We all know the problem with a public ledger. Most of us living inside the crypto ecosystem can’t actually bring ourselves to say that.
But find a normie on the street, someone with some knowledge of blockchain (good luck with that) and they’ll tell you right away. It’s public. A public ledger is public.
We’ve spent nearly two decades trying to sell pork pies to vegans and trumpeting “publicity” as a virtue when people actually crave privacy.
Out there in the real world, norms don’t see radical transparency. Many perceive insanity. They see data breaches. They have no doubt that sharing a permanent and immutable record of every transaction they’ve ever made is completely absurd.
You wouldn’t use a credit card if your neighbor could see every transaction you made. You wouldn’t want to run a business if your competitors could see exactly who your suppliers are and what you pay them.
To put it simply, on-chain is too public, off-chain is too private. There must be a balance. Some information must be published for audit and regulatory purposes. Some information must remain private to enable businesses to operate effectively.
Companies need to protect their proprietary movements from competitors while providing a “view key” to regulators or auditors. It is a balance between complying with the law and operating efficiently in the market.
There are some good reasons why institutional finance hasn’t fully embraced blockchain – why hedge funds, asset managers and corporate government bonds with billions to invest haven’t gone red. One of those reasons is that they understandably don’t want to divulge their proprietary strategy to the entire world and simply can’t do it. It would be like broadcasting their alpha for free.
The company’s reality check
Stablecoins promise speed and efficiency for B2B transactions. The cost is low, but the price is high. Privacy. A transparent ledger means that everyone—friends or foes, allies or rivals—can see a company’s business. Which supplier they use, the quantity of orders and the price per unit. There are no secrets; everything is on display and they are actually leaking their entire supply chain. Companies must find ways around the problem by improving privacy while remaining compliant.
What we need is the blockchain equivalent of the internet’s SSL moment. We didn’t get a functional web until encryption became a standard layer so we could send credit card information without the world seeing it.
From theory to practice
We are finally seeing this infrastructure move from white papers to the real world. For example, the Canton Network has had some success in bringing privacy to corporate finance, albeit in a permissive form. I have been involved in one of the most recent advances in privacy. It is the recently announced plan to launch strkBTC on Starknet. We’ve spent years treating Bitcoin like digital gold – a great store of value, but one that’s largely static and totally exposed if you try to use it in DeFi.
For the first time, you can have Bitcoin’s security with a “privacy layer” that protects your balances and counterparties from public view. It is the first proof that we can have an “active” Bitcoin that respects the commercial need for privacy, all with selective disclosure for reasonable risk management.
The way forward
One of the values for early crypto adopters was privacy, but that ambition will remain unfulfilled if we don’t build for the systemically important capital flows that move the world. Public blockchains will only scale if they can support private funding.
Through selective disclosure and protocol-level privacy, we’re not just adding a feature. We are finally building a system that the world can actually use. The technology is here – the remaining question is which networks will set the standard for the next era of global finance.
