Over-transparency on blockchains isn’t a feature — it’s a bug

Before Satoshi Nakamoto bowed out of Bitcoin, he was actively looking for ways to bolster privacy for users. Here, we look at his writings on the topic — and why complete transparency can be dangerous.

It’s been almost 13 years since Bitcoin’s pseudonymous founder, Satoshi Nakamoto, vanished without a trace — to this day, his identity remains concealed. So much has changed since then and the technology underpinning blockchains has evolved, with BTC continuing to go from strength to strength.

Despite all of this, it’s tempting to wonder what would have happened if Satoshi remained on the scene. Were there any innovations he wanted to implement? Does he have any regrets about how the crypto industry has developed? And what are the pain points and weaknesses in 2024 that this legendary coder would tackle first?

BitcoinTalk — the original forum where the development of BTC was discussed — helps give us an insight into Satoshi’s thinking. In the months after Bitcoin’s genesis block made its debut, he regularly engaged with fellow enthusiasts about the challenges and opportunities facing the network. A topic he touched on was privacy.

Back in August 2010, a forum user called Red wrote: “One of the things that bugs me about Bitcoin is that the entire history of transactions is completely public … The goal is to provide all the same security of the existing system, but to avoid creating a public graph of every transaction that is easily correlated.”

Replying to that topic, Satoshi Nakamoto gave the most powerful indication yet that he wished his blockchain was less transparent by design, and said: “This is a very interesting topic. If a solution was found, a much better, easier, more convenient implementation of Bitcoin would be possible.”

At the time, zk-SNARKs (that stands for Succinct Non-Interactive Argument of Knowledge) were touted as a solution that could eliminate the risk of a coin being spent twice — all while ensuring that an exhaustive record of every transaction, as well as the identities of the sender and recipient, weren’t broadcast to the entire world. But here’s the problem: this approach to zero-knowledge cryptography was very basic back in 2010, and implementing it would have risked slashing the transactions per second that Bitcoin could handle even further.

Although privacy coins like Zcash did emerge in the years that followed — complete with robust zk-SNARKs cryptography — it wasn’t without pitfalls. A Carnegie Mellon university study famously found that just 0.09% of transactions on this blockchain were untraceable over a 30-day period, primarily because users had to opt in to shielded pools that obfuscate activity.

By going back even further, to the Bitcoin whitepaper that was released on Oct. 31, 2008, we can uncover further insights surrounding Satoshi’s attitude to privacy. In that document, he had noted how traditional financial institutions protect their users by keeping databases of past transactions confidential to all. Addressing how BTC could tackle this issue, he wrote: “As an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner.”

Unfortunately, in its current form, the Bitcoin blockchain — and countless networks that have followed in its footsteps — fail to protect their users’ privacy, and even offer less protection than the fiat world. An “all-or-nothing” approach to transparency is leaving crypto enthusiasts exposed, with potentially devastating ramifications. And for a damning indictment of how open the BTC network is, consider this: cybercriminals try to avoid using this blockchain wherever possible because of how easy it is to trace transactions. Some ransomware gangs now insist on being compensated in Monero — and charge a hefty premium if they’re paid in Bitcoin instead.

Just like Satoshi Nakamoto envisaged back in the early 2010s, there has to be a better approach — a way of giving law-abiding users the privacy they deserve, without creating a hotbed of lawlessness where thieving criminals can stash ill-gotten gains in the shadows. Data Ownership Protocol delivers exactly this. We strongly believe that our cutting-edge infrastructure aligns with Satoshi’s ambitions — and crucially, our features aren’t at the expense of network performance. So what does this look like in practice… and why does it matter so much?

The dangers of transparent blockchains

“Sunlight is the best disinfectant” is a common catchphrase among those who believe in complete transparency. “If you’ve got nothing to hide, you’ve got nothing to fear” is another. But it’s wrong to suggest that law-abiding citizens shouldn’t have the right to keep their financial affairs private — and those who seek confidentiality are up to no good.

For a moment, just think about your bank account, and the transactions you’ve made over the past week. Some of the payments may be pretty innocuous — $5 at a Starbucks perhaps, or $10 picking up groceries from Walmart. But others could be exceedingly sensitive. What if you’re making a donation to a politically sensitive cause? Choosing to spend your hard-earned cash on legal forms of entertainment that some in society might disapprove of? Or even settling medical bills that you want to keep confidential? Incoming payments can be equally problematic, especially when it comes to the salary you make.

Now imagine if all of the activity within that bank account was actually done using a Bitcoin wallet. Through block explorers, it would be possible for anyone to piece together information about your life in alarming detail. Your commute to work would be timestamped to the second. Contributions you make to charities and campaigns would be visible to all — and in a world where some people have lost their livelihoods because of their beliefs, this could be disastrous. Every transaction would amount to a tiny piece of an intricate jigsaw.

And if you’re fortunate enough to have a substantial crypto balance, or own a blue-chip NFT or two, publicly available information about your holdings risk making you a sitting target for fraudsters. Data about your past activities could be used to generate highly personalized phishing scams — leaving you one click away from having your wallet drained, and your savings gone forever.

Here at Data Ownership Protocol, we believe it shouldn’t have to be this way… and we’ve done something about it. Our approach to selective transparency means you can pick and choose which elements of your financial records are public — and to whom. Want to conceal an NFT from block explorers? Job done. Keen to preserve the exact balances of your crypto? You can hide them altogether, or opt for generic statements about your holdings. Assets can be encrypted within a couple of clicks — and sent to others within DOP’s ecosystem. This subsequently prevents records of the transaction from entering the public domain.

DOP is built on top of the Ethereum blockchain, and fully compatible with countless ERC-20 tokens — including flagship cryptocurrencies you’ll use everyday. We’re blending privacy with usability, and ensuring you don’t have to switch blockchains or wallets to seize the control that you should have had in the first place. Through a collaboration with Chainalysis, we also make it much harder for malicious actors to transact on our protocol — as tainted funds are flagged and siloed before they infiltrate the ecosystem.

Our team is confident that Satoshi Nakamoto would approve of the infrastructure that we’ve built — and it would meet his definition of a “better, easier, more convenient implementation” of blockchain.

Around the world, there are countless consumers who are fascinated with crypto and want to start integrating it into their daily lives — but find the openness of this technology offputting. DOP fixes this — and with plenty of thrilling features in the pipeline, we’re just getting started.