The Future of Privacy on Web 3
Panel discussion on PriFi (Privacy Finance) with highlights from various privacy projects
As the blockchain ecosystems grow along with the DeFi applications that sit on them and the increasing amounts of TVL, there has never been a more important time to emphasize on-chain privacy. Privacy Finance (PriFi) is an emerging aspect of decentralized finance that has come to the forefront as the needs for Web3 privacy grow.
When Satoshi Nakoto originally conceived of the idea of Bitcoin and its underlying network, they applied pseudonymity for users, which would anonymize users and provided a level of privacy that worked for that time. However, since then a lot has changed including the development of smart contracts and more complex layer-one environments.
Along with that comes the need to evolve the privacy layers surrounding it. Recently, a panel discussion took place with some of the leading players in the Web3 privacy space. These included:
- Kenny, the founder of Manta, a privacy preservation layer focused on privatizing parachain assets within Polkadot and Kusama ecosystems;
- James from Obscuro, a confidential privacy-preserving smart contract platform;
- Kai from Railgun, a product that is enabling privacy for existing smart contract chains; and
- Carter Wetzel from Secret Foundation, a not for profit foundation for privacy as a public good.
The issue of privacy is growing and should not be taken for granted. The current conversation around Web3 privacy needs to be elevated; it suffers from the same issues that Bitcoin itself suffered from in early conversations–when mentioning topics around the digital currency, critics would argue that its only use case would be money laundering and other illicit activities. Since then, Bitcoin has matured and the conversation around it has evolved as well, with new entrants such as traditional finance operators validating its value proposition to the world.
Now, with Web3 privacy, similar criticisms arise, indicating how early the conversations are around this important topic. In reality, though, the implications of a lack of Web3 privacy are heavy when it comes to the future of decentralized finance and other blockchain use cases. The conversation between the founders of the various Web3 privacy projects at DeFiCon highlighted topics that should be addressed to push the topics of privacy forward. Some key quotes from the conversation can be found below.
Key Quotes from the Conversation
- The original philosophy of Bitcoin and pure transaction focused on a peer-to-peer manner. The idea of privacy wasn’t there beyond pseudonymity, but things have definitely evolved since then, and the needs are evolving as well. (Kenny)
- Regarding the scalability of privacy: I think the gas cost is definitely a factor, because at the end of the day if gas fees are high, privacy is no longer a utility — it becomes a luxury. That’s why we’re all trying to figure out a solution to accommodate and make privacy work in a more frictionless manner, and I think we’re all taking different approaches to that. (Kenny)
- Privacy matters fundamentally; although people say, “if I’m not doing anything nefarious I don’t care if people see what I’m doing,” I think it’s more fundamental than that. (James)
- Privacy matters fundamentally, although people say if I’m not doing nothing nefarious I don’t care if people see what I’m doing, but, I think it’s more fundamental than that… I don’t want the world to know what my bank transactions are and what I’m spending my money on. (James)
- Unlocking the next massive layer of value in DeFi, comes with privacy. (Carter)
- It’s interesting to think that privacy started as this narrative of danger, but then five years from now it actually might be the thing that empowers Web2 to fully transition to Web3; it is a requirement, actually! (Carter)
- There’s a difference between how my Twitter username and my Ethereum address is tied to my identity, but from the data mining perspective, there’s not much difference. It’s even easier — it’s a literal cryptographic hash or the address that I’m using to carry out these actions, you couldn’t ask for a better identifier. (Kai)
- When it comes pseudonymity in the Web2 space, you could make the argument that maybe that’s good enough. But when it comes to Web3, one of the side effects is having everything you do permanently out there and permanently verifiable. (Kai)