2021 on-chain privacy research report: digital native awakening paves the way to Web3.0

Data has always been the driving force of the Internet economy. While data generates huge economic benefits, data leakage and data abuse have also become a new and inevitable topic in the digital society. Web2.0 enters the “read-write” network and collects data through a centralized server. After a large amount of personal data is collected by Internet companies, it becomes the target of network hackers and data illicit production. Data is constantly being leaked, personal privacy is not protected, and the dividends brought by the digital economy cannot be enjoyed, which has become a major obstacle to the development of the Internet.

Dr. Gavin Wood, the founder of the Web 3.0 Foundation, pointed out that as an inclusive protocol, Web 3.0 embodies the spirit of openness and decentralization of the Internet. Web3.0 directly implements basic functions such as data storage, privacy protection, and identity authentication through the protocol layer. Under Web3.0, the privacy protection protocol combined with blockchain technology can play an important role in the construction of data property rights.

From 2020 to the present, as the encryption market has become increasingly concerned by the mainstream market, various new tracks such as Defi, NFT, and Metaverse have brought the prosperity of the world and digital assets on the chain, as well as the construction of privacy technologies and applications in a broad sense. There is strong demand in various scenarios. From the realization of technologies such as anonymous transactions to the exploration of smart contracts, cross-chains, public chains, consortium chains, etc., blockchain + privacy has become a subject of continuous in-depth research by all parties.

In the middle of 2021, the Institute of Computing Power Think Tank will launch the “2021 On-Chain Privacy Research Report-Digital Native Awakening, Paving the Road to Web 3.0” for the first time. Based on the development context of privacy technology on the traceability chain, this report attempts to take stock of the entire ecology of the past two years, compare the differences between mainstream privacy technologies, and explore and analyze the practical value of representative cases and project parties, with a view to Web3.0 The data flow and the development of privacy technology in the era clarify the direction.

Privacy on the chain: an important part of entering Web3.0

The report pointed out that due to the contradictory theory of open traceability of the blockchain itself and privacy security, the risk of data leakage on the chain increases and it is difficult to protect user privacy. The emergence of privacy solutions on the chain can avoid data leakage to unauthorized persons on the premise that data can be transferred, thereby better protecting privacy.

Privacy Anonymous Coin keeps the information such as sender, receiver, transaction amount and transaction IP confidential, so that this information is only visible to the participant (or a third party designated by the participant). Anonymous coins such as Monero, Dash, and Zcoin solved some of the privacy issues of cryptocurrency transactions at that time.

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Figure 1: Comparison of the market value of anonymous currency projects (100 million ¥)

Data source: non-small, deadline July 23, 2021

Smart contract privacy mainly lies in encrypting input and output data and network status, making it concealed from all parties except the user (including the node that executes the smart contract). Specifically, privacy solutions for smart contracts: one type is a basic public chain that focuses on privacy; the other type is based on different public chains and provides tools or in-functional projects for privacy technology.

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Figure 3: Comparison of the market value of anonymous coins + privacy smart contract projects (100 million yuan)

Data source: non-small, deadline July 23, 2021

When there are more and more blockchain protocols, asset interactions becoming more frequent, and data privacy becoming more and more insecure, there is an urgent need for a type of technology to enable interaction between different chains. This is the reason for the emergence of cross-chain privacy. On the one hand, cross-chain privacy can allow the assets on the chain to flow through value-to-peer exchange, solve the problems of the inextensibility and poor liquidity of the public chain, reduce the cost of proof and verification time, but at the same time ensure the concealment of transactions; on the other hand; It can be used as a middleware protocol, relying on the underlying infrastructure of the public chain, linking more fields such as DeFi, NFT, etc., to achieve cross-chain interoperability and huge composability.

Ecological map of privacy projects on the Web3.0 chain

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Comparison of privacy technology paths

The report also sorts out the core privacy projects on the chain, such as Phala Network, PlatON, Raze Network, Tornado, and Manta Network. Discuss the development context of privacy projects in the Web3.0 era and the problems that need to be solved continuously in the future.

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Comparison of privacy projects on the chain

Data source: non-small, as of July 22, 2021

The future development path of privacy on the chain

The report provides suggestions on the future development path of on-chain privacy through three aspects:

First of all, in addition to the continuous development and improvement of the public chain itself, the emergence of cross-chain bridges and financial public chains has also promoted the continuous growth and development of the privacy chain. From the perspective of technical implementation, these private public chains can solve the problem of inextensibility of Ethereum on the one hand, and realize data confidential storage, privacy protection and anonymous access on the other hand. The new privacy chain is committed to capitalizing data, which can not only reduce the current cost of privacy protection, but also allow the blockchain to naturally adapt to the data circulation on the chain in terms of confirmation and incentives.

Secondly, most of the current privacy solutions on the chain are limited to transaction privacy issues, and do not really consider the issue of user identity privacy leakage. In the future web3.0 era, privacy identification will be an important basic function. The user identity verification can be completed through the technology of private identity certification. In the entire on-chain transaction process, user identity information is completely anonymized, and personal privacy will not be leaked. Therefore, on-chain privacy should not be limited to solving transaction privacy issues, but should also address identity privacy issues.

Finally, privacy technology has received great attention and development in the blockchain field. Many projects have chosen different directions and paths based on their own characteristics and technical capabilities and scenarios. “The on-chain privacy solution is not simply a solution to the problem of the chain, nor is it a solution to the privacy itself, but a win-win situation,” said Su Guantong, chief cryptographer of ARPA and a cryptographic chip doctor of Tsinghua University.

The on-chain privacy solution is dedicated to solving the problems in the original blockchain system. In the future, it will not only provide solutions to the problems of the blockchain itself, but also fall to the general privacy level to truly solve data privacy security issues. This will enable Web3.0 to build a data flow ecology and a systematic infrastructure for the growth of digital assets.

 

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