The Development and Challenges of Privacy Technology in the Web3 Era

Blockchain originates from privacy technology, especially cryptography. From elliptic curves to zero-knowledge proofs, it reflects the success of privacy economics in the Web 3.0 era. However, reality is not perfect. Events such as certain anonymous coins frequently being delisted from exchanges and the arrest of a founder of a mixing protocol indicate that even if new projects can go live on major exchanges, the geek spirit of privacy projects is fading, and their ultimate product delivery capabilities are far from perfect. In refining privacy products, blockchain projects need to learn from their Web2 counterparts to improve their own standards.

Proton: Privacy Can Be an Excellent Product Form

Privacy is not just a feature; it should be a complete product. Merely discussing the reinforcing significance of privacy for product forms is not very meaningful; privacy also needs to find a suitable market positioning. Large tech companies can maintain user stickiness while infringing on privacy mainly by relying on convenience and network effects. Users often accept these companies' full suite of services because of "ready to use" and "everyone is using it."

The model of replacing regulation with fines has proven ineffective. Even imposing a hefty fine of nearly $3 billion on a certain search giant only allows the company to earn back that amount in about 16 days. More importantly, these fines have not translated into revenue for European tech companies, making them even more powerless when facing the giants.

In response to this issue, Proton's strategy is to build its own ecosystem. Researchers from the European Organization for Nuclear Research inherently possess a high level of credibility. Through cryptographic technology, open-source code, product audits, and other means, they have created privacy products with real significance—users can achieve the corresponding functions without relying on the ecosystem of a certain search giant.

Although the current network effects and economies of scale are still unable to compete with the giants, the products offered by Proton are sufficient to meet the daily usage needs compared to its blockchain peers, making it a viable alternative.

Proton's product line mainly revolves around its email service. It is worth mentioning that this email service is also the preferred choice of a certain social platform founder. It can be used without binding a mobile phone number and supports end-to-end encryption mode, ensuring the privacy transmission of emails. Before a certain instant messaging software was regulated, using it in conjunction with its end-to-end mode could basically create a higher level of commercial privacy experience.

Similar to a certain instant messaging software, Proton has also started to venture into the Web3 field by launching a wallet product. Unlike transaction-oriented products, Proton's wallet features are relatively simple.

The significance of Proton lies in demonstrating the feasibility of building products based on privacy technology. Unlike the advertising profit models of traditional giants and the token economics systems of Web3 peers, Proton adopts a paid system and has not issued tokens. We can refer to it as: a non-tokenized practice of cryptographic technology.

From Skiff to Emerging Projects: Tokenization of Cryptographic Technology

Compared to "idealists" like Proton, emerging projects like Skiff are more like "pragmatists." Their product market positioning is still unclear, but they have started issuing tokens.

On February 9, 2024, a certain collaboration tool announced the acquisition of Skiff, marking the first instance of a large Web2 product acquiring a Web3 startup. Skiff's product line is similar to that of a certain search giant's suite, including an IPFS-based document suite and encrypted email services. However, its biggest issue is the poor user interface and bad user experience. This is also a common problem for current Web3 products, which are constrained by the performance bottlenecks of the underlying blockchain, making it difficult to compete with their Web2 counterparts when developing large-scale products.

The development of other Web3 privacy products has also not been satisfactory. A certain network anonymity project has gradually shifted its focus to the VPN field, a certain fully homomorphic encryption project emphasizes more on applications in the AI field, while emerging multiparty computing projects are still stuck in the narrative of the previous cycle.

Technical narratives are cyclical. The concept of emerging multi-party computing projects is a derivative narrative of Ethereum and zero-knowledge proofs in the layer two network domain. As Ethereum's price performance weakens, privacy technology products are being discarded by the market, with the most obvious example being that fully homomorphic encryption has failed to become the next hotspot for zero-knowledge proofs.

This does not mean that privacy technology is unimportant, but rather that the combination of privacy technology and tokens has lost its appeal at the current stage. For emerging projects, the support of large exchanges and well-known investment institutions seems to be more important than the technology itself.

In the latest technical paper, the research focus of a certain emerging project remains on the practice of multi-party computation, primarily concentrating on how to reduce algorithm complexity to enhance computational efficiency. However, it is challenging to find real application scenarios for these AI-integrated Web3 privacy technologies, as mainstream AI companies have not adopted them. Only when new products can leverage privacy technology to capture market share from these companies can they be considered meaningful innovations.

Conclusion

A certain anonymous cryptocurrency may be somewhat unfamiliar to today's rapidly evolving cryptocurrency market participants, but it should be the last attempt to truly consider how cryptographic technology can be combined with practical application scenarios after Bitcoin.

On February 7, 2024, two days before a certain collaboration tool officially announced the acquisition of Skiff, this anonymous cryptocurrency was delisted by a major trading platform, losing its largest source of liquidity. Perhaps from then on, the so-called privacy technology will become a tool for market speculation, but the Web3 privacy economics has not completely collapsed yet.