Why Vitalik is Wrong About Blockchain Privacy
Vitalik Buterin, the co-founder of Ethereum, recently wrote a blog post advocating for the implementation of private transactions on the Ethereum network. In his post, he highlights the current lack of privacy as a major challenge for Ethereum and proposes the use of Stealth Addresses to provide privacy for users who do not want their on-chain transactions to be transparent. The stealth address feature is also said to be applicable to Ethereum Name Service (ENS) domains and non-fungible tokens (NFTs).
Blockchain technology has become increasingly popular in recent years due to its ability to create a secure and transparent way of storing and sharing information. However, as blockchain adoption continues to grow, concerns about privacy have also become more pronounced. While the decentralized and transparent nature of blockchain technology can offer many benefits, it also raises questions about how to protect sensitive information and maintain user privacy.
However, the idea of private transactions is not the priority of the Web3 community, which has gone through significant events in 2022, including the collapse of trusted protocols and institutions, that revealed a severe lack of transparency from high-profile individuals in the cryptocurrency space, leading to a loss of trust and faith in the decentralized future.
To rebuild trust in blockchain technology and increase adoption, blockchain developers and protocols need to focus on building more transparency and accountability, rather than promoting opacity and obscurity on the blockchain.
What are Stealth Addresses?
Buterin’s concept of a stealth address is designed to keep the spending key of a user secret through cryptographic encryption. The process involves:
1. User A (the recipient) generates a stealth-meta address by encrypting their spending key and sharing it with others who wish to send assets to User A.
2. User B (the sender) generates a stealth address with the meta-address and sends the asset to the generated address while adding an ephemeral public key, informing User A that the asset is intended for them.
3. User A has to combine their actual key with the entire ephemeral public key registry to see if it matches their address. If it matches, User A can withdraw the asset.
More Transparency, Not Less
While the concept behind stealth addresses is sound, it is not the right solution for the Web3 space at this time. Private transactions may be necessary in some circumstances, but they form a small minority compared to the numerous on-chain transactions that public blockchains process every day. Therefore, there is little practical use for stealth addresses at this moment, and more efforts should be made to increase transparency on public blockchains.
The current mistrust in the Web3 space resulted from the events of 2022, including the collapse of FTX, and other institutions, which were due in part to opacity and lack of accountability by prominent figures and a disregard for regulations. The blockchain and Web3 community suffered the most as they form the majority of users of these platforms. More transparency will benefit these end-users and restore confidence in the space, and obscuring wallet addresses will only further alienate them.
Promoting Greater Accountability with Tectum’s Proof-of-Utility (PoU)
Tectum’s Proof-of-Utility (PoU) is a patented concept that verifies the transparency of data on the blockchain. The process involves:
1. When transactions are stored in a block, a certifying authority encrypts the actual block hashes with a private key to create a signed hash value, which is different from the block hash.
2. An external party, such as an auditor, may request the public key of the authority to generate a retrieved hash value. At the same time, the external party generates a re-computed hash value from the blockchain.
3. By comparing the generated hash values, the external party can easily determine if the data provided is valid or if it has been tampered with, without ever having to interact with the direct block hash.
Actual Use Cases with Tectum’s Proof-of-Utility (PoU)
Proof-of Utility (PoU) plays an important role in verifying the real-world use of blockchain technology and its applications. Transactions and activities on Tectum’s blockchain network can be audited more efficiently, as auditors would only need to analyze the data on the chain to determine its validity and utility. This is particularly important for industries such as finance, supply chain management, and e-commerce where the transparency and authenticity of transactions are critical.
With Tectum’s PoU, financial institutions, and cryptocurrency exchanges can prove their operational efficiency, as well as their ability to deliver real value to their customers. This not only promotes trust and confidence in these organizations but also helps to eliminate potential fraudulent activities.
Blockchain Privacy (Conclusion)
In conclusion, the concept of privacy in blockchain technology is not entirely without merit. However, the current state of the Web 3 industry calls for greater transparency and accountability, rather than secrecy and obscurity. Tectum’s Proof of Utility (PoU) offers a solution that balances the need for privacy with the need for transparency, enabling the real-world application of blockchain technology while promoting trust and confidence in the ecosystem. The future of mass adoption in the Web 3 space lies in promoting transparency, and Tectum is poised to lead the way.
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