Public Blockchains were always well known for their virtue of transperancy
When I stepped into the world of Web3 in 2019, one of the main highlighted characteristics of Blockchain was its transperancy. The Web3 landscape was only beginning to emerge and form as Blockchain-powered applications were getting created at a nascent stage. At that stage, it was mostly the crypto-enthusiasts who were onboarding to use these Dex protocols.
It was understood that these dapp protocols and Blockchain technology on which they were built needed to evole further for their widespread adoption and large-scale usage.
Those days we crypto enthusiasts were just excited trying out dapps built harnessing the power of Blockchain technology that the transparent nature of public Blockchains did not concern us.
Public Blockchains have their benefits but have a huge limitation of not being able to provide their users with data Confidentiality
Further advanced developments in both Blockchain Technology and dapp platforms were required for them to be geared for widespread adoption. One of the features that needed to be incorporated into Blockchains was the functionality that would enable these Web3 systems to keep user transaction details confidential.
The transparent nature of Blockchains does have its benefits. For instance, it can be leveraged to set up a mechanism that enables a consumer to verify the source of any produce they purchase from a store. This produce could be meat, milk, vegetables, fruits, mushrooms etc.
A consumer can just scan the QR code on the item and verify for themselves which facility/ farm the produce was grown/produced etc. This way consumers can ascertain if the produce was procured from an Organic, chemical-free and hygienic facility.
Similarly, public Blockchains due to their transperancy can be leveraged to create platforms for Governments where public finance and other details can be disclosed to the public transparently.
However, users of Web3 protocols require confidentiality, as we all have the right to financial and data privacy.
Blockchains being public by default decentralized systems cannot provide users confidentiality with all of the users' transaction details recorded on Public Blockchains being visible to all. This super transparent characteristic of Blockchain impedes its widespread adoption.
Security risk for Web3 users due to public visibility of all their financial details
Users cannot be comfortable using DEFI platforms built on public Blockchains that are not equipped to keep their details private.
All the assets held in users' Web3 Wallets can be queried by inputting the corresponding wallet address into the Blockchain Explorer.
All users' transaction activity can be also known - from assets held, sent, received, swapped, deposited in the Money Market as collateral for borrowing funds etc. This is creepy, as everything can be tracked here.
Although Web3 indeed provides users pseudonymity as their real world identity is not shown that won't stop greedy hackers from hacking users crypto account.
Also, a smart hacker may even discover a crypto user's real identity, if they get to know the user's IP address and other metadata(location/region for instance) which is easy for proficient hackers to extract.
This can be dangerous if a gang teams up to track that unfortunate user and steal crypto from him through kidnapping and blackmail.
There have been unfortunate and disturbing instances of crypto holders kidnapped and coerced to transfer their crypto into accounts of these evil thieves, won't go into that here.
Read about it yourself -: 4 suspects forced a Bitcoiner to transfer BTC before killing him, police say
Therefore, for crypto users privacy provides safety for them and therefore it is required.
Enterprises would not take to Web3 if their business transaction details are not kept private
Corporates and business enterprises, value privacy and would not use these Web3 platforms on public blockchains if their transaction details are not confidential.
For ex, No company having competitors would venture to take loans from a DEFI platform, if their collateral and liquidity threshold details were visible to their competitors.
Web3's advantage over Web2 can only benefit users when their data can be kept private!
Web3 provides users ownership and control over their data & wealth but it is meaningless without privacy.
The problem with Web2 is centralization, that a Central entity owns and holds control over our data which they can sell to third parties.
In the context of finance and money, banks have control over our deposits. These banks are subordinate to the powerful, say Government forces. So, a Government can have a journalist's account frozen, if they want to harass a journalist known to report uncomfortable truths about the Government's policies or measures.
This is just an example.
However, despite Web2's centralization, a user's details are not publically visible to everyone.
One's deposits, bank transactions are known only to the bank employees and not to the public.
It is another matter that powerful forces can get access to this confidencial data but Web2 is not transperant and this provides users with the confidentiality required for them to feel secure.
Web2 does not provide users complete ownership over their financial assets that Web3 does. As in Web3, users have control over their assets if it's self custodied, that is if it's stored in self-custody wallets rather than CEXs.
However, Web3 is super transparent with those assets that are both owned and controlled by the users being visible to the public. This financial asset ownership power of a Web3 user is meaningless without financial privacy.
A Web2 user would want Web3 to atleast offer them the kind of privacy available to them in Web2. It is only then that users in large-scale would start using and supporting Web3 applications.
Web3 now gets the ability to keep users' data private offering them Confidentiality
Well, let’s fast forward to the current time, there have been developments that have geared Blockchains for mass adoption. Now, it’s even possible for Public Blockchains to keep users' data private. The technology to do this is already developed and well-proven. I am talking about Secret Network, a privacy-preserving Blockchain.
*** At first, Secret Network powered dapp protocols that were built on it with privacy-preserving computation. Now, Secret Network can power Web3 protocols on public Blockchains with its privacy-preserving computation. ***
The TLDR here is that with Secret Network able to extend its Decentralised Confidential Computing operations(DeCC) onto 20 plus public Blockchains; dapp protocols that are created in popular Public Blockchains like Ethereum, Binance, Polygon, Scroll, Base etc will be able to keep user data private. This makes it possible for users of Web3 to have confidentiality that was unavailable to them before.
So details of users' asset holdings in wallets, their on-chain transaction and activity details can be hidden from the public which is a relief. It is now possible for the Web3 advantage of empowering users with ownership and control over their data and wealth to play out in full swing.
Conclusion
I have outlined limited reasons on why privacy is required for users in Web3, but practically there are a lot more.
Learn more about Secret Network and its privacy-preserving operational details from the website -:
https://scrt.network/about/about-secret-network/
Thank you for reading! Don’t forget to upvote this article if you enjoyed reading it!