Privacy & Decentralization: 2023 Will Set The Foundation
2022 was a crazy year for the entire cryptocurrency industry. Not only because the ongoing bear market affected many market players, including ourselves, but also due to fundamental problems with the infrastructure of this industry.
Various events, also occurring outside the market and our industry, led to two major issues finally getting a bit more attention than in previous years:
Privacy & Decentralization!
On the one hand, new regulatory efforts by governments and government institutions worldwide have ensured that more people are now interested in privacy solutions. This is not surprising, given the prospect that in the USA, for example, all transactions with a value of more than $600 will receive special attention in the future; while there are similar approaches in other parts of the world as well, especially in the European Union.
The steady advance of CBDCs also plays a significant role here. Reaching critical mass no longer seems so unthinkable; however, awareness among the population about the fundamental issues is still far from where it should be.
On the other hand, there was a real Black Swan event this year: the crypto exchange FTX, together with Alameda Research, turned out to be a large-scale fraud and caused $8 Billion in damages. Investors and users of FTX had to bear these losses; Sam Bankman Fried (CEO) will have to answer for it in a US court in 2023.
Since then, the use of decentralized exchanges has increased, while the trust in CEXs is dwindling. This is an important development if you look at the private finance (PriFi) sector, as we do here.
2023 will be a very interesting year, and we are anticipating that it could be one of the most important years ever for the industry:
Can PriFi projects deliver important innovations? What are they specifically needed for, and what are the key threats? Will the use of decentralized exchanges continue to rise? And what are we at Navcoin up to in 2023?
What is PriFi (Private Finance)?
First things first: What is ‘PriFi’, anyway? PriFi stands for Private Finance. This includes all projects and efforts to use cryptography and blockchain technology to create solutions that help users preserve and increase their financial privacy.
Cryptocurrencies like Bitcoin and blockchain ecosystems like Ethereum cannot do this due to technological fundamentals. They are merely pseudonymous, not anonymous, and allow anyone interested to trace wallets and payments via public ledger.
Within PriFi, two main subcategories can be identified:
1. Privacy Coins
2. Private Finance Ecosystems
While privacy coins include anonymous cryptocurrencies, such as Monero (XMR), the best known and most successful private cryptocurrency in terms of market capitalization, which allows users to send/receive funds without trace, private finance ecosystems, such as Navcoin in our case, are experimenting with other use cases.
Navcoin: Enabling Privacy For Non-Private Tokens
For example, we are working on technologies that not only completely anonymize the Navcoin blockchain (check: Privacy-enhanced Proof-of-Stake), but also provide the same protection to pseudonymous blockchain ecosystems and their tokens. With Navcoin and the blsCT protocol we developed, we will be able to create a 'private version' of tokens on Ethereum, BSC, Solana, ... Blockchain. A very exciting and important work that will potentially help many users and the cryptocurrency ecosystem as a whole. Check our roadmap and Discord for more information!
Why You Will Need PriFi Solutions in 2023+
As mentioned at the beginning, more and more people are finding out why they might need PriFi solutions in the future. Growing awareness will lead to a change in sentiment: from privacy as a ‘Nice-to-Have’ to necessity!
Besides the obvious problem of the lack of privacy in ordinary cryptocurrencies and blockchain ecosystems, there are several developments in the 'real world' that need to be mentioned here:
- CBDCs: CBDC is short for Central Bank Digital Currency and represents the digital form of FIAT money that is used in one particular nation or region. It is issued by the country’s central bank just as regular FIAT currencies are.
Central banks and regulators see in CBDCs their answer to cryptocurrencies, which are threatening their power monopoly. When it comes to the development of cashless societies, and thus societies threatened by increasing surveillance, CBDCs are playing a major role.
The development of CBDCs saw a boost since the COVID pandemic, especially now in 2022, and one can be sure that this trend will not stop in 2023 and the years to come. On cbdctracker.org, one can always check on the development status of any CBDC in different countries:
- Digital IDs: A 'digital ID' is basically an extension of our physical identification documents such as national ID, passport, driver's license, etc. - With this digital ID, it should be 'easier' in the future to prove one's identity.
- Social Scores: With China, under the communist rule of the CCP, as the best example, social scores enable governments to reward or to punish their citizens based on behaviour. If you, for example, pay your bills late, have debts, have to pay fines for parking your car incorrectly, or commit other misdemeanours, or express opinions online that are not in-line with the (gov-) given narrative, your social score will be lowered, leading to disadvantages in your daily life.
Each of these aspects in isolation already make clear that we need to brace ourselves for a dystopian future. Combining them, however, makes this picture even darker. Here isa comprehensive guide on how those three technologies described above could work together:
Everything will be interconnected and sold as a convenience-increasing solution that was only developed to make your life better. Except that it will not. It is very important to keep an open and critical mind, and to not believe the lies that governments are serving you!
Regulators & Governments vs. Developers & Users
Regulators and governments are not our friends. On August 10, 2022, Alexey Pertsev was arrested on suspicion of facilitating money laundering by the Dutch FIOD (Fiscal Information and Investigation Service), just two days after Tornado Cash, an Ethereum-based crypto-mixer, was sanctioned by the U.S. Treasury Department.
The allegations that Tornado Cash was used by North Korean hackers to launder more than a billion U.S. dollars were repeated. In the following, the request for bail was subsequently denied, and Alexey has been in custody ever since.
This case makes clear that we have to work on our very own financial system in order to remain as free as possible, able to transact our money freely, spend it when we want, where we want, without being able to be tracked down at any given point.
Are you ready to take privacy matters into your own hands? Well, you should be, because nobody else is going to do this for you; it is not too late!
Inform yourself about privacy issues, about new systems like the ones mentioned in the article (CBDC, Digital ID, Social Scores) and how they could impact your daily life, try out new technologies, and also try to inform others about what you have learned. We are only strong together!
At Navcoin, we are very motivated to deliver these new technologies; with going fully private as our main goal in 2023, we are working on one of the first privacy-enhanced Proof-of-Stake protocols & also supporting fellow decentralization-oriented projects and exchanges, such as AtomicDEX.
Take your privacy into your own hands - nobody else will do it for you…
Happy new year!