blockworks.co
A blockchain is just a ledger.
My bank also maintains a ledger of account balances and transactions.
However, unlike the Bitcoin and Ethereum blockchains, my view of that bank ledger is limited only to information that pertains to me. Checking my bank accounts shows me only my balances, not how much money my neighbor has at this bank, or my boss has in his savings account, or any random stranger’s balance. With the non-crypto financial system today, there is an implicitly implied level of privacy.
But this is different from how today’s public blockchains work.
As innovative as blockchain’s concept of “programmable money” is, it is also arguably the most invasive technology we’ve ever created from a user-privacy standpoint.
We’re definitely still early
These are still early days in blockchain, which often invites comparisons to the early eras of the internet.
The early web was unusable for transacting at all because there was no end-to-end encryption protecting consumer payment information as it transited between HTTP servers. This left it vulnerable to “man-in-the-middle” attacks in which a snooping hacker could easily steal everyone’s credit card details.
Netscape, the first web browser, played a crucial role in solving that problem by creating the Secure Sockets Layer (SSL) protocol, which encrypts traffic between parties over the web.
Today, almost every website uses these encryption protocols by default, as do many popular messaging services.
Crypto has come a long way from the cypherpunk days of Bitcoin, and an even longer way from the days when sending transactions via the early web left you vulnerable to credit card fraud.
But are we content with the primarily speculative use cases that dominate Web3 today? Or do we believe that Web3 can actually reshape not only finance, but the way we interact online?
If we accept the premise that blockchain is a privacy-invasive technology at its core, then it’s clear that to become actually useful, blockchain needs an equivalent to the SSL innovation that brought Web2 out of its essentially unusable, lack-of-privacy era.
Zero-knowledge cryptography, and the protocols integrating it, is the best chance this industry has to have a scalable, secure, and compliant infrastructure.
By functionally encrypting the blockchain ledgers and allowing users to prove facts about their data using zero-knowledge proofs, we can protect sensitive user data while at the same time ensuring regulatory compliance.
Zero-knowledge proofs open up an entirely new design space and exponentially increase the available market of blockchain-related products. By integrating this technology, next-generation blockchains can afford users the privacy they are accustomed to, and often legally entitled to, while enhancing regulatory compliance.
These are the “use cases” that blockchain skeptics have long been demanding.