Do you want privacy? Don’t use Blockchain yet

A blockchain is just a ledger.

My bank also keeps a ledger of account balances and transactions.

But unlike the Bitcoin and Ethereum blockchains, my view of that bank ledger is only limited to information that pertains to me. Checking my bank accounts only shows me my balances, not how much money my neighbor has in this bank, or my boss has in his savings account, or some random stranger’s balance. With the non-crypto financial system today, there is an implicitly understood 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’s also arguably the most invasive technology we’ve ever created from a user-privacy standpoint.

We are definitely still early days

These are still early days in blockchain, which often invite comparisons to the early eras of the internet.

The early web was useless for transactions at all because there was no end-to-end encryption protecting consumer payment information as it passed between HTTP servers. This made it vulnerable to man-in-the-middle attacks where a snooping hacker could easily steal everyone’s credit card information.

Netscape, the first web browser, played a crucial role in solving this problem by creating the Secure Sockets Layer (SSL) protocol, which encrypts traffic between parties over the web.

Today, almost all websites use 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 satisfied with the primarily speculative use cases that dominate Web3 today? Or do we think that Web3 can actually reshape not just economics, 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 be actually useful, blockchain needs an equivalent of the SSL innovation that brought Web2 out of its essentially useless, lack-of-privacy era.

Zero-knowledge cryptography, and the protocols that integrate it, are the best chance this industry has to have a scalable, secure and compliant infrastructure.

By functionally encrypting the blockchain ledger and allowing users to prove the facts of their data using zero-knowledge proofs, we can protect sensitive user data while ensuring regulatory compliance.

Zero-knowledge proof opens up a whole new design space and exponentially increases the available market for blockchain-related products. By integrating this technology, next-generation blockchains can provide users with the privacy they are accustomed to, and often entitled to, while improving compliance.

These are the “use cases” that blockchain skeptics have long been asking for.

Alex Pruden is CEO of Aleo, where he leads outreach, operations and strategy among other departments. Before joining Aleo, Alex was an investment partner in the Andreessen Horowitz team where he specialized in cryptocurrencies, decentralized protocols and blockchain technology. Alex also served 9 years in the US Army as an infantry and special forces officer and developed an interest in blockchain and cryptocurrency due to his work with Syrian refugees in 2015-2016. He earned a bachelor’s degree from the US Military Academy at West Point and an MBA from Stanford University.

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