The Development and Challenges of Privacy Technology in the Web3 Era

The roots of blockchain can be traced back to privacy technologies, 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 ideal. Certain privacy coins frequently encounter delisting from trading platforms, and founders of privacy projects even face legal risks. Even if some emerging projects manage to get listed on major exchanges, the geek spirit of privacy projects seems to be waning, and their ultimate product delivery capability is far from perfect.

In polishing privacy products, blockchain projects may need to learn from their Web2 counterparts to enhance their product development capabilities.

Proton: Privacy can be an excellent product form

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

Simply discussing the supplementary significance of privacy to products is not very meaningful. In other words, privacy also needs to find a suitable market. Some tech giants are able to maintain the appeal of their products while infringing on user privacy, mainly relying on their convenience and network effects. Users often accept these products because of characteristics like "ready to use" and "everyone is using it," even if they are not needed in personal scenarios and have to be used in office environments.

The penalties imposed by regulatory authorities have limited effectiveness. Taking a certain technology giant as an example, even when faced with nearly $3 billion in fines, the company can recover from the loss in just about 16 days. These fines have not effectively promoted the development of local tech companies in Europe, but instead have rendered them even more powerless in the face of giants.

Proton's strategy is to build its own product ecosystem. The research background from the European Organization for Nuclear Research has brought it a high level of credibility. Through cryptographic technology, open source code, and product auditing, Proton has created meaningful privacy products that allow users to achieve corresponding functionalities without relying on the full suite of services from certain tech giants.

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

Proton's product line mainly revolves around its email service. It is worth mentioning that Proton Mail is also the preferred choice of a certain social platform founder. It can be used without linking a mobile phone number, and it supports end-to-end encryption, ensuring the privacy of email transmission. Before certain instant messaging software was regulated, using these two products together could basically create a high level of commercial privacy experience.

Proton has also begun to venture into the Web3 space, launching its own cryptocurrency wallet. Unlike some transaction-oriented products, Proton Wallet has relatively simple features but places a greater emphasis on privacy protection.

The significance of Proton lies in demonstrating the feasibility of building products based on privacy technology. Unlike the advertising profit model of traditional giants, Proton adopts a paid system. Also different from the token economic model of Web3 peers, Proton has not issued its own token. This approach can be described as: a non-tokenized practice of cryptographic technology.

From Skiff to Emerging Projects: Tokenization of Cryptocurrency Technology

Compared to the steady development of Proton, some emerging Web3 privacy projects seem more eager to issue tokens rather than focus on product development.

At the beginning of 2024, a well-known collaboration tool company announced the acquisition of Skiff, marking the first case of a large Web2 product acquiring a Web3 startup. Skiff offers a document suite and encrypted email services similar to those of a certain tech giant, but its user interface and experience are far inferior to Web2 products. This also reflects a major challenge faced by current Web3 products: constrained by the performance issues of underlying blockchain technology, it is difficult to develop large applications that can compete with Web2.

The development of other Web3 privacy projects has also been unsatisfactory. Some projects have shifted their focus to the VPN field, some emphasize applications in the AI field, while others are still stuck in discussions about the hot technologies of the previous round.

It is worth noting that the combination of privacy technology and tokens seems to be less important in the current market environment. For certain projects, gaining support from well-known investment institutions appears to be more critical than technological innovation.

In the latest technical paper, certain projects are still researching how to enhance the efficiency of Multi-Party Computation (MPC) to reduce algorithm complexity and improve computational efficiency. However, it is currently difficult to find real application scenarios for this type of Web3 privacy technology combined with AI. If new products can capture market share from existing AI giants through privacy technology, it would be a meaningful innovation.

Conclusion

Monero (XMR), as a representative that truly considers the combination of cryptographic technology and application scenarios after Bitcoin, seems to have become somewhat unfamiliar in the rapidly evolving cryptocurrency market. Recently, XMR was delisted by a large trading platform, losing an important source of liquidity. This may signify that the so-called privacy technology is becoming part of market speculation rather than a genuine tool for solving problems.

However, the story of Web3 privacy economics is not over yet. Truly valuable privacy products still need to prove their worth through practical applications, rather than merely staying at the level of technical concepts.