The Evolution and Challenges of Privacy Technology in the Web3 Era

The roots of blockchain are deeply embedded in privacy technology, especially cryptography. From elliptic curves to zero-knowledge proofs, these technologies highlight the importance of privacy economics in the Web 3.0 era. However, the reality is not as optimistic. Certain privacy coins are frequently delisted from trading platforms, and founders of privacy projects face legal issues. These events indicate that even if some privacy projects can go live on mainstream trading platforms, the geek spirit of privacy projects is gradually fading, and their ability to deliver final products cannot be deemed perfect.

In developing privacy products, blockchain projects may need to learn from their Web2 counterparts to enhance their technical capabilities and product quality.

Proton: Privacy Can Become an Excellent Product Form

"Privacy is a feature, not the product itself."

Simply discussing the supplementary significance of privacy to product forms is not very meaningful. In other words, privacy also needs to find a suitable market. Although certain tech giants are often questioned regarding privacy, their products are still favored by users, mainly due to their convenience and strong network effects. Users often accept certain privacy compromises because of the ease of use and prevalence of the product.

In this regard, the fine strategy adopted by regulators has not been significantly effective. Even when imposing hefty fines on certain tech giants, these companies usually manage to recover their losses in a short period of time, and these fines do not genuinely help European tech firms enhance their competitiveness.

In the face of this predicament, a certain email service provider has adopted a strategy of building its own product ecosystem. Its scientific background from the European Organization for Nuclear Research has earned it a high level of credibility. Through cryptographic technology, open source code, and product audits, they have constructed a meaningful privacy product ecosystem—users can achieve corresponding functionalities without relying on the services of certain mainstream tech companies.

Although it is still difficult to compete with technology giants in terms of network effects and scale effects, compared to their peers in the blockchain field, the products they offer are sufficient to meet daily usage needs and have become a reliable alternative.

The company's product line mainly revolves around its core email service. It is worth mentioning that this email product has also been favored by the founder of a certain social platform. It can be used without binding a mobile phone number and supports end-to-end encryption, ensuring the privacy of email transmission. Before a certain instant messaging tool came under regulation, their combined use could provide users with a higher level of commercial privacy experience.

The company has also begun to venture into the Web3 space, launching its own cryptocurrency wallet. Unlike other trading-oriented wallets, this wallet has relatively simple functions.

The significance of this company lies in proving the feasibility of building products based on privacy technology. Unlike the advertising profit models of traditional giants and the token economics systems of Web3 projects, they have adopted a paid model, which can be termed as "non-tokenized practices of cryptographic technology."

From Skiff to Nillion: Tokenization Attempts in Cryptography

In contrast, some Web3 privacy projects like Skiff, Nym, Privasea, and Nillion seem to have yet to find a clear product-market fit but have started issuing tokens.

In February 2024, a well-known collaboration tool announced the acquisition of Skiff, marking the first time a large Web2 product has acquired a Web3 startup. Skiff offers document suites and encrypted email services similar to those of a certain tech giant, but its user interface and user experience still need improvement. This also reflects a common issue faced by current Web3 products: constrained by the performance bottlenecks of the underlying blockchain, it is difficult to compete with Web2 products in large application fields.

The development of other Web3 privacy projects is also less than satisfactory. One project gradually shifted its focus to the VPN field, another project focused on fully homomorphic encryption emphasizes applications in the AI field, while Nillion remains stuck in the narrative of multi-party secure computation (MPC) from the previous cycle.

As certain mainstream cryptocurrencies show lackluster price performance, privacy technology products are gradually being marginalized by the market. This does not mean that privacy technology is no longer important, but rather that the combination of privacy technology and tokens has lost its appeal at this current stage.

For projects like Nillion, support from large exchanges and well-known investment institutions seems to be more concerning than the technology itself. Although Nillion has promoted several concepts, its true source of profit may primarily rely on the token. In contrast, at least some projects are still working to develop actual markets.

Nillion's latest technical paper still focuses on the practical application of MPC, researching how to reduce algorithm complexity to enhance computational efficiency. However, this type of AI-integrated Web3 privacy technology currently struggles to find real-world application scenarios, as mainstream AI companies have not adopted these technologies. New products need to demonstrate their unique value to succeed in the market.

Conclusion

In the context of the rapidly changing cryptocurrency market, early projects focused on privacy technology, such as Monero (XMR), have gradually faded from people's attention. However, it represents an important attempt to truly combine cryptographic technology with practical application scenarios after Bitcoin.

With XMR being delisted from a large trading platform, it has lost an important source of liquidity, which may signify the end of an era. From now on, so-called privacy technologies may become more of a tool for market speculation rather than solutions to real problems. Nevertheless, the story of Web3 privacy economics is not yet fully concluded, and there is still the potential for genuine innovative solutions that can balance privacy protection with practicality in the future.