Why Pseudonymity in Blockchain Might Not Be Enough

user avatar

by Giorgi Kostiuk

2 years ago

Since the inception of cryptocurrencies, pseudonymity of addresses was seen as a reliable way to protect user privacy. However, the rise of AI and security threats question its effectiveness.

Challenges in Maintaining Privacy

Leona Hioki, a system architect at INTMAX, states that pseudonymity no longer provides sufficient protection for users. Centralized exchanges demand user data for compliance with 'Know Your Customer' rules, creating a risk of identity exposure in case of a hack. Analytical tools like Chainalysis and Crystal make maintaining anonymity more challenging. 'Centralized databases have no incentive to protect information,' Hioki notes.

So many databases are centralized, there’s no incentive to protect that. For example, there was a huge privacy leak on a Japanese exchange, FTX Japan. Its name was ‘Liquid,’ but was renamed to FTX Japan. And now nearly all their records are hacked and leaked. And why did that happen? Because there’s no incentive to protect people’s information from a CEX.Leona Hioki

Privacy Risks in the AI Era

AI blockchain founder Alex Page claims pseudonymity has become obsolete as AI models demand constant user data access, compromising user privacy. Page suggests multi-party computation (MPC) technology to limit data access, allowing collaboration without large corporations.

I think pseudonymity works in a world where you can create an unlimited number of wallets, or you can have an unlimited number of, say, small identities that exist in different connection points. Where it falls apart is when we’re talking about actual use cases where you’re consistently contributing data to an application [...] we need systems to solve for that part.Alex Page

Countering Bad Actors

Concerns exist that blockchain privacy might allow offenders to evade justice. However, Hioki assures that the worst violators can still be barred from networks. INTMAX uses decentralized chain analyzers for risk assessment, blocking major hacker deposits. Page asserts that adding privacy won’t facilitate malicious actions.

Pseudonymity as a user privacy protection method in blockchain has lost its effectiveness. Advanced and robust methods like multi-party computation and zero-knowledge proofs are necessary to ensure privacy.

Tier I

Sector: #18291

Sealed Hiding Place Room

Resource Cache

Resource Cache

Tier I

Requires 25% Tier Progress to Claim
Meme Cache

Meme Cache

Tier I

Requires 50% Tier Progress to Claim
Equipment Cache

Equipment Cache

Tier I

Requires 75% Tier Progress to Claim

After collecting, hiding places will be stored in your inventory and can be opened with Keys.

Other news

Coinbase Launches Ripple USD (RLUSD) for Eligible Users

Coinbase has launched Ripple USD (RLUSD) for eligible users, allowing deposits and withdrawals on multiple platforms, enhancing stablecoin liquidity.

user avatarTenzin Dorje

DTCC Launches Tokenization Service to Enhance Blockchain Infrastructure

The Depository Trust Company (DTCC) has launched a tokenization service to enhance blockchain infrastructure, allowing the movement of eligible assets between traditional and tokenized environments.

user avatarBayarjavkhlan Ganbaatar

CFTC Takes Legal Action Against Utah to Protect Kalshi

CFTC files lawsuit against Utah to block enforcement actions against Kalshi, a prediction market platform.

user avatarElias Mukuru

Utah Charges Kalshi and Co-Founders with Illegal Gambling Promotion

Utah has filed criminal charges against KalshiEX LLC and its co-founders for illegally promoting gambling in the state.

user avatarMohamed Farouk

Arbitrum's Network Fees Remain Stable Amid Increased Activity

Arbitrum's daily user-paid fees remained stable at approximately 19,100 on October 28, despite an increase in active addresses, indicating a shift towards lower-cost interactions.

user avatarDiego Alvarez

Transaction Activity Increases but Lags Behind Wallet Growth

Transaction activity increased modestly to approximately 21 million on the Arbitrum network, despite a significant rise in active addresses, raising concerns about the sustainability of growth.

user avatarMaria Fernandez

Important disclaimer: The information presented on the Dapp.Expert portal is intended solely for informational purposes and does not constitute an investment recommendation or a guide to action in the field of cryptocurrencies. The Dapp.Expert team is not responsible for any potential losses or missed profits associated with the use of materials published on the site. Before making investment decisions in cryptocurrencies, we recommend consulting a qualified financial advisor.