Every day, there are new innovations in the crypto space. Blockchain technology is constantly innovating, whether through decentralized applications or new methods to use nonfungible tokens within decentralized finance. Only thing missing is widespread adoption. Widespread adoption. The very public nature blockchain is one thing that holds this back. DeFi’s current operation lacks any meaningful privacy. To encourage widespread adoption of blockchain technology by individuals, governments, and businesses, all parties involved in transactions with blockchain should expect consistent, regular privacy.
First, let’s define privacy. Privacy does not refer to pseudonymity as cryptocurrency claims. Meaningful privacy is the inability to trace a person’s financial accounts and protects an individual’s wealth. This means that trade secrets can be protected by businesses. Privacy is the concept that a government’s finances are only its business, not those of its neighbors.
Related: Crypto doesn’t care who you are. Here’s why it’s a good thing.
Cryptocurrency can be described as a currency. It will be treated as currency regardless of how it is regulated, thanks to the Canadian trucker convoy. It is a financial asset and the current knowledge of financial privacy supports privacy across DeFi. Every internet entity within the EU must adhere to the General Data Protection Regulation. Fiat banks also have privacy protocols. Many of these are subject to human error. Privacy is a natural thing, and is often overlooked until it is removed.
Crypto transactions between corporate entities are sensitive.
It is not difficult to see that large financial institutions and corporations are turning to crypto. News has even reached the point that Commerzbank, a giant in traditional banking, has applied for crypto custody business licenses. Companies are beginning to recognize the advantages of crypto in solving a problem they have had for decades: instantaneous cross border payments. The lack of privacy in these transactions will hinder wider adoption. Until the privacy of institutional transactions can be secured, it will still remain a niche offering.
Trade secrets are protected by companies, regardless of whether they relate to finance or payments to contractors and employees. Hedge funds will reap the benefits of blockchain technology by being able to track their financial movements. Private businesses cannot protect themselves if every asset movement is tracked. This will reduce competition. Privacy for business is as reasonable as privacy for individuals. Crypto will see wider adoption and be hampered every step of its journey until it is resolved.
Similar: Privacy loss: Why we must fight to decentralize the future
Regulation does not require privacy
It is possible to have privacy in DeFi that is both secure and responsible. As frustrating as regulations can be for the Wild West that is blockchain projects, they can also help to facilitate growth. People don’t trust anything they don’t understand. Regulations signal that those in charge of the government know what’s going on and what needs to happen. This is a positive thing. The government can and should regulate crypto exchanges and fiat on- or off-ramps. Individuals who are subject to local and regional laws, as well as federal laws, will be subject to these laws regardless of where they live. Privacy does not negate or prevent regulation. Privacy on social networks is codified by governments. Why should financial networks be any different?
DeFi will be more secure once it can be used privately. This is the bottom line. People don’t trust anything they don’t understand so we need to introduce them using the expectation paradigm that is associated with other financial ventures. We can also invite people to the space by separating the privacy argument from the discussion about anonymity. This will solve the problem that new users face when they mistakenly believe crypto is a convenient way to facilitate illegal transactions. DeFi is still a risky venture, for both businesses and private parties, until there is a reasonable expectation that privacy will be maintained.
This article is not intended to provide investment advice. Every trade and investment involves risk. Readers should do their research before making any decision.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Railgun is a decentralized smart-contract project that provides privacy and integrates seamlessly with DeFi. Chief scientist is Kieran Mesquita His extensive experience in the development of technologies for blockchain and DeFi projects is a testament to his expertise. He was an early adopter and pioneer of Bitcoin mining software.