First we had personalized Geocities sites and AOL Instant Messenger profiles. Then we had MySpace accounts, quickly followed by the Facebook page. Now we have Web 3 wallets.
People are increasingly using their Web 3 wallets as a way to signal who they are to others. Wallets are no longer just abstractions representing ownership. They are digital profiles that share our tastes, beliefs, values and, yes, trading history.
Jill Gunter, a CoinDesk columnist, is co-founder and Chief Strategy Officer of Espresso Systems.
If you use an Ethereum Name Service address (or something similar) or if you have a non-fungible token (NFT) linked to your Twitter profile picture, you are broadcasting your data to the world and, whether consciously or not, making a statement about yourself. If you curate and showcase your NFTs, collect proof of attendance protocol (POAP) mementos, brag about your trades and investments to fellow degens (with the block explorer receipts to match) or donate to causes you care about from your crypto wallet, then you are using your wallet in this manner.
All of this transparency is one of the really compelling features of blockchains and the products they enable. Leveraging this transparency to create a portable online profile is a delightful and novel application for users.
Unlike personal websites and Facebook profiles, your blockchain wallet is permanent. It can be manipulated without your consent through people sending or airdropping your tokens. It showcases not only who you are but also what you own, when you acquired it, what you traded it for and all manner of potentially sensitive financial data.
Read more: Dan Jeffries – The Trojan Horse of Privacy
This is a problem in all kinds of obvious ways. Your tastes might change over time and you might someday be horrified at the NFTs you spent so much money on, but there will be no way to scrub them from your history. The causes you donate to and how much you donate might come under unwanted scrutiny. One of your investments might skyrocket in value and you might suddenly be uncomfortable with everyone knowing how much money you’ve made.
There are more subtle ways the public wallet-profile can become a problem. Unwanted airdrops are a good example. Last year, Vitalik Buterin became a target of several such airdrops to his wallet as the creators of various dog-related meme coins sent billions of dollars’ worth of the tokens to the Ethereum co-creator's wallet. This is an uncomfortable and burdensome situation.
Other ugly scenarios are also imaginable. Spammers may blast you with unwelcome, inappropriate content in the form of NFTs. Competitive traders can work to manipulate markets to move against your positions. You could become the target of a “$5 wrench attack,” wherein an adversary extorts you by threatening you physically, knowing how much cryptocurrency you own.
Today, we are in a golden age of enjoying on-chain transparency for all it offers us. I predict, however, a time when we are no longer comfortable with having all of this personal and financial data on permanent display, particularly as the tools to view and analyze blockchains become ever more sophisticated and ubiquitous.
There are options available to those who want more privacy when it comes to their Web 3 existences. One approach is to use multiple wallets and work diligently to keep them unlinked from each other, protecting the privacy of at least a subset of your holdings by keeping that wallet address to yourself. This option is operationally complex when done right and, when executed imperfectly, offers only a superficial level of privacy.
For those wanting more complete privacy for their Web 3 applications, there are options like Zcash, Monero, TornadoCash and Aztec’s zkMoney. Generally, the way that these products are used is for full anonymity and masking of amounts being held and moved. But Zcash’s view keys and TornadoCash’s compliance tool, touch upon something more interesting: the ability to selectively reveal data about what you are doing to someone else.
Most crypto and Web 3 applications today offer full transparency all the time, while a select few default to the fullest privacy possible. Neither of these options reflect how users tend to actually conceive of their needs and desires around how they share their data.
Read more: David Z. Morris – The Privacy Boom Is Going to Change Everything
The technology industry loves to debate whether people actually care about privacy or not. This is rarely an informative or fruitful discussion because it is so vague. Privacy from whom? About what? Under what circumstances? It is a rare person who does not care about their privacy whatsoever! Those who say users do not care have not adequately defined in what ways their users care. Privacy is not black and white. It is a spectrum that is ripe for Web 3 developers, asset creators and entrepreneurs to explore to meet their users’ needs.
The future of crypto assets and Web 3 applications can empower builders to be intentional about who sees their users’ data. Espresso Systems, the company I am working on, is unlocking these possibilities for asset creators with our Configurable Asset Privacy protocol. Other projects including Mina, Aleo, and Secret Network are also tackling the problems presented by the blanket transparency of blockchains.
These platforms all have the promise to yield the next generation of Web 3 products that will lean into transparency where users want it and guarantee privacy where users demand it. They will have the ability to educate users about their options and drive users to a place of more well-informed consent about what data they share and with whom.
We can imagine all manner of new offerings that better protect users and their data while continuing to provide the benefits of real-time transparency. Stablecoins will be designed to offer users privacy from public view while also aligning with the risk management needs of the issuers, unlocking their use in payments for retail and businesses alike. Asset managers will be able to protect their investment strategies from public view while maintaining the ability to audit the history of their holdings. Mainstream consumers will be able to use their wallets as their profiles while being able to choose who can see the monkeys and witches in their wallets – without displaying their income, investments or donations for all to see.