Locating transaction privacy
In the crypto space, we always advocate for the transparency benefits that blockchain enables, while we often neglect the other side of the coin. Public blockchains lack the privacy that people take for granted in real life. For example, when paying or wiring money via traditional rails, the sender can’t see the receiving end’s transaction history, and vice versa. On the blockchain, everything is publicly available by default, and companies like Arkstream and Chainalysis are instrumental in monitoring on-chain activities. If blockchains continue to lack privacy, institutional adoption will be tough as it will leave their proprietary data vulnerable to exposure. It is, therefore, not surprising that pioneers like Zcash and Monero, which enable anonymous payments and transactions, have quickly found adoption. However, this first wave came to an abrupt end in August 2022. The OFAC blacklisted the popular transaction privacy protocol Tornado Cash, sending the whole on-chain privacy market in agony.
But now, there are promising signs of a second wave. Recently, we have seen several protocols and innovative approaches tackling application privacy that could win over both authorities and users.