I was looking at the news on a Sunday morning, and I came across a story about a person being scammed, all because it was easy to track their on-chain movements. It was not about the money, it was about how exposed everything really is. This made me think, and I started to wonder, if everything on the blockchain is exposed, how safe is it for people in the long run?
A lot of people in the crypto space are saying that everything should be on-chain, and it should all be fully exposed. On paper, it sounds like the perfect system, built on trust and transparency. However, in reality, it does not work that way. When people are able to be tracked, and patterns are able to be analyzed, it opens the door for a lot of risk that people are not thinking about at the beginning.
The bigger problem, however, is that not all data should be exposed. In the real world, companies are not exposing their transactions, and people are not wanting their information analyzed. While the idea of being fully transparent sounds great, it does not work in reality.
This is where the concept of everything should be on-chain falls apart. When our personal information is on-chain by default, it puts limitations on the application of blockchain technology in areas where privacy is actually important.
During my exploration of the Midnight network, I realized that they are tackling this issue in a different way. Rather than everything being on-chain and thus public, the network has been built on the concept of selective disclosure, which enables data to remain private.
For example, it’s possible for a transaction to be verified without access to the user’s entire balance or history. This is especially good for businesses, where this kind of verification is possible without sharing sensitive information with business rivals.
Another example is given with identity. Instead of sharing an entire personal identity, users can share specific pieces of information. This keeps their information private while still allowing for trust.
Finally, there is an example given of how application logic is private with Midnight. This means that smart contracts don’t have to be open for all to see. The verification of an application is still possible, but the inner workings don’t have to be shared. This is especially good for both users and businesses.
The interesting thing about all of these examples is that privacy is not an afterthought. It’s actually built into how the system works from the beginning. This is very different from traditional blockchain technology, where everything is open and then privacy has to be added.