I feel that at some point, we'll need to trade one for the other and I can see how that would not totally be a bad thing.
People always seek balance, but sometimes, you just need separately functioning solutions that serve different purposes.
The values of blockchain and decentralized money, through crypto, serve everyone at the fundamental level but I feel like it doesn't need to be “responsible” all the way up otherwise it risks getting over complicated and essentially giving room for compromises that defeats what the technology was intended to solve.
Sometimes I come across discussions on privacy tech within crypto and the general consensus is also that said tech enables criminals to carry out criminal activities even when that is untrue but what do we expect when most people are sheeps and effectively a means or channels that echoes what the system has engineered for the public to believe through media outlets.
It's not entirely their fault but this very reality is a reason to give some deep thoughts to what it means for crypto long-term.
Transparency and privacy, what matters most?
Privacy makes the most sense and is generally more effective when the chain is based on proof of work consensus algorithm.
When it comes to blockchains governed by stake, it becomes sort of a weakness for privacy of the same scale, as with projects like Monero, to exist.
Certainly, this belief is partly influenced by the fact that we lack proper risk and reward systems that makes even the lack of knowledge of stake distribution not a fear of a chain centralization.
So let's assume we've somehow figured it all out on how to have just the right amount of risks and rewards that even with zero knowledge on who holds what amount of stake, network participants still remain good and don't attempt to exploit or attack the network.
In such a scenario, there would be no need for transparency because the primary purpose was always about knowing what goes on by network participants to combat bad actions that could cost the blockchain its security and lack of censorship.
Now of course, this does not take away the fact that some bad people may use the chain to move money. The thing is, however, that a bad person moving money on a chain is not what anyone should really be worried about. Real world systems are still required for bad people to finalize trades.
Weapons, drugs or human trafficking — which are the most common cases, still need to be settled in the real world, so if the government cares so much about the people, they need to worry about providing the security to ensure that things like this don't wiggle their way through.
They should quit focusing on the money that moves and focus on the products or bodies that move.
That said, when it comes to general finance security, this is something the chain should not be responsible for. This is why in the beginning, I stated that decentralized money serves everyone but is not responsible all the way up.
What I meant by this is that as regular users, because everyone is just that at the end of the day, the blockchain gives you the freedom, privacy and power over your finances, anything above this is up to you, that's what self-custody is about, holding the keys to secure your wealth.
That said, when it comes to businesses, the same applies. If a business gets hacked, it is not a blockchain that needs to provide solutions to combat a hack either by tracking or retrieving funds, a business just simply needs to improve their security systems/measures.
The traditional finance system that claims to be “safe” still has a lot of illicit funds moving through them and many cases of hacks, we don't have to give blockchain networks shit over the same happening here, that's frankly not the job of a blockchain.
But of course, there's more to blockchains than money, so when we shift our attention towards things like file storage on-chain for social networks that enable publishing content onto a blockchain, here we have to rethink how much privacy should exist given the need for information to be public in solutions like this.
One solution I could think of is for such services to be on different layers from where monetarily transactions reside. Maybe an appchain or if possible, an L1 could be designed or optimized to handle different txs differently, essentially making it possible to have private transactions for money but maintain the ability to keep certain other data types posted to the chain, public.
At the end of the day, privacy is basic human rights and we shouldn't be bullied into giving up data we believe should not be public information. I expect a lot of push backs from governments over privacy blockchains and generally privacy tech, but I'm optimistic we'll come out of it winning.