Anonymity 3.0: Do We Have a Chance with Web3?

In the digital era, the volume of data generated online keeps on growing. Users leave their information at every step of interaction with websites and apps. Instead of a long intro, watch this funny video “authorized by the Ministry of NoMemes.”

With that said, is it still possible to stay private on the “Filternet”? Yes, it is. It has been made possible through unstoppable decentralization.

Matching anonymity and openness

Anonymity describes the quality or state of being unknown, meaning the user name and identity are kept concealed. Users may stay anonymous for security or malicious purposes. The term that seems to be the closest opposite of “anonymity” is “openness,” referring to the free use, exchange, and modification of information for any purpose.

However, openness and anonymity are not mutually exclusive. In Web 3.0, openness stands for the ability of users to track all transactions and see the links between them. In this case, users do not know anything about the parties involved in these transactions, so they do not violate any privacy rules.

When activities covered by the term “openness” do not lead to the non-authorized disclosure of private data, there is an optimal balance between anonymity and openness.

Decentralization and crypto as contributors to openness

Decentralization in crypto is achieved through the use of blockchain technologies. From a security perspective, blockchain technology introduces a new way of storing information and enabling safe transactions, thereby, trust.

Blockchain does not rely on any central point of control. Participants of the network have to agree unanimously to add a new block while ensuring its integrity. The other important characteristic of blockchain technologies is immutability meaning that data remains unchangeable since any alteration requires enormous computing power.

Thanks to these features, blockchain technologies bring openness and transparency to the financial world. Users can view holdings and transactions of public addresses using block explorers.

Decentralization and crypto indeed offer anonymity but for only one purpose: SECURITY. If a bad actor conducts malicious transactions and these activities are noticed, their address will appear on various blacklists, and all ethical projects will refrain from interacting with it.

If there is no central authority in decentralized technologies, who actually owns and controls data then? Generally, no one, but…

…everyone in the network owns and manages data.

Decentralization has led to the establishment of decentralized autonomous organizations (DAOs), the entities governed by the community in which all interactions are organized around the pre-determined rules embedded in smart contracts. By owning DAO virtual assets, users get voting power and, thus, can influence the development of the organizations they are a part of.

Blockchain technologies: do they fight or favor the darknet?

There is a widespread prejudice that blockchain tech and crypto are actively exploited by criminals such on the darknet for criminal activities like money laundering.

Is this true? Let’s analyze.

In essence, the blockchain offered a way for digital money to exist across borders and beyond censorship. As a result, this has indeed favored darknet activities, such as selling drugs and other prohibited goods, services, or content as sensitive data for buyers. Almost all payments on the darknet are made in crypto. Transactions carried out in virtual assets grant anonymity to cyber criminals, and the use of special crypto mixers makes it extremely difficult for intelligence agencies to track the movement of funds.

According to the by Chainalysis, darknet markets received $2.1B in crypto in 2021, $1.8B of which was attributable to drug markets, and the rest of $300M was received by fraud shops. Although the price of crypto assets skyrocketed in 2021, the number of fraud shops and drug-focused markets declined by 5 and 13 units respectively. Thus, the crypto boom did not lead to the uprising of darknets.

“Every individual has the right to vote” — 100% true in DAOs

As mentioned above, decentralization and blockchain have brought openness and transparency to users. And one of the forms of transparency is fair voting power. With the rise of decentralized autonomous organizations (DAOs), decisions are made from the bottom up since users are both owners and managers of projects.

DAO is not about chaos: a proposal goes live only upon getting approval from the majority of stakeholders.

It prevents DAOs from being spammed with proposals. All activities taking place within DAO are fully transparent and verifiable.

Is it obligatory to join DAOs? Users are free to decide whether to join a DAO. They can do it only after understanding the underlying governing rules.

As we can see, DAOs prevent barbaric behavior. Users do not have to rely on and trust the only agent instead, as they work in groups with members having aligned interests.

Are users capable of making correct decisions?

The critics of DAOs argue that these organizations are not perfect since the masses are given the right to make complex financial decisions without even understanding their nature. The share of tokens owned by a user is the only determinant of their voting power. Therefore, the knowledge and expertise of users do not impact the voting power.

Some projects solve this problem by launching educational campaigns with attractive financial rewards on their websites. These campaigns can be launched on the biggest industry platforms. The majority vote also reduces the risk of fundamental decisions made by a few users with no understanding of the issue.

Data ownership in Web 3.0

In the Web 3.0 network, data is stored and handled locally over a distributed and decentralized ecosystem. Data tokenization is the firm confirmation of ownership, meaning that a data creator gets complete control and freedom to distribute data whenever they want.

In Web 3.0, digital wallets are used to interact and exchange data, thereby creating an online identity. Access to our personal and professional digital spaces resides in users’ wallets. Online identity enables participation in the online economy, access to content, and trading of digital assets. The purpose is to ensure that no organization would be able to limit user access.

Generally, vital information should be stored with decentralization because centralized solutions remain too vulnerable to outside pressure and attacks.

Decentralized identification systems

Decentralized identity is an emerging concept in Web 3.0. It is the approach to identifying and accessing administration where people can create, manage, and control their personally identifiable information without the consent of third parties.

Decentralized identity management enables transparent and secure interaction between users, organizations, and things. Distributed ledger technologies and blockchains validate the existence of a legitimate entity. The basis of decentralized identity management is decentralized encrypted wallets built on blockchain.

For crypto projects, decentralized identity management simplifies their compliance responsibilities since they can collect and store only the information they really need, thereby handling fewer identity data.

What about depersonalization in crypto?

Concerning the most recent advances in crypto, such as the ones related to the Metaverse, the global community is moving towards depersonalization rather than complete anonymity. Interactions in the Metaverse take place through digital avatars that may, but not necessarily, contain sensitive data about their true owner. However, if an avatar makes a real individual identifiable in the real world, this data should be treated as sensitive.

Decentralized labeling as the upcoming cybersecurity solution

Simply speaking, labeling means attributing positive, neutral, or negative connotations to any object or item based on predefined criteria. Labeling is widespread in crypto. For example, you may label your addresses on different exchanges or give names to the address of your friends or relatives to distinguish them from malicious players. On the contrary, upon being scammed, users put negative labels on all addresses and contacts involved in the incident. It’s the crypto labeling on a micro level.

Crypto projects and exchanges compose their lists of either reliable or malicious users and contacts. Centralized cybersecurity companies also compile their whitelists and blacklists of projects that meet and violate essential security standards. However, the capacity of each cybersecurity brand is limited to its internal human capital and available technologies.

Now imagine a situation where the whole crypto community is engaged in gathering cybersecurity data about projects, exchanges, and platforms. A huge open database with projects getting labels from the community in real time. No doubt that all these volumes of data have to be managed by an independent and trusted intermediary to ensure people have access to high-quality verified information.

What can it look like? Imagine that there is a security scale in front of each project ranging between 0 and 100 and changing every single moment based on the inputs introduced by the community. Through this scaling, we can even form groups of projects based on their security, as well as clearly point out bad actors. This new cybersecurity paradigm may be referred to as decentralized labeling.

Decentralized labeling contribution to crypto community growth

Decentralized labeling would create links between cybersecurity and crypto communities. Namely, the former will become even more deeply integrated into the latter by meeting the security needs of crypto holders. Imagine that through decentralized labeling, we can turn cybersecurity data into something like public goods that would serve the whole crypto community.

Whitelisting as the outcome of decentralized labeling

Would you like to interact only with reliable and secure projects? What about finding all possible security information about your chosen projects in a single place with a few clicks? Or viewing the biggest database of secure projects, so-called crypto whitelisting?

It is the new reality thanks to decentralized labeling, which opens new horizons in crypto. So, don’t miss the chance to stand among the first beneficiaries of decentralized labeling. I guess, we still have a chance for anonymity. Thanks, web3.

---