Fungibility and privacy are the missing factors that are holding back cryptocurrencies from megascale adoption. But neither Bitcoin nor some major blockchain was ever intended to be public; “they were designed to be publicly verifiable.” However, the landscape has shifted from no privacy to limited privacy over time to programmable privacy.
Binance CEO Changpeng Zhao and investor Chamath Palihapitiya, revealing their thoughts on a podcast on CoinBureau, agreed that fungibility and privacy are the key parameters that are holding back cryptocurrency payments and transactions from taking over the mainstream.
Privacy, the missing link for mainstream adoption
Sharing the video of the podcast on an X post, Zhao captioned it, saying, “(Lack of) privacy may be the missing link for crypto payments adoption.
Imagine a company pays employees in crypto on-chain. With the current state of crypto, you can pretty much see how much everyone in the company is paid (by clicking the from address).”
For instance, if a person was staying in a hotel and made a payment to that hotel, someone who is presently there or was there would know and recognize the address and would be able to identify that you are there. Hence, he pointed out that privacy was important.
As long as privacy is optional crypto will struggle
Analyst Lavneet Bansal mentioned that one of the most basic expectations in any financial system is discretion. Today, most crypto payments are transparent by default, which works for auditability but not for real-world business use. No company wants its payroll or vendor flows publicly traceable.
“Until privacy becomes native rather than optional, crypto will struggle to function as everyday payment infrastructure.”
Meanwhile, Colin, a crypto netizen, mentioned the current crypto market is at a fork, where either privacy could become a standard or it could be niche.
The evolution of privacy
“Neither Bitcoin nor most of the blockchains that followed were designed to be public,” stated Colin. However, ‘non-optional transparency max’ had everyone rerun computations to verify state, which at that time required revealing data, and thus, we are where we are.
Colin further explained that the technology has moved from no privacy, like Bitcoin, to limited privacy with Monero and Zcash to programmable privacy like PETs (Privacy-Enhancing Technologies) and TEEs (Trusted Execution Environments).
PETs have matured to the point where these issues are falling away. TEEs enable private smart contracts and encrypted end-to-end transactions and have been built into larger trust systems capable of supporting non-deterministic apps.
He further stated, “Privacy didn’t vanish; we aged out of remembering what it feels like.”
