Decentralized technology will end the Web3 privacy conundrum

While the modern internet connects us in unprecedented ways, one thing younger generations have never really experienced is a true sense of privacy. Even the older generation has forgotten what life is like until our every thought and action is tracked.

Web3 vision An open, trustless, permissionless internet in which users can interact peer-to-peer without relinquishing ownership control, privacy, or relying on intermediaries.

Building on this vision, blockchain is one of the most important tools. They eliminate the need for a trusted third party and help create a direct relationship between users and service providers, record rules of engagement on an immutable ledger, and even store direct interactions between them. Blockchain also fundamentally reconfigures the structure and balance of power of data ownership.

With blockchain, individuals can now bypass centralized websites and expensive intermediaries and interact directly with each other through end-to-end encryption. People can buy assets such as homes or art, access public resources, and participate in high-level decision-making. Furthermore, the control and management of these processes is much simpler using a decentralized platform, and third parties cannot access the data unless the participants agree to enable it.

This is the theory.

The reality of blockchain privacy

In effect, today’s blockchains are “pseudonymous,” where users are identified by an alphanumeric string called a public key. However, associations between activities in a transaction and metadata often break pseudonymity. This renders one of the main proposed benefits of blockchain useless and potentially exposes sensitive information to all participants in the network.

We may not know who Satoshi Nakamoto Yes, but we can track transactions related to their addresses. Blockchain forensics firms including CipherTrace and Elliptic often use digital ledgers to track financial activity on the blockchain.

related: Web 3.0 needs more users, not more investors

A seemingly unrelated phenomenon has recently been observed in the evolving world of blockchain-based marketplaces, where transactions that are visible to miners become the subject of “front-running.”

While at first glance this doesn’t have much to do with privacy, this type of attack happens before miners are able to read plaintext transactions submitted on-chain and insert their own transactions into users, getting the best deal and letting the rest of us lose value. Maximum Extractable Value (MEV) is the amount of value that miners can suck out of the system through front-running transactions — the value users would otherwise receive.

Since January 2020, miners have extracted Hundreds of millions of dollars in value from Ethereum users. Clearly, this is a real problem that the industry needs to address.

This begs the question: where is the blockchain layer that provides true privacy?

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As it stands, privacy enforcement doesn’t get the priority it needs or deserves. Instead, the blockchain community has opted for other priorities—especially addressing the scalability, speed, and cost challenges that hinder blockchain mass adoption.

Solutions for Web3 Privacy Already Exist

Of course, it’s not just willful negligence. There are good technical reasons why today’s web applications cannot execute on existing blockchain architectures. Since all participants are currently forced to re-execute all transactions to verify the state of their ledger, each service on the blockchain effectively time-shares a single, limited global computing resource.

Another reason privacy isn’t a priority is that it’s hard to guarantee. Historically, privacy tools have been slow and inefficient, and making them more scalable is a tough job. But just because privacy is hard to enforce doesn’t mean it shouldn’t be a priority.

The first step is to make user privacy simpler. Achieving privacy in encryption shouldn’t require clumsy workarounds, shady tools, or deep expertise in complex cryptography. Blockchain networks, including smart contract platforms, should support optional privacy as easy as clicking a button.

Blockchain technology is poised to answer these calls with security measures that guarantee maximum privacy through social responsibility.

zero-knowledge proof (ZKP) and Secure Multiparty Computation (sMPC) are two technologies that could revolutionize the way we perceive privacy on the Internet and help us regain control of the roles we create online.

related: The Crypto Industry Has Completely Destroyed Privacy

Both solutions would allow the internet to become a place where our sensitive data is published only with our approval. However, each solution has its own drawbacks.

Blockchain Privacy Issues

While ZKPs allow basic transport, they do not allow multi-user interaction. While sMPC allows for multiple users, it can be quite slow by itself. The obvious answer is to combine these two technologies to eliminate pitfalls and create a fast, secure, and highly private framework from which to work on Web3 projects.

Perhaps the right way to look at online privacy today is that we’re finally ending the huge log jam. The destination — a better form of privacy that users can control — is unmistakable, but there are other fish to fry.

The reason for the congestion is the understandable focus on addressing scalability, speed, and cost, leaving too little energy and investment in addressing privacy concerns. But that is in the past.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk and readers should do their own research when making a decision.

The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.