Opinion: Confidentiality, the Elusive Piece in the Puzzle of a Decentralized Internet
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In today’s digital world, confidentiality is crucial for maintaining the privacy and security of sensitive information. Whether it’s online payments or supply chain management, various aspects of our digital lives rely on data confidentiality. However, as web3 technology evolves, the lack of on-chain composable confidentiality remains a significant obstacle to its widespread adoption. While decentralization and transparency are important, absolute transparency is not always applicable to every industry.
Imagine playing poker on a transparent board where everyone can see your hand. It wouldn’t be fair, right? Poker relies on the secrecy of cards and the unpredictability of the game to strategize and outsmart opponents. Developing decentralized poker applications on public blockchains, where all transaction data is transparent, would be impossible.
Confidentiality is crucial for industries such as gaming, payments, identity verification, voting, and institutional finance to function effectively. Without confidentiality, many potential uses of decentralized applications (dapps) would remain unexplored.
For example, user confidentiality is a major concern for individuals and institutions when conducting financial transactions. While cryptocurrencies offer improved platform reliability, they still lack the privacy provided by traditional payment methods. Additionally, blockchain’s transparency makes it unsuitable for mass adoption, as people wouldn’t want their financial information to be publicly accessible. On-chain confidentiality can enable private yet traceable transactions, addressing user concerns and complying with regulations like the European Union’s General Data Protection Regulation (GDPR).
Similarly, video games, including multiplayer card games and strategic RPGs, require the secrecy of certain game elements to maintain an exciting and challenging experience. Without confidentiality, blockchain platforms would be limited in hosting such games, restricting the range of on-chain gaming options.
The “all or nothing” authentication approach of blockchain networks also hampers their adoption in areas like voting, identity verification, and healthcare. Striking the right balance between transparency and privacy is crucial for the broader adoption of web3 and decentralized technologies on a global scale.
While public blockchains like Bitcoin and Ethereum are open-source and enhance trust and accountability, they also expose transactional data, potentially infringing on privacy. Sensitive data, such as transaction information, medical records, and identity information, can be easily stolen and shared without adequate security measures. This opens the door to privacy breaches and crimes like identity theft. However, total privacy and anonymous transactions can also be exploited for illegal activities like money laundering, tax evasion, and terrorist financing.
Current cryptographic methods like zero-knowledge proofs (ZKP) and trusted execution environments (TEEs) have limitations that hinder their effectiveness for on-chain, composable confidentiality. ZKPs allow one party to prove the validity of a statement without revealing additional information, but they face challenges in scenarios involving multiple parties. TEEs provide a secure environment for confidential computations but are susceptible to side-channel attacks, compromising overall security.
Fully homomorphic encryption (FHE) emerges as a promising solution for on-chain confidentiality in the blockchain industry. FHE allows computation and manipulation of encrypted data without decryption, preserving the confidentiality of sensitive information throughout the process. This technology enables the creation of complex, multi-party applications on blockchain platforms, expanding the utility and appeal of web3 technologies.
However, FHE is still in its early stages and faces performance limitations, particularly in processing speed. The computational demands of FHE operations are higher than traditional cryptographic technologies. Advancements in the market, such as field-programmable gate array (FPGA) chips designed for such computations, may address these limitations.
Web3 solutions with FHE can comply with data privacy regulations and facilitate industries with strict data security requirements. Unlike standard cryptographic methodologies, FHE offers theoretically unbreakable security and resilience against future quantum computing technologies.
In conclusion, confidentiality is a crucial aspect of web3 that needs to be addressed for the widespread adoption of decentralized technologies. Fully homomorphic encryption and other novel cryptographic protocols can create a decentralized ecosystem that empowers users with control over their data without compromising security and reliability. By incorporating on-chain composable confidentiality, the blockchain industry can attract sectors like healthcare, finance, banking, and entertainment.
