Digital currency was thought to be the ultimate means of exchange since it provided users with anonymity and privacy in their transactions. In truth, it is a common misunderstanding that people have both fresh investors and high rollers.
Satoshi Nakamoto, ironically, incorporated transparency straight into blockchains, allowing anybody to examine transactions and more.
The number of surveillance tools on the Blockchain network is currently growing at an exponential rate, and the software is developed using artificial intelligence that runs through blockchain and gathers information about a crypto-wallet as well as coin movements, while also producing intricate transaction reports. The amount of money moved, what is moved, and where it is moved provide only a sliver of the picture. All relevant cryptocurrency actions are known once a user is linked to a crypto wallet and transaction history.
This type of software development allows regulatory bodies to trace funds from crypto exchanges, investors’ wallets, and hacks. However, like with all technologies, the potential and worth of any Blockchain exploitation is totally dependent on the entity and the final goal for which it is being used.
Initially, transparency was thought to be a benefit after Satoshi Nakamoto incorporated it into the blockchain network, and other developers continued to work on it while creating new decentralised crypto projects and Altcoins.
However, it is becoming increasingly clear that crypto has a transparency problem. And the decentralised system’s future could be altered as a result of the transparency issue.
Uncertainty in Crypto Technology Causes Regulators to Be Concerned
Any discussion of cryptocurrencies causes predictable shifts in political sentiment around the world. On the one side, there are countries like India, China, and now Russia that are attempting to impose crypto prohibitions. Direct adopters, on the other hand, such as El Salvador, are leading the way in crypto adoption by constantly legalising and purchasing Bitcoin and other major cryptocurrencies.
All of the remaining countries are essentially in the middle, while a number of other crypto-agnostic, crypto-curious, well-intentioned government agencies are exhibiting an interest in the regulation of this rapidly emerging business.
There is a major movement forming in order to over-regulate the crypto sector, which is unsure on how to proceed. Certain regulatory bodies have been attempting to push for aggressive data collecting, crypto regulation, and much more, whether it is due to excessive caution or simply a lack of understanding about how crypto works.
This, however, does not indicate that investors will have a wonderful time.
For example, the United States Treasury Department released Joe Biden’s administration’s revenue proposals for the fiscal year 2022 in May 2021, which included a requirement of reporting obligations, particularly on crypto transactions, to all personal and business accounts from financial institutions. Financial institutions would subsequently be required to keep track of any money transfers exceeding $600 into and out of personal and commercial accounts, including crypto transfers. This essentially gives the government access to all expenditure done by personal or commercial accounts over a certain dollar threshold.
Furthermore, despite the fact that such adjustments were implemented in October of last year, if firms use the blockchain network for their financial flows, the authorities would still want a report with complex details on the amount spent, delivered to whom, and through which medium, if bitcoin is moving.
In contrast to traditional banking systems, where all financial records are kept hidden from regulatory organisations, this data may be easily acquired on the blockchain network, which has open on-chain information and immutable records, and there is no option. In a word, regulatory agencies will not be allowed to access financial records.
This level of intrusion into user privacy is a significant step backward in terms of personal liberty and is associated with dictators and despots. The transparency on the blockchain, on the other hand, goes beyond these overzealous authorities whose ultimate goal is to extract information without the public’s knowledge. Transparency on Blockchain networks can be used for any purpose by anyone.
Everyone is exposed when there is transparency.
Corporations and governments aren’t the only ones attempting to delve deep into the Blockchain system in quest of information and data to use for their own reasons. According to Chainanalysis’ research from blockchain analytics, more than $7.7 billion will have been lost or stolen in bitcoin scams by the end of 2021. In comparison to 2020, this figure has increased by more than 80%.
Furthermore, the trend is accelerating.
The transparency of blockchain opens up a new route for criminals, con artists, and scammers to take advantage of. Furthermore, as criminals become more creative and sophisticated in their attacks, the blockchain network’s transparency problem will become more obvious as the rate of exploitation rises.
Corporations and IT behemoths are likewise looking forward to obtaining and utilising this data for their own benefit. Data is the new oil, according to a popular aphorism in the modern world, which helps to explain why huge corporations like Facebook, Amazon, and Google are making billions with their algorithms.
It is more tempting when financial data is openly available to the public. This is the cryptocurrency and Blockchain networks’ transparency issue, which can have negative consequences.
The Unfortunate Outcome
The terrible and unavoidable result of the crypto transparency problem is that the bulk of protocols and dApps in the industry have ignored the Blockchain problem, exposing massive amounts of user data and perhaps causing future harm. It’s worth noting that just because nothing has happened yet doesn’t mean the data won’t be extrapolated at some point in the future. Immutability is one of the most important characteristics of blockchain technology. Any form of record or transaction history never vanishes.
The impact is limited as long as data exploitation is limited to a few billion dollar scams and hacks, but as democracies and dictators pursue their interests in regulating and controlling the population, this problem of financial data exploitation will undoubtedly be at the top of their personal agendas. PriFi, or Private Finance, comes to the rescue to combat this and balance off the fault in the technology.
PriFi stands for Prerequisite for Financial Independence.
As a human right, everyone has the right to privacy. And it’s something that’s mentioned in the human rights code, which is followed by over 140 countries. PriFi, or Private Finance, is a predecessor to many of the code’s core human rights.
What is the purpose of it?
This is because, in a community where CBDC or central bank digital currencies exist, where crypto assets and coins can be blocked, seized, or frozen, financial data is the primary means of controlling one’s ability to transact, earn, buy, or sell in the crypto digital world.
The world is gradually moving toward Web 3.0. PriFi, together with Metaverse and CBDC, enters the scene to protect an individual’s freedom. The system makes use of protocols like Monero, Dero, and Haven, which have directly tied privacy into blockchain networks, rendering data unavailable even to their core teams.
Furthermore, given that a feature of Haven and Monero’s technology allows users to pick who can monitor their transactions, it is conceivable to restrict undesired intervention while still requiring law enforcement to provide information. So, what makes this unique?
Individuals were previously forced to be transparent through blockchains, but now users have control over their privacy and the ability to make informed decisions.
It’s vital to remember that privacy erosion is something that happens to users, not something that they choose to do or not do. It was shocking to learn that a massive corporation like Facebook was accumulating and selling data to the highest bidder, or that the National Security Agency was retaining metadata information for years.
People can now select what to do with their personal information that affects their future. It’s not about concealment when it comes to privacy. It’s about having the power to choose whether or not to expose information and share it with people we believe are trustworthy and reliable. It is a fundamental human right that underpins all other rights to which we are all entitled.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.