Coinbase along with Ethereum co-founder and privacy advocate Vitalik Buterin are calling for more robust privacy protections in Web3. They caution against the dangers of storing personal or sensitive data directly on blockchains and call on developers to prioritize user protection. They’re asking the Web3 community to embrace new technologies and strategies that help protect sensitive information.
The interest in privacy comes around the realization that personal data might be exposed when using decentralized applications. Onchain transactions and other data registries are completely transparent, accessible, and auditable by anyone who uses blockchain explorers. As a result, sensitive information is often left widely available and readily exploitable.
Coinbase recently announced that onchain data registries are a growing danger to user privacy, naming them as the new “enemy #1” of user privacy. The exchange further emphasized the numerous occasions where personal information was being saved on-chain. These range from rideshare applications to crypto tax solutions to social media protocols. Ethereum Name Service (ENS) names and other similar identifiers can inadvertently incorporate personal data identifiers.
To address these risks, Coinbase is sharing some basic steps you can take to help protect your personal information. The exchange cautions that not all anonymity solutions are created equal. Ultimately, users need to consider the privacy risks of each of these Web3 tools, applications, and services carefully.
Vitalik Buterin has joined the discourse too, urging a privacy-protecting direction in Web3 development. He made the case for privacy to be a priority for Web3 builders. He called on them to bake strong privacy protections into the underlying infrastructure of DApps from the get-go.
Buterin and other privacy advocates are already looking to more advanced technologies. For example, they are working on zero-knowledge proofs and homomorphic encryption to improve user privacy. As a reminder, zero-knowledge proofs allow users to prove something without revealing the underlying information. Simultaneously, a revolutionary technology known as homomorphic encryption enables computations to be performed on encrypted data without ever requiring decryption.
These technologies are rich and evolving, but they’ve become a critical enabler of privacy-preserving applications in Web3. Developers can leverage these tools to build applications that better safeguard user data. At the same time, they can take advantage of the benefits of decentralization and transparency.
Coinbase has always been committed to building an open financial system. They further take a user-privacy-first approach, because they understand maintaining user trust is essential to Web3’s long-term success. The social media company has made major strides in researching and adopting privacy-enhancing technologies to safeguard its users’ data.
The call for greater privacy in Web3 happens at a time where the industry is still growing and maturing. As blockchain technology becomes infrastructure for more applications and data, privacy needs to be addressed in order to meet the demands of users and ecosystems.
When registries are not carefully designed, onchain data registries can accidentally expose sensitive information. For instance, rideshare apps could store location data and payment information onchain, while crypto tax solutions might record transaction histories and tax identification numbers. Social media norms might likewise save individual accounts and messaging information on the blockchain.
Coinbase is advocating for a multi-faceted approach to privacy, including user education, developer best practices, and the adoption of privacy-enhancing technologies. The exchange is similarly collaborating with industry partners to use open protocols and provide Web3 standards to ensure privacy and interoperability.
Vitalik Buterin's advocacy for privacy aligns with his broader vision for Ethereum as a platform for decentralized and user-centric applications. He is a firm believer that privacy is a basic human right. He believes that Web3 has to be engineered to prioritize user privacy from the ground up.
Zero-knowledge proofs and homomorphic encryption aren’t the only technologies being explored to create privacy in Web3. Other alternatives are secure multi-party computation, differential privacy, and confidential computing.
Secure multi-party computation enables a group of otherwise distrusting parties to collaboratively compute a function over their inputs while keeping those inputs private. Differential privacy protects individual’s privacy by injecting random noise into the data but still provides information for analysis and conclusions. Confidential computing secures data in use through hardware-based isolation, protecting it from unauthorized access and malicious actors.
The challenge will continue to be striking the right balance among privacy, transparency, and functionality. Certain applications are especially hard to balance with privacy considerations. At the same time, the others need to be forthright and transparent in order to adhere to regulatory or compliance obligations.
The process is underway, and the Web3 community is already well-ensconced in Working Group discussions. Developers, researchers, and policymakers are working together to find the appropriate balance for privacy in decentralized applications.
On the Web3 front, Coinbase’s and Vitalik Buterin’s advocacy for privacy is an encouraging sign. Through their honest reporting, they help highlight the dangers of Web3. By fostering the adoption of privacy-enhancing technologies, they ensure that a safe and secure environment is preserved for all users.
As Web3 grows and matures, privacy is sure to be a point of attention that cannot be overlooked. Developers who invest in privacy will find themselves best equipped to develop the successful, sustainable applications that users demand.
