Vitalik Buterin Is Right — Crypto Needs More Privacy

Earlier this year, Ethereum co-founder Vitalik Buterin released his L1 privacy roadmap for Ethereum. 

The document proposes a few solutions enhancing users’ privacy in on-chain payments, application activity, and network interactions.

In an article “Why I support privacy” published a couple of days later, he gave a broader explanation of why privacy matters and provided a few indisputable arguments to support his point of view.

Since then, the need for crypto privacy has become more important than ever. Here’s why.

Government Backdoors: A Crypto Privacy Crisis

Buterin specifically highlights that adding government backdoors to privacy-oriented systems will lead to a dangerous imbalance in power.

Assume that only a selected group, such as a government or a political party, has access to private communications and data. That would undermine democracy and eliminate individuals’ control over their data.

Besides, the allowance of government backdoors may lead to the following problems:

• Violence and bribery in public systems: Anyone with the power to verify your actions can bribe and pressure you to behave in a certain way.
• Temptation to abuse data access. This refers to people in positions of power, like government officials or corporate executives. Such individuals will always feel the pull to exploit their privileges for personal gain.
• A possibility of a hack. There is no centralized system that would be 100% hacker-proof and ensure data security. The recent data leaks at the US telecommunication companies and the Ukrainian government are the best examples.
• Governments may change. Regimes do not always stay the same, as leaders may change, and those who are in charge today may later be persecuted. No one can tell what will happen to sensitive data in this case.

In addition, Buterin states that privacy is an important aspect of decentralization. Anyone who possesses the information has centralized control over it, and therefore, such situations must be avoided.

The Lack of Privacy in AI

Another “deeply worrying” aspect that Buterin talks about is the lack of privacy in AI tools.In particular, he mentions AI personalization, the trend that is likely to deepen in the near future. 

Not only do tools like ChatGPT use our past conversations to enhance our communication. These AI products may tamper with our privacy further by collecting our browsing history, accessing our emails, biometric data, etc.

With the current trends, it looks like we are moving towards a truly dystopian future where IT giants collect data about everyone. However, it does not have to be that bad.

To stand against this intrusion, Buterin suggests the following simple yet powerful techniques:

• Running AI tasks locally whenever possible
• Using cryptography to enhance the privacy of remote computation
• Using the hardware verification for better privacy in the physical world

What Solutions Does Buterin Propose?

In the L1 privacy roadmap for Ethereum, Buterin comes up with a few technological changes that could solve the privacy problems:

• Incorporate privacy tools into existing wallets. In particular, he mentions solutions like Railgun and Privacy Tools. Crypto wallets, in turn, should support shielded balances and enable private sends by default to improve the user experience.
• Use one address per application by default. This would make it more complicated to link users’ activities across different dApps.
• Implement FOCIL and EIP-7701. These proposals improve censorship resistance and simplify the maintenance of privacy tools like Tornado and Railway.
• Aggregate proofs for privacy transactions. This would make privacy transactions cheaper and more scalable by reducing gas costs.

The good news is that all these changes do not require any major shifts on the consensus level. Therefore, implementing them would be relatively easy.

Proposed Changes to the Ethereum Protocol

In addition, it’s worth saying a few words about the proposals that Buterin refers to. Both EIP-7701 and FOCIL are aimed at improving Ethereum’s privacy, though offering different approaches. 

In a nutshell, this is what they suggest:

1. EIP-7701

This proposal doesn’t directly implement privacy features but enables private interactions for Ethereum wallets. 

Once implemented, it would allow users to carry on operations without revealing their full identities or wallet details.

2. FOCIL (Fully On-Chain Intermediary Layer)

This is a zk-rollup-based privacy layer that allows interactions with Ethereum smart contracts through a privacy-oriented intermediary. Simply put, it serves as an invisibility cloak, allowing users to hide details like a sender’s address or an amount transferred. 

In addition, it is designed to prevent the censorship of transactions. It’s not a silver bullet, though, as centralized regulators would still be able to block the FOCIL smart contract. However, the underlying technology would make it way harder.

Where Do We Go From Here?

Privacy is not just about technical problems. It's the cornerstone of freedom and decentralization: the two key principals of the crypto movement.

But blockchain systems can become more centralized as they evolve, and as networks like Ethereum gain more traction, it’s just a matter of time before governments try to control them the way they control other systems.

That's why we need to fight for the crypto vision that we believe in.