We all know the problem with a public ledger. Most of us who live within the crypto ecosystem dare not say it.
But find a normal person on the street, one with some knowledge of blockchain (good luck with that), and they’ll tell you straight. It’s public. A public ledger is public.
We’ve spent almost two decades trying to sell pork pies to vegans, touting “public” as a virtue, when people actually crave privacy.
In the real world, regulations do not see radical transparency. Many perceive the madness. They see data breaches. They have no doubt that sharing a permanent, immutable record of every transaction they have ever made is completely absurd.
You wouldn’t use a credit card if your neighbor could see every transaction you make. You wouldn’t run a business if your competitors could see exactly who your suppliers are and how much you pay them.
Simply put, on-chain is too public, off-chain is too private. There has to be a balance. Some information must be made public for regulatory and audit purposes. Some information must remain private to allow businesses to operate effectively.
Companies need to protect their ownership movements from competitors and at the same time provide a “viewing key” to regulators or auditors. It is a balance between following the law and functioning effectively in the market.
There are some good reasons why institutional finance hasn’t fully embraced blockchain: why hedge funds, asset managers and corporate treasuries with billions to invest haven’t been put in the red. One of those reasons is that they understandably don’t want to hand over their proprietary strategy to the entire world and they simply can’t do it. It would be like streaming your alpha for free.
Control of corporate reality
Stablecoins promise speed and efficiency for B2B transactions. The cost is low, but the price is high. Privacy. A transparent ledger means that everyone (friends or enemies, allies or rivals) can see a company’s business. Which supplier they use, the volume of orders and the price per unit. There are no secrets; everything is in plain sight and they are effectively leaking their entire supply chain. Companies have to find ways to solve the problem by improving privacy while remaining compliant.
What we need is the blockchain equivalent of the Internet’s SSL moment. We didn’t get a functional website until encryption became a standard layer, allowing us to send credit card information without the world seeing us.
From theory to practice
We are finally seeing this infrastructure move from technical documents to the real world. For example, Canton Network has had some success in bringing privacy to corporate finance, albeit in an authoritative way. I’ve been involved in one of the latest advances in privacy. It is the recently announced plan to launch strkBTC on Starknet. We’ve spent years treating Bitcoin like digital gold: a huge store of value, but one that’s largely static and totally exposed if you try to use it in DeFi.
For the first time, you can have the security of Bitcoin with a “confidentiality layer” that protects your balances and counterparties from public view. It’s the first proof that we can have an “active” Bitcoin that respects the business need for privacy, all with selective disclosure for reasonable risk management.
The way forward
One of the values of early cryptocurrency adopters was privacy, but that ambition will remain unfulfilled if we don’t build for the systemically important capital flows that move the world. Public blockchains will only grow if they can support private financing.
Through selective disclosure and protocol-level confidentiality, we are not just adding a feature. We are finally building a system that the world can actually use. The technology is already here; The remaining question is which networks will set the standard for the next era of global finance.
