Why Investors Should be Concerned About Crypto’s Privacy Problem
News | February 04, 2022, 9:21 AM | The content is supplied by a Guest author
Bitcoin isn't anonymous, contrary to what you might believe.
It's actually one of the most transparent ways to send money, since the details of your financial transactions are stored on a public blockchain. People can't exactly see your name, but they can see your public wallet address where your cryptocurrency is stored. The challenge with this, is that there’s a growing industry in the blockchain space that is devoted to pairing public wallet addresses with real world identification. Said another way, your public wallet address could ultimately be used to expose who you really are.
Bitcoin, contrary to what you might believe, is not anonymous.
What happens on the blockchain carries real world consequences. This will become incredibly evident in the future, as regulators and other organizations acquire the ability to look deeper into the blockchain for information opportunities. The truth is, any technology can be put to the purposes of its user. When those purposes or intentions aren’t in our best interest, the results are dire, and the chance for us to recover our rights are extremely low. Therefore, it's easy to see that the transparency function of the blockchain isn't a feature at all, but a bug, and the technology has the potential to do great harm if used by the wrong people.
The only solution to maintaining our financial privacy is PriFi. Let's dive deeper into what this means, and why it’s so important today.
Loss of financial privacy means loss of agency
What it really boils down to is a loss of autonomy in your financial life. When all our financial activities are encoded on an immutable blockchain, this means that depending on the regulatory environment you live under—you could see regulatory bodies restricting your financial life, forcing you to spend cryptocurrency, or freezing your accounts all together. And because the data is forever stored on the blockchain, it would not be difficult for a regulatory agency to go years back to make their decision.
In China, this is already a reality.
They've introduced the Digital Yuan, which gives China complete control over how their citizens spend this digital currency, transact with others, and carry out their financial lives online. And while we may not have seen this here in North America yet, that’s not to say that this system isn’t coming. It is. Canada, the United States, the UK, and countries around the globe are all actively pursuing their own central bank digital currencies (CBDC).
Once in place, this means that they’ll have direct access to your digital financial transactions, and can act in whatever manner they so choose. Perhaps an overzealous agency will flag your Ethereum transaction because it was sent to a specific wallet address. Or perhaps they’ll go back in the blockchain’s data to see if you’ve interacted with a decentralized exchange they don’t like. The possibilities are endless. It’s the transparency bug in blockchain technology that gives them this power. Unfortunately, most blockchains are built with this weakness.
Privacy focused blockchains however, are not. Designed to ensure that the user maintains agency over their financial transactions, PriFi protocols like Haven, Monero, and Oxen allow you, the user, to choose what data you’re going to release to the world. But loss of autonomy isn’t the only worrisome exploit that blockchain’s transparency bug brings to the future. Human rights violations are another.
Financial Privacy is a human right and worthy of defending
Most of us have grown accustomed to this simple fact. We take privacy for granted, and believe that it’s just a ‘thing’ that we automatically get. It’s not. It’s something we have had to fight for throughout the ages, and is something that many people around the world don’t have access to. Unfortunately, we’ve already given up more than we realize - to social media giants like Facebook, search engines like Google, or to phone companies who have the power to store and record our ‘private’ conversations.
The transparency on the blockchain makes the privacy problem worse. A lot worse. With unchangeable data that is stored forever, it will only be a matter of time before corporations or regulatory authorities find a way to extract the data they want.
The financial data that is currently being stored on the blockchain can then be used to restrict access to your most basic needs, by allowing regulatory agencies to restrict, freeze, or control your finances at will. These fundamental rights are literally written into the United Nations code as defined as:
- Your right to privacy (yes, it’s written in the code)
- Your right to own property
- Your right to work
- Your right to an adequate standard of living
With the right information, a regulatory body could freeze your cryptocurrency, but could also connect with your bank, centralized exchange, or cell phone company to further extract information and alter your real world interactions.
This is not science fiction, this is a very real possibility.
PriFi is a solution that gives you control, but it must be built into the blockchain.
Financial privacy is nothing less than a prerequisite for freedom.
Privacy gives us all the ability to live our lives in the way that we choose. Financial privacy allows us to spend our money, earn our money, and provide food, shelter, and growth to the people we choose. It’s essential for our ability to develop as a person. It’s essential for our ability to thrive in society. It’s essential for innovation and growth.
We have yet to see the massively detrimental impacts of surveillance states, but we’re keenly aware of the damage of societies that have implemented civilian ‘self-surveillance’. In nations where political climates led to civilian ‘self-surveillance’ such as the Great Leap Forward in China, The Cultural Revolution in China, or in Leninist Russia, citizens reporting others for ‘crimes’ at the time, led to terrible atrocities. Is this where blockchain is heading? No, not necessarily, but it is a cause for concern.
Imagine the effects on the quality of our lives if we knew that every bit of information placed on these immutable ledgers could somehow, or someday return to haunt us. It doesn’t matter if the financial transaction with that decentralized exchange, store, or person is currently allowed - if at any point in the future it’s not, the financial data that is currently stored on the blockchain, can be used against you.
In a very tangible way, this blockchain transparency bug is a very significant problem. How then can we advance into the Web 3.0 future with blockchain technology supporting our financial privacy and human rights? We use private finance (PriFi) blockchains to transact.
A solution, here and now:
There are innovative blockchain protocols that are actively pursuing a private blockchain future. Protocols that understand the dangerous exploitation potential of blockchains transparency bug. PriFi is woven into the fabric of their design, unchangeable by even the teams that created them.
Protocols like Haven, Oxen, and Monero are all pushing the boundaries of blockchain and privacy. They understand that it does not have to be a choice between technology or privacy, but that it can be both at the same time. Technologies are themselves inherently neutral. But the temptation to overreach, over extract, and take data for one’s own corporate or regulatory needs is there. And it’s built into the blockchain itself.
We know that the powers that may be, do not always have your best interests at heart. If we want to safeguard our financial privacy and ultimately our freedom, why then, leave it to chance? Explore solutions like Haven, Oxen, and Monero who give you, the user, choice.