Cryptocurrency: PriFi Bringing Needed and Requisite Privacy to DeFi

grarpamp grarpamp at
Wed Aug 18 01:17:12 PDT 2021

Privacy Without DeFi Is Boring, DeFi Without Privacy Is Predatory

One does not need a transparent blockchain,
all that is needed is a coin whose software and
by extension operation are formally verified thus
trusted by all to do the right thing, effectively just
as BTC does today by default.  Dawn of Private Defi @ ETHCC4

Developers have traded riches for user privacy. It's time to return
crypto to its roots.

In the pursuit of excitement and growth, the crypto community has
largely relegated privacy to the back burner of blockchain innovation.
Such a transition is not only antithetical to the very ethos of
decentralization, but myopic and regressive in the extreme.

To succeed in replacing traditional finance, digital assets and the
cryptographic protocols that support them must manifest decentralized
architecture that both facilitates permissionless exchange and confers
unequivocal fungibility to all financial instruments via
privacy-centric protocols.

    Alex Shipp is the head of business development at Offshift, a
privacy-focused derivatives platform.

In reality, the subtle, systemic benefits of privacy – important
though they may be – pale in comparison to decentralized finance’s
(DeFi) provocative double-digit APYs and non-fungible token (NFT)
auction markets, which have reeled in the attention and capital of
cryptocurrency’s mass market, leading elite developer teams and
venture capital resources to follow in suit. Now, DeFi is advancing at
the expense of privacy-focused initiatives, which only continue to
sink further into the backdrop.

DeFi presents an enticing opportunity to make untold fortunes, while
privacy-centric architecture can only offer broad social and economic
benefits that take form over time and rarely pay. For now, the problem
remains: DeFi and privacy stand diametrically opposed in the modern
landscape of cryptographic innovation, as the presence of each demands
the exclusion of the other.

Edward Snowden’s words from Ethereal 2021 speak to the imperative of
private decentralized finance (PriFi) more eloquently than any others

    The internet already allows us to do tremendous things, but it’s
being controlled – it’s being exploited. And the financial aspect is
where a lot of this control is entering through […] we can permit
people to act without permission and privately in this space, in which
I think […] alt-coins need to be private, or they are failing. This is
my position.

DeFi’s next frontier

PriFi platforms establish a tech-o-nomic standard that dissolves the
existing trade-offs between DeFi and privacy. The PriFi Standard
encompasses all of the following components:

    A basis in decentralized, sound money
    Truly decentralized financial applications
    Uncompromising privacy
    On-chain architecture

Close, but no cigar

To this point, there have been many earnest attempts to establish
genuine PriFi platforms in the crypto space, but none has yet to hit
the mark.
Privacy coins

Monero, Zcash, and others have developed independent blockchains which
confer privacy as a solitary value proposition. As per their
intention, users remain siloed, unable to interact with the rapidly
evolving DeFi landscape and totally isolated from operations involving
credit and derivatives. Privacy coins allow individuals to store
wealth securely in the event of an economic catastrophe; like bitcoin,
they are havens, not solutions.
Off-chain private DeFi

In the effort to bring privacy to DeFi, a number of projects have
begun building privacy-centric DeFi platforms on standalone
blockchains, a compromise of sorts between the privacy coin model
championed by Monero and the DeFi innovation at the forefront of
everything crypto. Unfortunately, in the pursuit of private DeFi,
off-chain initiatives impose a host of trade-offs and limitations
which can only be surmounted by conquering incumbent public blockchain
ecosystems and absorbing their communities.

In this regard, building a privacy-centric DeFi application off-chain
is like giving out loans denominated in Alex-dollars (believe me, I’ve
tried): It aims to fix a credit problem by inventing new money. The
path to cultivating a robust user base for one’s credit instruments is
a long and arduous journey on its own. Building an independent
blockchain, on the other hand, requires the development of a robust,
battle-tested consensus mechanism, a globally decentralized ecosystem
of validators, and a community of adept developer teams. Secret
Network, Incognito and Haven are among the ambitious platforms
building their own privacy-centric financial universes from ground
zero. More power to them.
On-chain mixers and tumblers

Applications like Miximus and Mobius divide and shuffle public tokens
through a network of random addresses in order to dissociate them from
their original owners. Though useful tools, these types of
applications operate with digital assets that are fully public, and
which ultimately land at new public addresses. They are neither a
complete nor a sustainable PriFi solution, as they do not provide for
truly private ownership.
Layer 2 private DeFi

Aztec Protocol, whose EIP 1724 was one of the first to publicly
conceive on-chain privacy, supports certain applications of
decentralized finance in the Ethereum ecosystem. However, by virtue of
employing a ZK-Rollup, Aztec’s obfuscation process takes place on a
layer 2 with a code that is closed source, and by default not
trustless (see: Offshift’s proprietary research). If monetary and
economic history have revealed a single, incontrovertible lesson, it
is that systems that can be exploited will be exploited.
Unequivocally, we need a robust, comprehensive and inclusive PriFi
solution, one that is fully decentralized, that is uncompromising in
protecting user privacy, and that operates fully on-chain – on layer 1
in the Ethereum and Polkadot ecosystems. There are to be no if’s,
and’s or bridges.
The way forward

Technically speaking, PriFi composes a suite of emergent,
decentralized applications that facilitate advanced, on-chain
financial operations while fully protecting user privacy and
minimizing tradeoffs with transparent, public incumbents in the DeFi
space. PriFi applications release privacy from the burden of mutual
exclusivity, so it can become an accessible and affordable feature
that does not demand technical savvy.

Pragmatically speaking, modern internet infrastructure is both a gift
and curse. While blockchain-based systems have produced tremendous
advancements in the realms of property ownership, money and finance,
they sit atop highly exploitative systems designed to streamline
surveillance, systematic wealth extraction and censorship. PriFi is
the one-stop, one-click, opt-out that any freedom-oriented individual
can access and use.
Read more: Public Opinion Shifts on Big Tech and Privacy During Pandemic

Really, it’s all or nothing. Without PriFi, the prospects of sound
credit – and therefore of a world where individuals are endowed with
freedom and communities with stability – there is very little that
will be able to curb the encroaching wave of authoritarianism from
enacting technocratic systems of mass surveillance that absolve
privacy and ordain censorship and centralized control as global norms.

PriFi means returning crypto to its privacy-centric roots without
holding back innovation, so developers, engineers and entrepreneurs at
the cutting edge can create and build freely without disconnecting
from the purpose that seeded their journey in the first place. PriFi
means stepping forward boldly into uncharted territory without leaving
your principles nor your people behind; it means adventure without
recklessness, innovation without sacrifice, freedom without chaos,
evolution without regression.

Privacy without DeFi is boring. DeFi without privacy is predatory.
PriFi is the way forward.

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