This article was originally published on X on August 24 2024
No crypto project geared towards payments without basic privacy will survive.
Surprisingly, it isn't a major privacy-focused crypto that's pushing this new normal: it's PayPal. 🤯
Yes, you heard that right. PayPal's new stablecoin, PYUSD, will have privacy features. And this will push the whole space to get on a minimum privacy standard for payments.
In the PYUSD whitepaper, it describes a feature called "Confidential Transfers," which seems exactly like Confidential Transactions (CT).
CT doesn't do anything to hide where you send a payment, but it does hide the amount you're sending, as well as your balance, from public view. It was a proposed upgrade to Bitcoin that never got implemented, but it got into a few other projects.
Monero, for example, uses RingCT (currently), a combination of CT and ring signatures (basically generating a bunch of decoys among which your payment is hidden).
But back to PayPal. Three reasons it's launching privacy forward in crypto:
1: It's extremely regulated
PYUSD is a regulated fiat asset issued by one of the largest payment companies in the world. It's one of the very short list of explicitly greenlisted assets in New York. It's a global brand.
It very well may be one of the single most-regulated crypto assets in existence. And if it supports privacy beyond what most blockchains today offer, that completely removes the excuse to not implement it for fear of regulators cracking down.
2: PayPal is normie-geared
Crypto natives have been dealing with weird, rough, and broken tech for many years now. It's normal for us. Regular people, however, won't have patience for major shortcomings.
An average person is not going to want to have their entire balance public, just because it's crypto. PayPal will set the expectation for broader society, so cryptos seeking to onboard regular people will then need at least this feature.
3: CT makes sense as a bare minimum
CT provides the bare minimum (people can't see how much money I have) that regular users demand, but also doesn't scare banks and regulators by making completely hidden payments.
Also, if there's a glitch in merchant software when buying something, you can still look the payment up on a public block explorer and show that it did happen, even if the amount is hidden. The inability to do this with private/shielded transactions has been an issue I've encountered with merchants before.
Overall, I see the CT address type transitioning into the "new transparent address" across the crypto payments space. Users wanting greater privacy will use additional techniques such as Zcash-style zero-knowledge shielding.
Today, privacy is exceptional. PayPal is making a modest privacy improvement normal.
Privacy is normal. Let's not stop here!
Posted Using InLeo Alpha
I published this on Hive today because Circle just followed suit and started pushing this Confidential Transactions standard for "compliant privacy." Looks like I was right again!
https://circle.com/blog/confidential-erc-20-framework-for-compliant-on-chain-privacy
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