We all know the problem of a public ledger. Most of us who live in the crypto ecosystem can’t bring ourselves to say it.
But find a Norman on the street, someone with some knowledge of blockchain (good luck with that), and they’ll tell you straight. It’s public. A public ledger is public.
We’ve spent almost two decades trying to sell pork pies to vegans, extolling “publicness” as a virtue, when people actually crave privacy.
In the real world, standards do not see radical transparency. Many perceive madness. They see data breaches. They have no doubt that sharing a permanent, immutable record of every transaction they have ever made is completely absurd.
You wouldn’t use a credit card if your neighbor could see every transaction you make. You wouldn’t run a business if your competitors could know exactly who your suppliers are and how much you pay them.
To put it simply, the channel is too public, the channel is too private. There must be a balance. Certain information must be made public for auditing and regulatory purposes. Some information must remain private to allow businesses to operate effectively.
Companies must protect their proprietary actions from competitors while providing a “viewing key” to regulators or auditors. It is a balance between respecting the law and operating efficiently in the market.
There are good reasons why institutional finance has not fully embraced blockchain – which is why hedge funds, asset managers and corporate treasuries with billions to invest have not been mobilized. One of these reasons is that they simply do not want to trust their proprietary strategy to the whole world and simply cannot do it. It would be like releasing their alpha for free.
The business reality check
Stablecoins promise speed and efficiency for B2B transactions. The cost is low, but the price is high. Confidentiality. A transparent ledger means that everyone – friend or foe, ally or rival – can see a company’s activities. The supplier they use, the volume of orders and the unit price. There are no secrets; everything is exposed and they effectively disclose their entire supply chain. Businesses need to find ways around the problem by improving privacy while remaining compliant.
What we need is the blockchain equivalent of the Internet’s SSL moment. We didn’t have a working web until encryption became a standard layer, allowing us to send credit card information without the whole world watching.
From theory to practice
We are finally seeing this infrastructure move from white papers to the real world. For example, the Canton network has been successful, to some extent, in ensuring the confidentiality of corporate financing, albeit in a licensed form. I was involved in one of the latest breakthroughs in privacy. This is the recently announced plan to launch strkBTC on Starknet. We’ve spent years treating Bitcoin like digital gold – a great store of value, but one that is largely static and totally exposed if you try to use it in DeFi.
For the first time, you can benefit from the security of Bitcoin with a “privacy layer” that protects your balances and counterparties from public view. This is the first proof that we can have an “active” Bitcoin that respects the business need for privacy, all with selective disclosure for reasonable risk management.
The way forward
One of the values of crypto’s early adopters was privacy, but this ambition will remain unfulfilled if we do not take into account the systemically important capital flows that move the world. Public blockchains will only scale if they can support private financing.
With selective disclosure and protocol-level privacy, we’re not just adding functionality. We are finally building a system that the world can actually use. The technology is there; the remaining question is which networks will set the standard for the next era of global finance.
