Has Crypto Regressed From The Cypherpunk Vision Of Privacy?
In many ways, cryptocurrency is the embodiment of the Cypherpunk vision. However, the focus on privacy has been lost in recent years.
A group of cryptography experts and libertarians called the Cypherpunks played a critical role in the development of cryptocurrency and blockchain technology. Formed in the late 1980s and early 1990s, they were driven by a shared vision of using cryptography to protect privacy, resist censorship, and promote individual freedom in a digital age.
Alongside cryptocurrencies, their movement inspired the development of other privacy-enhancing technologies, such as encrypted messaging apps, privacy-focused browsers and virtual private networks (VPNs).
There is growing concern about digital privacy
Various surveys have shown that audiences are increasingly in tune with their vision. In 2021, the Edelman Trust Barometer survey found that 74% of people worldwide believe their personal data is less secure than five years ago, and 66% are more concerned about their privacy than they were 12 months ago. In the same year, PWC’s Global Data Protection Study found that 72% of consumers are more concerned about how companies use their data than they were a year earlier. 81% said they would stop doing business with a company that misused their personal data.
And yet, compared to the early crypto community—which was populated by privacy radicals and broad-minded libertarians—today’s crypto users are in many ways less skeptical. As cryptocurrency adoption has increased, it has become populated with speculators and those confused by the performance of the markets. Perhaps this move towards transparency is not very surprising. Blockchain, after all, has transparency at the heart of the technology.
For Grace Rachmany, co-founder of PricelessDAO, privacy has always been at the heart of the crypto ecosystem. It comes as a package along with freedom and decentralization. “While the bulk of the crypto community is drawn in by the financial gains, there is and always has been a core of people who are concerned about these issues,” she says.
“Projects such as disco.xyz, Starkware and tomi.com work with solutions in privacy and freedom. They’re not the big money makers, and you won’t find much mainstream coverage for them, but people concerned about privacy aren’t always looking for mainstream coverage. Most of the crypto community has lost its way when it comes to privacy, both when it comes to transferring funds and when it comes to data protection. You still hear crypto advocates talking about how people will be able to pay for their data while also talking about soul-bound tokens (SBTs) that show you someone’s reputation.”
(A soul-bound token is a type of NFT that is tied to a specific individual and cannot be transferred to another person or traded on a marketplace. They are often used to moderate the disadvantages of crypto-anonymity by allowing individuals to build trust and reputation.)
The emergence of self-sovereign identities
Self-sovereign identity (SSI) is a newer concept that builds on the cypherpunk vision of privacy and anti-censorship. SSI is a decentralized approach to identity management where individuals have control over their own personal data and can choose to share it with others on their own terms. With SSI, individuals have full ownership of their data and can use cryptographic technologies to secure, store and share personal information. This approach gives individuals more control over their personal information and reduces the power of intermediaries to control access to it.
Dr. Phil Windley, a computer scientist and executive director of the Sovrin Foundation, has called SSI “the key to unlocking the potential of blockchain technology.”
“The entire industry has ignored two decades of work in the self-sovereign identity community and is mostly trying to justify the openness of everything,” Rachmany continues. “Patters like ZkSnarks and other privacy teams are a start, but the industry has never gotten down to the basic need for self-sovereign identity. What we saw with Tornado money is that the Ethereum community is swimming in so much money that they will largely ignore the fact that the network is no longer censorship-proof.”
“Crypto should work closely with the self-sovereign identity community to create identity solutions and privacy-preserving wallets. Right now, too much of the Verifiable Credential (VC) work is based on government and corporate authorities instead of decentralized identities. There is a ton of work to do to create institutions or decentralized capabilities that people can trust.”
Privacy is less important to some
The crypto community has never been a homogenous bloc. While hardcore cypherpunk types have always wanted to maintain a private sphere away from the prying eyes of the authorities, for many privacy was not part of the original technology’s value proposition and should be considered separately. “The ethos of crypto has been to have an accessible and trustless, open financial system,” said Dhruv Patel, co-founder and CEO of Arch Lending. “Privacy is a separate piece that is added on top. Different crypto use cases require/want varying levels of privacy, so I don’t think there is a one-size-fits-all solution when it comes to crypto privacy.”
“I think that different use cases will have different types of privacy. We see this in DeFi protocols with permissioned pools where users have to go through a Know Your Customer (KYC) process in order to transact with the protocol. An important action point is in advocacy and working with the government to educate and improve privacy practices in crypto. Without government buy-in, situations like what happened in Dubai will continue to occur.”
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