2018: When Privacy and Decentralization Collided

Guy Zyskind is the CEO and co-founder of Enigma, a secure computation protocol that integrates with blockchains.

The following is an exclusive contribution to CoinDesk’s 2018 Year in Review.

In 2018, two major long-term trends finally collided in a very public fashion.

The first trend was the over-centralization of online platforms. For years, Facebook, Google and others accumulated power and influence by centralizing user behavior. Products given to users “for free” created closed systems and echo chambers designed to keep users inside siloed ecosystems. In turn, platforms repackaged these captured users into lucrative advertising products, creating an online oligopoly.

The second trend was the erosion of data privacy. A complete lack of transparency around how data was used, shared and protected by platforms and institutions led to some dramatic revelations. First, Cambridge Analytica whistleblowers exposed how Facebook data was misused to target individuals during political campaigns. The rest of the year was filled with news stories of massive data breaches, hacking coverups and yes, even more terrifying Facebook revelations.

So why did everything explode in 2018? The truth is that these trends have been converging for a very long time. Many of the most horrifying news items of 2018 concerned vulnerabilities that have existed for years. The only thing different about this year is that we finally started to notice. And maybe that’s the scariest thing of all.

No easy fix

It’s easy to see how centralization and data privacy are linked. Without the appropriate oversight, monopolistic platforms are not held accountable for their use of our data – or how it is protected. Also, keeping data in centralized databases under a single entity’s control creates a juicy target for opportunistic hackers who could leak, exploit, or ransom the data.

What’s not easy, however, is creating decentralized alternatives that adequately address the issue of data privacy. There were countless articles written over the past year extolling the virtues of blockchain and how it could disrupt Facebook’s business forever by enabling decentralized social platforms. Most of these articles, however, contained a fundamental misunderstanding of how blockchain worked or overlooked its existing limitations (like scalability and privacy). As a result, they did not foresee how challenging addressing this problem would actually be.

This is where the third major trend of 2018 comes in: the (over)correction of the blockchain hype cycle.

Enthusiastic speculation around the potential of blockchain exploded to unsustainable levels in 2017 and carried over into this year. Magazine covers and thought leaders promoted blockchain as a potential cure-all. Nearly any problem could be solved by “throwing a blockchain at it,” with WIRED famously categorizing 187 things the blockchain is supposed to fix. But as market prices for cryptoassets began to implode, this list narrowed dramatically over the course of 2018, culminating with more proclamations from thought leaders that “blockchain is useless.”

While there may be no end in sight for the first two trends – monopolistic platforms still lack oversight and transparency, and the worst breaches of data privacy are likely yet to come – there are signs the blockchain hype cycle has stabilized. Expectations are beginning to align with reality – and real solutions are being proposed.

Decentralized solutions for data privacy

We published an article on the Enigma blog back in March (around the time of the original Cambridge Analytica story) about how blockchain alone could not fix Facebook. As we wrote at the time:

“While blockchain is great for correctness and transparency, it fails in privacy. Today, as blockchain is applied to the financial system, we are able to see all transactions that have ever taken place. In a future where we have decentralized social networks, we will see all likes, posts, and connections. In other words, blockchains alone cannot give people control over their own data.”

This statement was our attempt to take a measured approach to the problems of over-centralization and data privacy. Rather than rejecting the utility of blockchain, we hoped that people would see blockchain for what it was good at being – a decentralized verification layer, not a complete platform. Fortunately, many builders and leaders in the space have embraced this healthy perspective, including Vitalik Buterin and the Web3 Foundation.

We expect 2019 to bring continued focus on the non-blockchain layers of the tech stack for the decentralized web. These include oracles, decentralized storage, state channels – but perhaps most importantly – privacy-preserving computation. This allows encrypted data to be computed by nodes in a decentralized network – all without revealing the data to the nodes themselves.

Secure computation has been a field of study since the 1980s, long before Satoshi proposed bitcoin. It is often considered the “holy grail” of computer science – and with recent advancements, we are finally beginning to realize some of the potentials of secure computation.

When combined with other decentralized technologies such as blockchain, we can create foundational platforms for unstoppable applications that preserve the privacy of their users. The dream of dapps has always been to put the needs and interests of users first – protecting their data and identities while preventing censorship. Decentralized privacy solutions are the missing piece for realizing this dream.

In 2019, we can expect to see more and more projects in the blockchain space embracing privacy solutions, including Ethereum itself.

There are many technologies to explore, such as zero-knowledge proofs and zk-snarks/starks, trusted execution environments, secure multi-party computation and fully homomorphic encryption. Understanding any one of them is challenging, and the development work supporting these technologies is still in its earliest stages. However, protocols based on these privacy technologies have as much potential to reshape the world as blockchain itself – if not substantially more so.

What now?

In 2018, the conversation around the potential of blockchains turned rapidly from “what can’t they do?” to “what can they do?” Pundits began to declare blockchains a solution in search of a problem. But this ignores the very real problems all around us, from government censorship to broken financial systems to the frequent violation of data privacy and security.

In 2019, we believe the conversation will turn again as people begin to realize the deep relationship between these problems and decentralized solutions. Specifically, we expect people to realize that the greatest risks to data privacy have always come from centralized platforms and architectures – and that this is by design, not by accident. We also expect people to understand the limitations of blockchain as a privacy solution – again by design. The trends have already coincided. It’s up to all of us to help draw the connections.

Our greatest priority in 2019, beyond building, must be education and advocacy. Importantly, this effort cannot just be limited to blockchain technology. We must also focus on other decentralized technologies and the problems they can help solve, such as censorship and data privacy. In that last area, there are already many incredible organizations doing great work on education and advocacy, including the Tor Project and EFF.

We want and need decentralized technologies to be globally implemented and have global relevance. To do this, we must all embrace purposes beyond speculation.

Our purpose is privacy. What’s yours?

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