Privacy May Be Cryptocurrency & Blockchain’s Best Use

Cryptocurrency and blockchain have taken off in huge ways over the past few months. There are countless opinions about the legitimacy, reliability, and future of cryptocurrencies and their widespread use. One idea that there is less disagreement on is blockchain and cryptocurrencies’ ability to protect user data from companies and governments.

What is Cryptocurrency?

According to Wikipedia:

“A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.”

If you’re reading this, there’s a pretty good chance that you are already somewhat familiar with crypto.

According to Pew Research Center, in December 2016, “around half of Americans had heard of the alternate currency bitcoin — but just 1% had actually used bitcoins themselves.” Now there are around 200,000 Bitcoin (BTC) transactions per day. And there are even crypto investment firms (like this one) and hedge funds popping up like crazy!

What are Privacy Coins?

Privacy and anonymity are a couple reasons why cryptocurrencies have received so much attention in recent months. However, Bitcoin, the most well-known coin doesn’t have the privacy that those unfamiliar with how it works assume. Privacy coins add layers of protection for the users who own them and complete transactions with them.

Because Bitcoin is run on the public block chain ledger, anyone with access can see every transaction and the address it comes from. The wallet address, or simply address, is an alphanumeric ID of 26–35 characters. While this code on its own doesn’t reveal much besides how much money is sent, and to which address, if the ID is linked to a person or organization, it can be a privacy threat.

How Do Privacy Crypto Coins Hide User Identities?

There are a few methods these coins use to hide user identities and transactions. Most use some sort of encryption, like The Invisible Internet Project (I2P), or Tor. Others use cryptography methods like zero-knowledge proofs or address scrambling methods to maintain anonymity.

Steemit’s Top 5 Privacy Coins:

1. DASH (DASH)
2. Monero (XMR)
3. Zcash (ZEC)
4. PIVX (PIVX)
5. VERGE (XVG)

Today, knowledge and even use of cryptocurrencies is more widespread. Bitcoin alone currently has a market cap of around $173 billion, and crypto as a whole has grown to an estimated $470 billion market cap, peaking at over $825 billion.

Interest in “Cryptocurrency” via Google Trends

Interest in cryptocurrency saw it’s biggest spike in the past five years at the end of 2017. Crypto and its underlying technology, blockchain, are steadily making their way into everyday life for more and more people.

Blockchain Is Great For Data Security

The Economist explains in this article, that “the cryptographic technology that underlies bitcoin, called the ‘blockchain’, has applications well beyond cash and currency.” Grass-roots organizations could use blockchain to undermine giant data companies, like Google and Facebook.

Building Blockchain gives us this easy to understand explanation of what blockchain does and how it works:

Blockchain for N00bs

The problem with most, if not all, internet services is that user information is collected and stored on servers. These servers are a target for hackers who can infiltrate them and steal the data.

Decentralizing control of global data, by moving it to block chain, reduces risk for the companies storing the user information. You would no longer have to trust individual companies with your private data. Another benefit is that you wouldn’t have a profile with multiple providers, such as Twitter, Facebook and Google. All of your information would be stored in one secure, and much more private, place.

Source: The Rising Tide of Decentralized Identity

Decentralized Identity Foundation (DIF)is working to build “an open source decentralized identity ecosystem for people, organizations, apps, and devices. Many large corporations are on board with DIF’s mission, including Microsoft and IBM.

Pillars of a New Decentralized Data Ecosystem

Ankur Patel, of Microsoft’s Identity Division said:

“Today, apps, services, and organizations deliver convenient, predictable, tailored experiences that depend on control of identity-bound data. We need a secure encrypted digital hub that can interact with user’s data while honoring user privacy and control.”

Adopting blockchain across the board could completely alter the way the internet works. Users would ultimately benefit the most, because their data is no longer at the mercy of the many companies storing their information.

Blockchain is a “1%” Conversation, and That Needs to Change

Saya Iwasaki explains that knowledge and influence in the crypto and blockchain markets are limited to a select group of people. This is an issue because placing all the power of blockchain in a few sets of hands could just transfer existing data power to those new groups rather than truly decentralizing.

Blockchain’s Decentralization Is Huge Technological Advance

Because, for the past couple decades, internet users have had to rely on big data companies like Facebook or Google to securely store their data, these companies have achieved great power. However, this means that the control of the internet (and the data gathered from it) falls into just a few private buckets. With block chain, users are empowered by being able to decide where their data goes, and knowing that it isn’t being sold to third-parties.

Block chain’s long-term effects on the internet becoming more democratic and run by its users will likely outweigh the effects it has on the world’s monetary systems.

Privacy May Be Cryptocurrency & Blockchain’s Best Use was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.