The difference between pseudonymity or anonymity: Zero is better 

BlockchainA new technology is emerging that will fundamentally change how we communicate, interact, transact and transact. This technology is unlike anything anyone had imagined before Satoshi’s seminal paper 14-years ago.

Distributed blockchain architecture is a new way to store data. Transparency and immutability are at the heart of distributed blockchain architecture, unlocking new functionalities and potential. These attributes make blockchain ideal for use cases such as international financial settlement, nonfungible coins, and supply chain management. There are many mainstream uses for blockchain. Web3You will have to address the widest possible user base. A data layer that requires such transparency is not a good idea. 

Blockchain isn’t as private as you may think

It could be because of the captivating and always-present stories of cryptocurrencyPeople mistakenly believe that blockchains are more private than their real purpose. If blockchains were truly anonymous, they would hide user identities and actions to prevent them from being linked to specific people. But that is not what most blockchains offer.

Blockchains provide pseudonymity instead of anonymity. You can use a fake name or persona to hide one’s true identity to be pseudonymous. For example, Alexander Hamilton, James Madison and John Jay wrote under the pseudonym “Publius” to promote the United States Constitution. 

Similarly, blockchain-based applications don’t require users to share personal identifiers like name, social security number, etc. Although this can seem like anonymity, it is actually almost the exact opposite. Instead of anonymity, transactions on the blockchain are identified by crypto wallet addresses. Each transaction is personalized by each transaction it attaches to. In short, anyone who transacts with a person’s wallet on a public blockchain can immediately access every action that wallet’s owner has ever taken for as long as that chain exists. 

Even in the digital age, transactions shouldn’t be made public.

We are increasingly living our lives online and most people have accepted the fact that we will need to give up some privacy in order to be able to take part in the digital world. Whether it’s our phones tracking and recording our real-time locations in exchange for navigation, search engines maintaining a history of our queries in exchange for convenient access to information, or email services parsing our messages to offer us more relevant advertising, consumers increasingly understand that these “free” services are rendered at the cost of their data.

There are still instances where privacy is essential. For example, revealing our medical data — especially in a way that is permanently and publicly viewable — would still be unacceptable to most of us. 

Web3’s data layer is transparent, and traditional blockchains can be used to make Web3 more transparent. With blockchain-based applications, it’s not only your ISP or search engine that has visibility into what you’re doing. It’s everyone. This is a major departure from the current web architecture. While you don’t have control over what data you disclose, at least you only reveal it to one counterparty.

Public blockchains make your data visible to anyone. This might make sense in some cases like supply-chain auditability and contact tracing. However, this is a prohibitive price for users who need to keep some confidentiality. 

Additionally, as Web3 utilities become easier to use and more interconnected, pseudonymity is likely to be less effective. The more information associated to a wallet address, it becomes more susceptible to being exposed. Users and institutions will need to have some privacy in order to use decentralized blockchain-based solutions for their main purposes. Privacy is not a matter of philosophy but security. Pseudonymy is insufficient protection for institutions that keep privileged information. 

Proof is possible with zero-knowledge.

A new technology, zero-knowledgeproofs, offers a solution. Zero-technology is a technology that allows people to prove the truth of an asserted statement without divulging any additional information. This is analogous to someone proving they are old enough to buy a beer without having to reveal all the other irrelevant personal information on their driver’s license. It allows individuals to only reveal the information they need. 

Public blockchains can be made flexible and compliant by applying zero-knowledge. These blockchains can be combined with zero-knowledge technologies to enable self-sovereign ID. For example, someone could prove that they have met a medical requirement, received a degree, or other relevant information. The self-sovereign identification could allow for more secure forms secure digital voting. This would only reveal the verified candidate selection, but keep the anonymity and identity of the individual voters. 

The zero-knowledge tech allows for the programming of blockchains and gives users the ability to own and secure the data they most value. This technology is crucial for the viability and growth of the Web 3 sector as well as the wider web. 

Alex Pruden is chief operating officer of Attainment. Aleo.