our personal privacy.
As we develop a decentralized financial (DeFi) system, it’s critical to remember that any decentralized financial system worth having must respect the financial sovereignty of the individuals it serves.
To better understand the role of privacy in DeFi, this article provides a short history of the evolution of privacy, describes the role of privacy in DeFi, and explains what Plutus DeFi is doing to bring privacy to DeFi.
A Brief History of Privacy
Even expectations of physical privacy are relatively new. Internal walls separating the rooms of a home came about around 1500 A.D. and sleeping in your own bed only started becoming a thing around 1700 A.D.. In both cases, it still took decades, if not centuries for these norms to gain mainstream adoption.
The Right to Privacy, written by Samuel D. Warren; Louis D. Brandeis and published in the Harvard Law Review in 1890, defined modern privacy as we know it.
In the essay, the authors describe the growing potential for governments and businesses to encroach on the privacy of the individuals they serve and argue that law must keep pace with technological advancements:
Recent inventions and business methods call attention to the next step which may must be taken for the protection of the person, and for securing to the individual what Judge Cooley calls the right “to be let alone.” Instantaneous photographs and newspaper enterprises have invaded the sacred precincts of private and domestic life; and numerous mechanical devices threaten to make good the prediction that “what is whispered in the closet shall be proclaimed from the house-tops.”
Privacy has also been recognized on the international stage. Article 12 of the U.N.’s Universal Declaration of Human Rights, published by the United Nations General Assembly in Paris on December 10, 1948 states that:
“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.”
Today, the issue of privacy remains as important and relevant as ever. As technology continues to redefine the way we communicate, new threats and tools for dealing with them constantly race to stay ahead of the curve.
Privacy in DeFi
With all of the excitement around the composability of the products and protocols in DeFi and the impressive interest rates offered by decentralized lending products, it’s easy to forget about the importance of privacy.
Some contend that applications using blockchain shouldn’t be intended for privacy, the logic essentially being that the whole point is to maintain a public record of transactions.
Transaction data, however, doesn’t necessarily need to reveal any personally identifiable information that could be correlated with an individual person using a given application.
As described on the website set up by the companies pioneering DeFi as a concept, “market-level information should be transparent to all participants while still preserving individual privacy.”
Important as transparency may be — it is one of the founding principles of DeFi, after all — promoting transparency at the market-level doesn’t necessarily mean exposing the identity of participants in the system.
Source: https://defi.network/
Without privacy, a decentralized financial system will suffer many of the same pitfalls as our current financial system. From inappropriate censorship and the exposure of customers’ personal information to outright theft, consumers must tiptoe through a minefield of potential problems when dealing with today’s financial institutions.
Where Plutus DeFi Comes In
The “Scalability Trilemma” states that distributed ledger technologies can only achieve two out of three fundamental properties: decentralization, security, and scalability.
Whether or not there’s an element of truth to this with regard to Web3 and decentralized infrastructure, we firmly believe the Scalability Trilemma doesn’t apply when it comes to DeFi applications.
To give people the tools they need to have a secure, scalable, and decentralized financial system, Plutus DeFi is working with
and on integrating and championing privacy in DeFi.Nexus Mutual uses smart contracts on Ethereum to pool risk and provide insurance against the failure of other smart contracts on Ethereum and Aztec Protocol provides simple APIs and developer tools for building privacy into decentralized applications (dApps) built on Ethereum.
Our work will involve integrating insurance and privacy into beautiful, user-friendly DeFi products. Our first product will be a lending product that provides built-in privacy and insurance features. Stay tuned for updates!
Conclusion
Fighting for privacy means staying vigilant against new threats and proclaiming our rights loudly.
Nobody said building a new financial system would be easy but with such a great community behind us, we’re excited to forge ahead into this new territory!
We aim to open up Early Access to our Lend & Earn product for beta testers in early December and look forward to getting your feedback!
If you’re interested in helping to shape the user experience of privacy-focused DeFi products, please sign-up on our website at https://plutusdefi.com/. 😀
