By MadLentil on The Capital
The digital realm allows freedoms and opportunities unknown and unimaginable prior to the global adoption of the internet. The barriers to use have, over time, become fewer as lower costs and easier access make it even simpler to communicate and interact with virtually anyone in the world.
As with all human technological progress, this comes at a price. To the vast majority, however, this cost has gone completely unnoticed and you only realise it’s gone when something goes wrong.
So what is the cost of convenience…..it’s PRIVACY.
Capturing people’s data has not only become big business, giving massive profits to global companies but is also a tool used by banks and governments around the world to attain oversight on every single interaction and transaction its citizens make. As with most tools used by humans, this has been abused on many occasions.
The war on privacy has largely been fought without anyone’s explicit permission or knowledge but has now got to the point, in many parts of the world, where privacy has almost become a term used in the same breath as terrorism and other criminal activity.
Anyone questioning this is assumed to have something to hide and is put under suspicion. The assumed human right to privacy has been flipped on its head and one has to ask the question as to why this has been allowed to happen.
There are many important aspects of everyday life that this can affect whether it be the tracking of your internet browsing history or who you converse with on social media but none as important as how you use your money.
It could be argued that one of the most basic human rights is the ability to transact. Without it a person cannot interact and be an active member of any form of civilised society and, furthermore, this cannot be guaranteed without a minimum level of financial autonomy and privacy.
This can be better illustrated using an example:
Your family lives in a different country to you and they suffer a major natural disaster. As any family member would, you want to send them some money so they can start rebuilding their home or buy some food, blankets, or other essentials. BUT due to the whims of your political administration, your relative’s country has been put on a blacklist and placed under financial sanctions.
The result is that you cannot send potentially lifesaving funds to your relatives because the transaction has to go through an intermediary that, in turn, has to abide by these restrictions.
Being forced to use intermediaries such as banks or money transfer services not only incurs additional costs but can delay the process of sending funds not by minutes or hours but potentially by days. Without financial privacy and autonomy, you are entirely reliant on a 3rd party to transfer that value and it could simply be rejected.
To sum this up you could say that….
“The freedom to transact is given by the ability to detach from your identity”…meaning that without a certain level of financial privacy you do not have the right to send or store money where you want or need to and cannot have full ownership of your financial assets.
So, what does financial privacy actually look like? There would have to be several things in place to enable you to have the inviolable right to transact:
- No requirement for 3rd party permission
- Transaction visibility only for those who are directly involved or who have been given explicit permission by the owner of the account
- No need for any intermediary to confirm the transaction on your behalf
- No requirement for you to link your identity or location to your transaction
- Direct access to infrastructure that allows you to send money regardless of political or religious beliefs, location, gender, ethnicity, etc.
Privacy in DeFi
So we come onto the question of privacy in DeFi (Decentralised Finance), a rapidly growing industry with a vast amount of experimentation and innovation. If DeFi is to become the future of money then one of the most important aspects has to be privacy. The level of privacy required should allow for private account balances as well as all transactions (including sender and receiver). Only with those guards in place can a person have the unencumbered right to transact.
The purpose of this article is to shine a light on what seems to me to be a glaringly obvious omission in the foundations of this new way of doing money.
For people to have the unstoppable ability to transact, as discussed above, privacy must be at the core of all finances and with the 90%+ of projects built on the Ethereum blockchain this is proving to be very difficult to attain. There are a growing number of incidences of Ethereum accounts and the assets contained within being frozen with the ‘owners’ having little chance of recovery.
Blockchain analysis has sprung up to provide services to government agencies and businesses globally and there are several companies that now claim to have over 90% ‘coverage’ by global trading volume.
Blockchain analysis or financial surveillance, the same thing going by different names.
Of course, as with all these things, there are two sides to the story, and with privacy comes the risk of bad actors doing bad deeds and not being caught. You can also argue that since the invention of paper notes (the original private money) the human race has been able to innovate and connect in ways thought impossible prior to that.
One final thought is whether we as a species choose to be subject to the political whims of those who can arbitrarily move the goalposts because without the right to transact they can do just that.
Financial privacy, good or bad? You decide.
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Why the future of money needs privacy was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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