Enterprise Blockchain And Our Privacy
Although it is widely understood that Bitcoin is pseudonymous and not completely anonymous, its growing popularity over its decade-long existence has sparked privacy-oriented innovation at a time of renewed debate about privacy.
Data privacy concerns, from the selling of personal information to third parties to the adversepotential of a cashless societyhave gained momentum, in a time where collateral developments of cryptocurrencies present an intriguing narrative.
To what extent does the business world reconcile conventional data structures, with an accelerated trend towards privacy?
One of the areas where this quandary is playing out is with enterprise blockchains, and some of the tangential privacy technologies driven by cryptocurrencies.
At one end, you have the cypherpunks and those who are predisposed towards levels of anonymity represented by cryptocurrencies like Monero and ZCash – that deploy technology to mask identities and transaction details.
The push by privacy-driven communities that support these cryptocurrencies, has shed light on some of the obscure yet profound technologies that underpin their networks.
Zero-knowledge proofs(ZKPs), though conceived 30 years ago, have gained momentum in the last several years in both the optimization of the technology and its application.
The concept is that a prover can verify a set of information (i.e., transaction data) to a verifier, without revealing any details about the data itself.
For example,Bulletproofs, a more efficient form of ZKPs, were proposed by the Stanford Applied Cryptography Group (SACG) in December 2017 and implemented in Monero the following year.
Similarly, zk-SNARKs, which are used in ZCash, have become aprevailing topicin Ethereum circles as both a way to improve scalability and preserve privacy.
Add in the increasingly popular proposal of theZether protocolby researchers – among them Dan Boneh of SACG – and it has become clear the ZKPs offer advantages for financial and data privacy.
This is precisely where the odd relationship between enterprises and privacy technology materializes – unique friction emerges.
The other group in opposition to the cypherpunk partialities are regulators and, in many instances, enterprises seeking to remain compliant with said regulators.
In the case of privacy technologies specifically referencing cryptocurrencies, it is banks and financial enterprises at the convergence of two often diametrically opposed positions.
The problem centers on the validity of producing a middle ground between anonymity and regulatory compliance.
For example, JPMorgan recently announced that their permissioned version of Ethereum, called Quorum, hasopen-sourced an extensionof the Zether protocol for confidential transactions in its enterprise blockchain.
The technology enables participants, including those building applications on top of Quorum, to use confidential transactions that mask transaction details.
This is useful for consortium networks that want to leverage Quorum but highlights the predicament to what extent privacy extends in such cases.
As a permissioned blockchain network, Quorum – and likely most of its enterprise consortia spinoffs – is not a public network like Ethereum, where permissionless users can come and go as they please and participate in consensus.
Instead, it is controlled by JPMorgan and approved entities, and any spinoffs of the open-source software used by enterprises are likely to remain in their control through network validation via consortium.
Only known and verified parties can join Quorum, which is the fundamental difference between public networks with permissionless nodes like in Ethereum.
It seems highly unlikely that, should Quorum become prevalent among legacy financial institutions, that government regulators would allow for full anonymity of transaction details in the network – especially if investigations into illegal activities were to arise.
