How to Find the Middle Ground between Blockchain Transparency and Privacy

The Changing Landscape of Blockchain

Alex Svanevik, the CEO of blockchain analytics firm Nansen, believes that the world is shifting towards a greater acceptance of asset and ownership transparency. In an interview with Cointelegraph, Svanevik discussed the delicate balance between privacy and transparency in blockchain analytics. He pointed out that achieving 100% of both is not feasible, but emphasized the importance of finding a middle ground.

The Privacy-Transparency Dilemma

Svanevik stated, "You cannot get 100% transparency and 100% privacy." While transparency on corporate entities, exchanges, and protocols is desired, individuals also expect a certain level of privacy. Fully embracing either extreme is not practical, according to Svanevik. Being fully private would hinder transparency in corporate dealings, while being completely transparent is uncommon as individuals value their privacy.

The Generational Divide

Svanevik highlighted a generational aspect to the issue, noting that younger generations are less concerned about privacy in the crypto world. He cited their openness on social media platforms like TikTok and Instagram as evidence. In contrast, people would have found such openness shocking just a few decades ago. This shift suggests that increased asset transparency may become more acceptable in the future.

Showcasing Assets on Social Media

Svanevik explained that as people own NFTs and cryptocurrencies, they might want to display them on social media to showcase their holdings. This growing trend of flaunting digital assets aligns with the changing attitudes towards privacy and transparency.

Finding a Solution

In order to strike a balance, Svanevik believes that blockchain projects need to develop settings that can cater to different privacy and transparency needs. Depending on the circumstances, users should have the option to choose more privacy or more transparency. Svanevik acknowledged that this approach may have regulatory implications.

Regulatory Considerations

Svanevik noted that regulators might raise concerns about complete privacy in transactions involving large sums of money, such as sending $500 million in assets through protocols like Tornado Cash. However, in the case of smaller transactions, regulators may adopt a more lenient approach. Striking a balance between privacy and transparency may require navigating these regulatory considerations.

The Search for the Right Protocol

While Svanevik hasn't encountered a protocol that achieves the desired balance yet, he anticipates that someone will develop one in the coming years. This protocol would not only strike the right balance between privacy and transparency but also meet the regulatory requirements.