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Digital currency was believed to be an ideal medium of exchange that offered anonymity and privacy of users’ transactions. As a matter of fact, it is a misconception that people have both new investors and high rollers.
Ironically, transparency was coded by Satoshi Nakamoto directly into blockchains that gave everyone the ability to view transactions and more.
Currently, the number of surveillance tools on the Blockchain network is growing exponentially, and the software is developed using artificial intelligence that runs through blockchain and gathers information about a crypto-wallet as well as coin movements, and at the same time, produces intricate reports on transactions. How much money is moved, what is moved and where it is moved offer just a peripheral view. Once a user is linked to a crypto wallet and transaction history, all associated cryptocurrency activities are known.
This kind of software development acts as a source through which regulatory authorities can, as well as have tracked funds from crypto exchanges, investors’ wallets, and hacks. However, similar to all technologies, the potential and value for exploitation of any Blockchain entirely depends on the entity and the end purpose for using it.
Originally, transparency was believed to be an advantage once it was coded into the blockchain network by Satoshi Nakamoto and other developers carried on with it while producing fresh decentralized crypto projects and other Altcoins as well.
However, it is becoming increasingly evident that crypto has a problem with transparency. And this transparency problem can result in a different future of the decentralized system.
Uncertainty in the Crypto Technology Leads to Regulatory Fear
Any topic related to cryptocurrency brings predictable changes in political attitudes across the world. On the one hand, there is India, China, and now Russia that are potentially trying to bear down with crypto bans. On the other hand, there are direct adopters such as El Salvador, setting examples of crypto adoption by consistently legalizing and buying Bitcoin and other major cryptocurrencies.
All the remaining countries essentially stand at the center while many other crypto- agnostic, crypto-curious, well-meaning government bodies are showing a slight interest in the regulation of this growing industry.
There is a notable movement that has been formed in order to over-regulate the crypto space, uncertain about how to move forward. Whether it is because of excessive caution or just a lack of comprehension about how crypto works, certain regulatory authorities have been trying to push for aggressive data collection, crypto regulation, and much more.
This, however, does not predict good conditions for investors.
For instance, in May 2021, the revenue proposals of Joe Biden‘s administration for the financial year 2022 were released by the United States Treasury Department, which involved a requirement of reporting obligations, especially, on crypto transactions, to all personal and business accounts from the financial institutions. The financial institutions would then have to maintain a report of money transactions going in and coming out of personal and business accounts of over $600, including crypto transfers. This means the government would essentially have access to all the spending done by personal or business accounts over a specific dollar amount.
Moreover, while such changes were introduced in October last year, with a threshold of more than $10,000 in transactions per year, if businesses use blockchain network for their cash flows, the authority would still require a report including intricate details on the amount spent, sent to whom, and through which medium, if crypto is moving.
Compared to the conventional financial systems, where all records on finances are kept hidden from the regulatory bodies, on the blockchain network, with open on-chain information and immutable records, this data could be easily collected, and there is no choice. In a nutshell, the regulatory agencies will not have any business with the financial records.
This encroachment level on user privacy is a huge step backward in terms of personal freedom and something related to dictators and despots. However, the transparency on the blockchain goes beyond these overzealous regulators whose ultimate objective is to pull out information without the knowledge of the public. Anyone can use the transparency on Blockchain networks and for any purpose.
Transparency Exposes Everyone
The corporate entities and the governments are not the only bodies who are trying to peer deep into the Blockchain system, searching for information and using the data for their purposes. By the end of 2021, more than $7.7 billion were either lost or stolen in cryptocurrency scams, as stated by Chainanalysis’ report from blockchain analytics. This number is a substantial increase of over 80%, compared to 2020.
Moreover, the trend is on the rise.
The transparency of blockchain provides an additional avenue for thieves, con artists, and scammers to exploit. In addition to this, as they learn to become more creative and sophisticated in their criminal attacks, the transparency problem of the blockchain network will become more apparent as the rate of exploitation increases.
Corporations and the tech giants are also looking forward to extracting and exploiting this information to their advantage. There is a common proverb of the modern world– data is the new oil – which helps in explaining why big companies like Facebook, Amazon, or Google are making billions using their algorithms.
It is more appealing when financial information is freely available for everyone to use. This is the transparency problem of cryptocurrency and Blockchain networks, which can have detrimental effects.
The Unfortunate Effect
The unfortunate and inevitable effect of the crypto transparency problem is that a majority of protocols and dApps in the industry have neglected this Blockchain problem, thereby exposing tons and tons of user information, leading to present or future adverse consequences. It is worth mentioning that simply because nothing has occurred yet, does not rule out the fact that the data will never be extrapolated in the future. One of the basic features of blockchain technology is that it is immutable. The records or transaction history of any kind never disappear.
As long as data exploitation is limited to scams and hacks of a few billion dollars, the impact is still limited, but as democracies and dictators start pursuing their interest of regulating and controlling the population, this problem of exploitation of financial data will undoubtedly be at the top list of their personal agendas. To combat this and balance out the flaw in the technology, PriFi or Private Finance comes to the rescue.
PriFi, Prerequisite for Financial Freedom
Everyone is entitled to privacy as a human right. And this is something that is literally talked about in the human rights code, followed by more than 140 countries. PriFi or Private Finance is a forerunner of many essential human rights mentioned in the code.
Why is it needed?
This is because in a community where CBDC or central bank digital currencies exists, a community where crypto assets and coins can be blocked, seized, or frozen, financial data is the main key to control one’s ability to make transactions, a key to control one’s ability to earn, buy or sell in the crypto digital world.
The world is slowly progressing to Web 3.0. Metaverse, along with CBDC, PriFi comes into the scene to defend an individual’s freedom. The technology uses protocols such as Monero, Dero, or Haven that have directly linked privacy into blockchain networks, thereby making information inaccessible even to their core teams.
In addition to this, assuming that a part of Haven and Monero’s technology allows users to choose who can view their transactions, it makes it possible to block unwanted interference but would still require sharing information with law enforcement. So, how is this different?
The previous setup had transparency forced on individuals through blockchains but now, the power over one’s privacy and to make a rightful choice is given to the user.
In Conclusion
It is important to note that privacy erosion is not something that users have committed or not committed, but instead, it is committed to them. It came as a shock to discover that a giant tech such as Facebook was accumulating and selling data off to one of the highest bidders, or the National Security Agency was keeping records of metadata for years.
However, now people can choose what to do about their private information that determines their future. Privacy is not about hiding. It is about empowerment or control of whether or not to reveal information and to share with those who WE find trustworthy and reliable. It is an essential right of every human, driving other rights that we are all entitled to.