BEAM Privacy
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BEAM Privacy

Beam: Enabling blockchain confidentiality through private-by-default transactions

Hello Beamers,

In this article, we will attempt to define a term that may have been confusing and somewhat of a mouthful “private-by-default transactions”; its significance to blockchain and the implications of its traditional counterparty, non-private transactions.

What are private-by-default transactions?

Private-by-default simply means transactions that are confidential. This is in contrast to non-private transactions, that are publicly broadcasted to the blockchain, as soon as the transaction enters the mempool, awaiting confirmation from miners.

In simpler words, non-private transactions’ metadata is publicly available before the transaction is even confirmed.

Antithetical to non-private transactions are private-by-default transactions that hide any transaction metadata that can be tied to a users’ identity, such as sender & receiver wallet addresses, transaction time, token type, amount, etc. This enables complete confidentiality for users as transaction history and wallet address are fully concealed.

Why should users care about private-by-default transactions?

Traditional blockchains like Bitcoin & Ethereum are pseudo-anonymous meaning if a user’s identity is ever linked to their wallet address, their entire transaction history will become exposed. Private-by-default offers true anonymity as no wallet addresses are stored on the blockchain.

Private-by-default also fixes the problem of frontrunning, where a trader (or a bot) copies another user’s trade (using transaction metadata broadcasted on the blockchain) and executes it faster by allocating higher gas fees than the originator.

Since private-by-default transactions do not store any transaction metadata tied to a user’s identity; copy trading and whale frontrunning become mere afterthoughts.

If the conversation is shifted from blockchain technology to morals, the right to privacy is safeguarded universally as a fundamental human right. This includes the right to financial privacy. Users should not be compelled to expose sensitive financial transactions, other than to authorized trusted parties and regulatory institutions. Read more about Beam’s mission to champion the universal right to privacy in blockchain

What are the implications of non-private transactions?

Non-private transactions record transaction metadata publicly and permanently on the blockchain, leaving billions of data points to be analyzed by supercomputers, artificial intelligence, and data analysis platforms like Chainalysis, The Graph, etc.

Adversaries (far more advanced in the future) have access to an ever-growing database that can be used to generate insights compromising humanity’s privacy as a whole. For example, artificial intelligence can analyze wallet addresses and transaction data to track and predict consumer behavior; corporations can monitor users’ wallets without consent or any awareness.

Non-private transactions will always leave users at risk of pseudo-anonymity’s flawed design illustrated below:

Users’ Wallet Address + Users’ Identity = Access to Users’ entire wallet & transaction metadata

Pseudoanonymity’s critical weakness is dealt a further coup de grâce when many centralized exchanges require users to register KYC in order to trade. Centralized exchanges make up the bulk of the user base and the daily total trading volume. Centralized exchange Binance has 300% greater daily trading volume than all decentralized exchanges combined. If Binance ever gets hacked, which is within the realms of possibility, and KYC information is ever stolen, it may bear disastrous consequences for users.

Other privacy coin projects like Zcash (ZEC) have implemented their own unique approach to protecting blockchain transaction metadata. Zcash covers only parts of the transaction data. The platform has different options for private and non-private transactions. This ability to choose may not be favorable to users as transacting a mix of private and non-private transactions can make users vulnerable to deanonymization if adversaries attempt to trace non-private transactions. Also, users who exclusively choose private transactions can arouse suspicion and be subject to unwarranted attention.

Should private-by-default transactions become the default?

If cryptocurrencies are to ever replace fiat and become the decentralized global payments standard as conceived originally, that people can use to make everyday purchases such as paying at restaurants, purchasing groceries, and paying utility bills, etc. then private-by-default must be the standard. Because it already is the standard for the fiat economy. It is challenging for adversaries to trace your cash transactions, relative to getting your entire transaction history exposed, whenever pseudo-anonymity is broken.

Beam: Infusing Privacy and Compliant Confidentiality with Blockchain

The Beam blockchain is designed with a privacy-first approach by leading cryptographers, privacy advocates, and blockchain diehards. The Beam Team has implemented multiple privacy protocols including Mimblewimble, Lelantus-MW & Dandelion to enable complete confidentiality whilst still remaining compliant to lawful authorities. A wallet key can be shared with legal institutions. This key provides authorities proof of ownership for the user’s crypto and evidence that no transactions were deleted.

BeamX is the planned confidential DeFi layer on the Beam blockchain with many upcoming features such as blockchain bridges, DAPPs (swaps, lending, yield farming), NFTs and blockchain games, etc.

In the future Beam and BeamX will transition into a completely decentralized community-driven DAO governed by holders of the upcoming BEAMX token. Just as Ethereum iterated the original blockchain Bitcoin, by introducing ERC-20 smart contracts and ERC-721 NFTs; Beam iterates them both by developing a scalable decentralized private-by-default blockchain.



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Danai Raza

Danai Raza


Finance Graduate from Mahidol University International College 2020. DeFi Degenerate. Writing about blockchain, crypto, DeFi and privacy coins.