Privacy needs to be balanced with innovation
Privacy and privacy debates have long been at the center of the crypto sector, and this reaches back to the libertarian origins of crypto itself. More recently, however, it is increasingly looking like these conversations around privacy are less focused on ensuring consumer protection, and instead are set on preventing some of the much needed innovation and maturation of the crypto space. For all of the enthusiasm that TradFi entering the sector has created via ETF applications, stablecoins, and other products and services, there are those in the marketplace who decry all of this positive momentum. Centralization, loss of privacy, and more control exercised over investors and developers in the sector are listed time and again as reasons to push back against these types of products, services, and innovations.
These positions absolutely have merit; large organizations and governments do not have a great track record when it comes to safeguarding and protecting consumer data. Hacks, breaches, and abuses of this information continue to occur, with research from IBM
IBM
This is 100% correct. Every effort should be made to not only ensure that consumers, investors, and developers can collaborate and innovate freely, but that these thoughts and actions be protected.
Let’s take a look at why at the end of the day, privacy and innovation and going to need to co-exist for crypto to continue innovating, expanding, and gaining more mainstream acceptance and understanding.
Crypto Winters Remove Weak Projects
One of the side effects of a crypto winter, such as the one that is dominating the cryptoasset sector currently, is that many of the weaker projects are eliminated. This includes a number of projects that touted either 1) an innovative attribute or idea without understanding whether there was a market demand for said innovation, and 2) whether some of the core fundamentals of the projects (including emphasizing privacy above all) actually operated as advertised. In other words, when free money dries up and interest rate increases put a squeeze on costs across the board, priorities can – and do – shift.
An example of this is the launch of WorldCoin, a non-U.S. based token project that is an almost perfect example of the overlap that tokenization and AI can deliver. Even though the upsides and opportunities still certainly exist, and the connection to leveraging the token to spread economic benefits generated from AI via a form of UBI should be wildly popular, privacy concerns almost immediately surfaced.
These are absolutely valid concerns, and any organization seeking to gather and possibly record personally identifiable information (including iris scans) should be held to the highest level of privacy possible. On the other hand, innovation often requires compromise, and this is just one example of such as development.
Stablecoins Are Not Privacy Driven
The reality is, and always has been, that the simplest and most straightforward way to encourage non-expert investors, entrepreneurs, and institutions to get into crypto and tokenized assets at large was going to rely on stablecoins. While some coins, such as Tether
USDT
USDC
PYPL
Profitability remains an issue for standalone issuers such as Circle, but that overlooks an important fact. Combining the real-time settlement, lower costs of transactions, and dissatisfaction with both the current ACH settlement infrastructure alongside doubts regarding FedNow continue to push adoption of stablecoin. The recent announcement by Deutsche Bank expanding crypto and crypto custody offerings is just the latest sign of this adoption.
The Market Selects The Best Options
Time and again, crypto advocates across the spectrum have proclaimed that the rise of bitcoin and other cryptoassets is a market driven event. Dissatisfaction with the way that monetary supplies have been handled by central banks and a desire to see the next stage of money enter the marketplace spurred the creation and evolution of the entire sector. This is how markets work, and should be applauded, but the market does not move to the whims of any particular project, no matter how much supporters of that one option would wish it to be so.
Bitcoin
BTC
Sentiment and use cases may change with time, but that will be driven by market demand and interest, and not the desires of bitcoin maximalists.
Privacy is important, and will remain critically so, but should not stand in the way of new, market-driven, and user-friendly innovation and creativity.