Why is Privacy Important
Last updated
Last updated
As blockchain technology advances, so does the recognition of the critical importance of privacy. Traditional blockchains often fall short in providing the anonymity users require for secure transactions and data protection. In this era of increased digital interconnectedness, safeguarding personal information and financial data has become not just a preference but a necessity.
Privacy gives you the power to choose what and with whom you’ll share. It’s essential for freedom, security, consent, and dignity.
Privacy isn’t about shutting out everyone and everything. It provides safety, control and the right to grant access. Privacy gives you the ability to express yourself, to be creative, to spend your time and your money in whatever manner you like, without the scrutiny of others. It protects our intimate moments, our most embarrassing ambitions, our radical ideas, and the ability to be our true selves.
Why are we focusing on privacy above all else in crypto?
Transparency makes users vulnerable to attacks: The transparent nature of blockchains forces users to reveal all their blockchain actions publicly by simply interacting with the system. This not only forces users to leak their sensitive financial information to everyone in the world, but this level of transparency also makes them easy targets for phishing attacks, scams, fraud, social engineering and theft.
Privacy unlocks use cases necessary for mass adoption: Private payments would allow employers to pay employees via crypto, provide a true alternative to bank wires, unlock safe crypto payments between individuals, let financial institutions digitize assets in a privacy compliant way, and much more.
Public payments can negatively affect users: crypto payments today are completely transparent, leaving users vulnerable by leaking sensitive information around purchases, account balances, and affiliations.
MEV deterrence: MEV (Maximum Extractible Value) is a complex issue across the crypto space. While some consider MEV to play a constructive role in helping mitigate economic inefficiencies across DeFi protocols, such as helping token prices on various DEXs more closely reflect market-wide demand, as a general matter MEV is considered a meaningful attack vector needing management. The practice of MEV is very well established due to the very public nature of blockchains. MEV is so prevalent that it accounts for well over $1B in profits for block producers and searchers. In some cases, MEV is neutral. In other cases, it hurts retail. Different “solutions” are being worked on — at both technical (prevention, such as private mempools) and economic-governance (fair distribution, order flow auctions, batch auctions) levels. Giving a layer of privacy for users and service providers would deter some of the more harmful MEV practices.
Unintended market reaction: “Whales” (aka large holders of an asset) can move the market by placing an order to buy or sell an asset. A well known account is frequently watched and monitored by bots to repeat its actions in hopes of a profit. A project’s reputation can be made or harmed by the perception of a whale buying into or selling off project assets. This leads to unintentional market movement that privacy could solve for.
Why build an entire infrastructure layer as opposed to a smart contract on an existing chain?
A transparent chain like Ethereum is built on the premise of pseudonymity. Pseudonymity is easily broken either through blockchain analytics, NFT profile pictures, or simply by asking users to link their identity with their wallet to get funds, airdrops, or other perks.
A robust privacy solution based on a smart contract on an EVM chain typically requires a network of relayers or batchers that post transactions on a user’s behalf. Users using relayers or batchers leak their some of their data to them, while typically paying high transaction fees.
On Iron Fish, a user always has the confidence that their data is protected without the user needing to know the cryptography behind the tech, or be aware of the sequence of their actions. Just like a user uses a website with https without needing to know or do anything extra to get encrypted traffic, we hope users of crypto will use Iron Fish with the same ease.
Building an L1 as opposed to an L2 gives the project resilience in decentralization and lack of a single sequencer that all L2 designs currently have.
