JAKARTA - Blockchain, the technology that forms the basis of crypto and Web3, is often praised for providing transparency and decentralization. However, is transparency always beneficial for users? Or instead become a new means of supervision?
Blockchain transparency means that all transactions and data that occur on blockchain networks can be seen by anyone. This is actually not an essential feature to maintain the security and validity of on-chain transactions. This is more of a weakness caused by a public and irreversible blockchain design.
This transparency forces Web3 users, namely users who access the internet through decentralized protocols, to expose their most sensitive financial data to the public. This data includes the number, type, and transaction time, assets owned, wallet addresses, and others.
This data is certainly very valuable for those who want to use it for various purposes, both legal and illegal. For example, marketers, sellers, regulators, law enforcers, hackers, thieves, and others.
Several blockchain marketing tools have emerged in recent years, allowing these parties to use freely flowing on-chain data to gain insight into Web3 users' behavior, preferences, and trends. These tools can also be used to create user profiles, target ads, offer products or services, and others.
In other words, blockchain transparency opens the door to the usual profile and supervision practices on Web2, namely the internet dominated by giant companies such as Google, Facebook, and Amazon. It's just that, this time, not only behavioral data is analyzed, but also the most sensitive financial data.
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Web3 will never be mainstream unless we manage to solve this transparency problem. Users won't want to switch to Web3 if they feel their privacy and security are in danger. They also won't want to use Web3 if they feel they don't have control of their own data.
Blockchain and Web3 should be an escape from centralized power, not a new means of surveillance. They should give users freedom and autonomy, not expose them and vulnerable.
For that, we need to find a solution that can balance transparency and privacy, between freedom and oversight, between decentralization and regulation. This solution should allow users to choose what data they want to share, when, and with whom.
As reported by Blockworks, one possible solution is to use encryption technology and zero-knowledge proof, which can prove a fact without revealing details. This technology can be used to verify identity, ownership, or transactions without having to expose personal data.
This technology can also be used to meet regulatory and verification requirements, which are increasingly important in line with the growth of the crypto and Web3 industries. Many countries have issued regulations to regulate this sector, such as KYC (Know Your Customer), AML (Anti-Money Laundering), and CFT (Comping the Financing of Terrorism).
With encryption technology and zero-knowledge proof, users can comply with these rules without having to sacrifice their privacy and security. They can also take advantage of their on-chain data for other purposes, such as accessing financial services, obtaining credit, or participating in the community.
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