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Battle for Financial Privacy in Our Blockchain World

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by Harlequin · 8 min read
Battle for Financial Privacy in Our Blockchain World
Photo: Unsplash

To safely enjoy the endless opportunities that blockchain provides us, we need to first understand what’s at stake, what our rights are, and what solutions we can employ to protect ourselves. 

Web 3.0, digital currencies, virtual shopping, gaming – we are rocketing towards the “everything digital” world at a faster rate than ever. It should come as no surprise that businesses are trying to gather as much data as possible to provide personalized experiences and use this data for their own means.

While we do have some data protection policies in some countries (like in the EU), most countries lack proper governance in this matter. Unfortunately, policy in place or not, there is always a way for businesses to get out of privacy protection. We further fuel these privacy violation business practices with our lack of understanding and our constant search for convenience. As a quick example, how many times do you just accept all cookies instead of disabling them or selectively choosing which ones to allow?

This is even more applicable in the context of blockchains. The ugly reality is that most blockchain transactions are by no means “anonymous”.

As we rocket forward, how can you protect your financial privacy and ensure people or government agencies don’t overstep their boundaries? The answer is easier than you think.

Where We Are, Where We’re Going: Accelerating Blockchain Technology

The blockchain space is still being developed, and it can be challenging for people to fully comprehend it and navigate safely. You have innovators, established companies, and eager governments all vying to establish their hold on the industry.

To make matters worse, there is even less policy protection in the blockchain space than there is in our current Web 2.0 internet.

When you transact through “secure” blockchain technologies, you still give away a lot of information. While you might not give out your name or contact information like you do when you browse online, when you transact, anyone can see your public wallet address, or where you store your cryptocurrency.

With this information, they can view your transactions (emphasis: in real-time), balances, what addresses you’re sending to or receiving from, and more. And for those who know how, discovering your personal credentials (name, content information, banking info, etc.) is but a step away.

The damage we’re starting to realize is far more than we think.

The Price We Pay

Giving up our data is the price we pay for surfing online. Unfavorably, we realize the price we paid only after we have paid it.

To illustrate this better, let’s look at a quick example.

There is an ongoing debate about which is better for privacy protection: choosing to browse on mobile apps vs websites on your desktop. The truth is they both leak more of our Personal Identifiable Information (PII) than we would like to share, the two only differing slightly by the type of information they give out.

Both mediums can leak your locations, names, email and device data, phone number, other apps you’re using and much more. Companies not only collect this information but can also cross-reference it with other companies who are collecting their own data on you. The result is a deep analysis of who you are, where you are going, what you buy, who your friends are, your interests, and so on.

This information is used for targeted ads, to sell you specific products, and sometimes for more nefarious purposes.

In the blockchain world, the harm of such practices can be far more grave.

For example, let’s assume you are a tea shop owner who transacts through blockchains. Your suppliers can gather information on your transactions. When they learn about your price sensitivity, you can lose your bargaining power, or your creditors could demand higher interest by understanding that your business is in dire need of supplies.

When all your digital transactions are transparent, when everyone can view information related to your sales, salaries, margins, and so on – you lose your competitive advantage. It’s worse when this information is on a personal level, as it threatens your ability to transact openly and freely in the marketplace.

The challenge is most of us don’t even realize it’s happening.

Shedding Light on Blockchain Transactions

Blockchains are permanent records of all transactions that have ever occurred on that chain. Yes, the very first transaction ever recorded on any blockchain can easily be seen with on-chain analysis.

Imagine a scenario where you pay your wine merchant through cryptocurrencies. Your wine merchant will most probably use the same address to collect payment from all customers. Their address, one that is receiving 1000s of transactions, is a well-known address now.

Using your merchant’s address and a bit of tracing technology, your address (and potentially more) would be findable. It wouldn’t matter if someone wanted to find your address three or five years from now either. Blockchain stores your information forever, allowing companies, scammers, or regulators to extract the information they want at the time they want.

There are countless examples of times and places where you would want your information completely anonymous or removed altogether. Health care records, certain purchasing behaviour, and financial records all come to mind.

Blockchain technology, and most of the dApps or chains that use the technology, haven’t taken these types of considerations seriously. As a result, most of them carry the problems of the past forward into the future.

Knowing Our Rights Help Us Navigate Effectively

Currently, we are in this cat and mouse chase in the crypto space. We have crypto companies and dApps rushing forward creating a bright future, often without the insight or dedicated thought to privacy in their ecosystems.

Regulators are struggling to grasp the full implications and consequences of the technology on industry, and are leaning towards a heavy-handed approach to the entire ecosystem. They too, often forgo the discussion of privacy, understanding that permanent records and data storage would be a boon for regulator insight.

However, when we know our rights, we can navigate the space in a better way. Privacy is a fundamental right. It is written in the human rights code, signed by over 140 countries. We need to be aware of this.

Even when we expose ourselves on social media, and the internet in general, we aim to keep our finances private. It is one of our most intimate pieces of information. We can and should protect the privacy of our finances.

Yet when it comes to blockchain transactions we don’t give it a second thought, assuming that privacy and protection are built into the technology. Unfortunately it’s not.

Yes, some blockchains are private finance (PriFi) focused. But you need to educate yourself about the right networks, networks like Haven, which is home to the world’s only private stable coin, Dero, or Monero.

Understanding why and how these networks go above and beyond when it comes to encryption, transaction protection, and privacy is a first step to navigating privately. There are fantastic solutions that exist now.

Battle for Financial Privacy in Our Blockchain World

Awareness Create Convenience

Now you already know about many privacy techniques that “protect” you from prying eyes.

Perhaps you have multiple wallets. Or you use a tumblers or mixer. This is a fantastic start to protecting your financial data. However, despite the fact that these techniques are time-consuming and more expensive, even then, these techniques can only go so far.

As long as the blockchain remains public, someone can always find a way around it. We are in a very fast-evolving environment. It is not a matter of if. It is a matter of when. When will a workaround come into place against these temporary techniques? One year? Three years? Five years out? When it does happen, your data will still be vulnerable, exposed for those who want to find it.

However when PriFi is built into the blockchain, then there is no need for difficult workarounds to protect your transactions. You can transact without worry on Haven, knowing that their ring-signatures and military grade encryption technology mask your address and the transactions that may expose your financial records.

When PriFi is built into the system, the solutions are seamless and convenient.

Privacy Is a False Promise But Doesn’t Have to Be

In our traditional finance space, it is upon the regulators and policymakers to protect our privacy. Whether all merchants, institutions, banks comply with it is a debate for another time.

In the crypto space, the ownership is on us. The responsibility is ours.

To safely enjoy the endless opportunities that blockchain provides us, we need to first understand what’s at stake, what our rights are, and what solutions we can employ to protect ourselves.

There are strong PriFi tools out there. They are also constantly evolving technologies and solutions. Some like Haven or Monero not only safeguard your privacy but also provide volatility stability and information control.

Educating ourselves about these strong technologies can narrow the gap between our online world and security, and can help you navigate into this accelerating blockchain world.

Disclaimer: The opinions and views expressed in this article are solely those of the author and are not necessarily shared by Coinspeaker. We recommend you conduct the necessary research on your own before any investment and trading move.

Guest Posts
Julia Sakovich
Author: Harlequin

Julia is an experienced content writer. She works with various topics and business domains, including but not limited to blockchain, cryptocurrencies, AI, and software development. Her articles are regularly featured on reputable news websites and IT business portals. Currently, Julia is the Editor-in-Chief at Coinspeaker.

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