Ethereum introduced smart contracts to the world and spurred a cambric explosion of innovation, including Defi, NFTS, DAOS and a universe of DAPPS. On July 30, the network hits its 10 -year anniversary.
The last decade of the ecosystem focused on proving Ethereum’s functionality and capabilities as well as improving efficiency through upgrades such as the merger that marked the transition from Proof-of-Work to Proof-of-Stake. The next era requires a pivot to match the more mature ecosystem that it now supports – one that includes not only web3 native but financial institutions, governments, businesses and people who do not know what “yield agriculture” is, but who may want to get a loan for their house with crypto security.
In the midst of rising government and institutional commitment, the hope that crypto will help to create a “free and open society”, is an ideal that was originally expressed in a Cypherpunk manifesto, sometimes lost. In order for Ethereum to do well with the original promise, privacy must be a fundamental element of its future.
Privacy is identity
Some degree of privacy is important for financial security and freedom. You do not want to reveal your net worth to the cashier every time you buy a latte or a slice of pizza, but it is essential how crypto has worked in the last decade – with the radical transparency of unchanging headbooks that record any transaction in public.
This level of transparency not only puts people at risk of phishing and other attacks, but it also hinders the involvement of institutions that do not want to give their competitors an advantage in revealing their activity. While it is possible to preserve pseudonymity by never interacting with a centralized platform, this is not convenient for interactions affecting the real world.
People and businesses must be able to interact with governments and knock through ID-connected accounts, and the key to enabling these types of interactions-other to put personal information at risk of theft and abuse-are programmable privacy.
The solution is ZKP-driven technology
The solution is already here: Zero Knowledge Proof (ZKP) -driven smart contracts give users control over what information to share and with whom. With the programmable privacy activated by ZKPs integrated in Ethereum at a basic level, a world of applications is not only feasible but convenient.
Products and services must comply with the regulatory requirements of each jurisdiction where they operate. This includes collection of customer information in accordance with KYC guidelines, counteracting the terrorist fight (CFT) and AML LOVE. Typical KYC processes involve sharing a form of ID, such as a passport or driver’s license, along with personally identifying information (PII) as name, date of birth and address.
If they are caught by bad actors, this type of information can be used to target people in phishing fraud and other types of attacks (see recent violation of coinbase data). Instead of demanding that people reveal their PII and make themselves and their data vulnerable to attacks and theft, ZKP-driven solutions allow people to prove that they do not operate out of sanctioned countries and to prove justification to participate, all without giving the platform their data and contributing to potential honey pots.
The opportunities that ZKPs have activated also go far beyond compliance. AirDrops is currently suffering from Sybil attacks, where AI -Bots beat real human participants to give certain participants a great advantage. The same question applies to decentralized management. Decision making in a DAO cannot be really fair and free unless it can be proved that the right number of votes goes to the right number of people – not bots. ZKPS offers a solution with “Proof of Humanity” through data understanding tools such as Zkpassport, Zkemail and Zktls.
Digital payments must provide the same privacy as cash. Payments in dollars, euros and other sovereign currencies via stableecoins are another important factor in enabling mass uptake of defi applications, but this will never take a lot of masses without privacy guarantees. The same applies to decentralized priority loans, loans and essentially any kind of legal contract that everyone requires IDs to carry out.
There are many other applications that are made possible with privacy as a core tenant of the Ethereum ecosystem. These include evidence of the authenticity of product or restaurant reviews that enable safe digital voting, decentralized escrow services, carbon development tracking, evidence of developer status on GitHub anonymously and verification of employment skills-all together performed on a safe, privacy that does not involve the sharing of sensitive PII to centralized providers.
Creating a culture that requires privacy
Although technology exists to implement ZKP solutions today, challenges must be overcome before privacy is reflected extensively as a core value throughout the Ethereum ecosystem. Technical challenges with the implementation of the ZKP-driven tech include the greater cost of ZKP transactions. Building ZKP-focused applications is also more complicated, which is a learning curve for builders. These are all looser problems.
Other challenges are cultural: creating universal buy-in from the spectrum of participants in the value of privacy and coordinating the implementation of solutions across the tech stack, from protocol to wallet. There are also the misleading perceptions of Privacy’s associations with illegal activity.
Changing technology is ultimately easier than changing minds, but Kernemetos of crypto is, after all, a philosophical – a technology that supports a belief in freedom and privacy of individuals and units. If we look back on another decade with Ethereum for another 10 years and can celebrate its role in enabling greater financial freedom, a emphasis on privacy will be key.
