The Bitcoin revolution is taking over the means of online trade. However, it has one flaw, and this has to do with privacy. The blockchain ledger has been in the public since the inception of Bitcoin. All transactions are always exposed. They are in the public domain. This makes traders vulnerable as it is possible to trace transactions.
While there is no direct security risk involved, financial transactions are private and should be kept private. You may hear, "you have not committed any crime, so you have nothing to hide", but it is important that you keep your transactions out of the public eye. Just because you may have no reasons to hide your transactions does not give the next person or government the right to snoop on your activities. Privacy is important.
It is very easy at the moment to trace transaction patterns on many blockchains. This is likely to bring some form of insecurity. Hackers can easily pick certain data and use it to bring down certain institutions. In this hyper-connected world, power lies in privacy. This is the only way to keep such elements as hackers at bay.
Even though today’s business requires a lot of transparency, this ought to be controlled. People who are not involved do not need to gain access to information they do not require. This is just good business practice!
Fungibility and the Future of Cryptocurrency
Fungibility being the property of a good in which its units can be mutually substituted, is a key property in the future of cryptocurrency. Cryptocurrencies such as ZenCash have this property well worked out. Like cash, it is untraceable. This is where privacy comes in.
This is because, in cryptocurrency, the likes of ZenCash have a private protocol. It uses the latest developments in cryptography called Zero-Knowledge Proofs. Zero-Knowledge Proofs are best illustrated using the Ali Baba cave analogy:
In the presence of privacy, business is likely to increase given that the history of cryptocurrency units and coins cannot be traced. This does away with the negative attitude that may lead to other rejecting some cryptocurrency.
Fungibility makes it possible for every unit to be interchangeable. This means that when one is paid with a paper note, it is not likely that the person will care about where you got the paper note. This principle must be applied to cryptocurrency! The value is added by not being able to trace a currency unit.
The ability to taint some currency and even notes tend to cause a lot of funds to lose their value. It is thus important to adopt privacy. Tainting notes and currency is a form of censorship, and this can bring about devastating effects to numerous businesses and individuals.
If funds can remain private, then it is possible to keep these funds fungible. ZenCash helps in breaking barriers.
Provenance and Privacy
Provenance is "the chronology of the ownership, custody, or location of a historical object". Soon with the help of blockchain technologies such as ethereum, supporting smart contracts, products will be assigned a digital passport and their provenance will be easily known. Auditable reports will be easily created. This will help in keeping fake products out of the market.
It is often heard in FinTech circles that the provenance of an asset should be known, however this cannot apply to money, for if it does, it affects its fungibility. Provenance can affect the value of a given currency unit. If it comes from a questionable source, the currency unit maybe worth less. If it comes from a reputable source it may retain the expected value. If it comes from a celebrity, it may be worth more. When it comes to money, provenance and fungibility are mutually exclusive.
Andreas Antonopoulos explains this well:
There is value added in not being able to trace a currency unit!
ZenCash is "The world's first private, distributed and reliable platform for communications, transactions, and publishing".