Generally speaking, internet privacy primarily concerns the invisibility of users’ data information, such as their identities, behaviors, and activities. In the era of the internet, all our information and actions are presented in a digital form. However, once any system storing digital information is connected to the network, it becomes a potential target for hackers. This is especially critical when it comes to sensitive information related to finance and personal health. The privacy and security of data become even more important.
Based on the development of the internet, it has gone through different privacy storage channels from Web 1.0 to the current Web 3.0:
Web 1.0 was a static internet where the main applications were network media. Websites provided content, and users could only passively browse through text, images, and videos. They couldn’t actively participate in the creation process.
Web 2.0 is the interactive internet, the stage we are currently in. The main applications include social networks, video platforms, e-commerce, etc. Users can independently create and upload content for interaction on these platforms. It can be observed that the data and privacy in the first two stages were stored and controlled by centralized institutions, similar to how traditional banking models protect necessary and valuable privacy information.
In the present Web 3.0, the main features include public and transparent blockchain ledgers and decentralization. The blockchain is used to record on-chain data, which includes our transactions and the information contained within them. Specifically, this usually includes the sender, recipient, and amount of the transaction. If users do not want to disclose this on-chain data, it becomes the aspect of user privacy that needs protection in Web3. But how can user privacy be safeguarded?
In the tenth chapter of the Bitcoin whitepaper, Satoshi Nakamoto dedicated the entire chapter to describing the privacy model of the Bitcoin blockchain network. The model goes from “banks to the Bitcoin network.” The Bitcoin blockchain solves this issue through asymmetric encryption. After users have control over their privacy information through blockchain privacy technologies, they can create and lead content and applications. This leads to user co-creation and decentralized governance (DAO, decentralized autonomous organization) while also allowing users to share the value of platforms/protocols.
According to data, identity, and computation privacy, the Web3 privacy sector has developed numerous applications. If we break it down, it can be divided into four main categories: privacy tokens, privacy computation protocols, privacy transaction protocols, and privacy applications. Here are the specifics:
- Privacy Assets:
Privacy assets refer to encrypted assets that natively support privacy. External parties cannot view specific transaction types, amounts, and other information about the parties involved. They usually do not support smart contracts or related applications. The earliest projects in this area emerged in 2011.
The most well-known project is Zcash. It is the first blockchain system to utilize the Zk-SNARK zero-knowledge proof mechanism, aiming to completely address the issue of transaction tracing and user privacy exposure.
- Privacy Computation Protocols:
Privacy computation protocols primarily protect privacy throughout the stages of data generation, collection, storage, analysis, utilization, and destruction. Apart from common use cases in DeFi and NFT scenarios, these protocols can also integrate deeply with the big data and AI industries as technology advances.
However, the practical application scenarios of privacy computation protocols are currently relatively limited, and their development is somewhat average.
- Privacy Transaction Protocols:
Privacy transaction protocols focus on the privacy-oriented processing of on-chain transaction data. Through technologies like zero-knowledge proofs, these protocols natively support users in conducting private transactions, ensuring that their privacy data is not visible to external parties. They also support the development of various types of privacy applications within the protocol.
Privacy transaction networks include Layer1 privacy protocols and Layer2 privacy protocols, but there are not many mainnet deployments currently, and overall development is average.
- Privacy Applications:
Privacy applications are built on Layer1 or Layer2 protocols and provide privacy protection functionalities for users or DApps in different application scenarios, such as transactions, payments, emails, etc.
Currently, there are also many projects developing privacy applications, but few have gained significant traction.
The decentralized nature of Web3 empowers individuals with greater autonomy and privacy protection, giving us more choices and control.
However, currently, industry security is still highly valued, particularly in the development of various wallets. The privacy sector still appears to be a niche market, with relatively lower user and usage volumes compared to other sectors within the crypto community. Most privacy infrastructure and applications are still in the development and construction phase.
Nevertheless, some people believe that privacy solutions have strong appeal in attracting more institutional capital to participate in the crypto ecosystem. Privacy ensures the protection of important financial data and trade secrets, making it an essential infrastructure for the next wave of crypto adoption.
Whether encrypted privacy can attract more users in future use cases is still worth monitoring and observing.
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