Zac Williamson, CEO of the Ethereum privacy layer Aztec Network, discusses what the future of data protection in the Web3 could look like.
According to Williamson “can future networks align with regulators’ goals while protecting users’ privacy. However, this cannot work with the existing regulatory structures.” With the ban on Tornado Cash, the authorities have gone the wrong way.
The Financial Renaissance
”A forward-looking government would consider issuing a base currency directly on blockchains like Ethereum,” Williamson explained in a lengthy Twitter thread.
“Fungible, real assets combined with private self-management and low barriers to entry into open networks could create the beginning of a new financial renaissance“, added the CEO of Aztec network.
Hackers from North Korea or other sanctioned countries would continue to use Tornado Cash or a clone, Williams said. “Questionable entities will always offer criminals opportunities to evade, as long as the fact of the crime is even in the slightest contestable.”
In light of the TornadoCash ban, I have some thoughts on the future of privacy networks that I would like to share with you all.
Despite the dark circumstances of the present, there are grounds to be optimistic about the future for web3.
A short 🧵 on why…
– Zac Williamson (@Zac_Aztec) August 16, 2022
Zac Williamsons speaks as a cryptographer“ “Many projects in this field build on my research and benefit from the open source crypto algorithms I have written.”
In 2017, he co-founded Aztec Network, a layer 2 privacy protocol on Ethereum. The platform allows users to access a number of services in DeFi. ”Largely anonymous, but with compliance and verification capabilities,” Williamsons said.
“There can also be regulations in Web 3”
According to Williamson, privacy networks could soon split into four areas: private by default; fully decentralized; user-side compliance – Users can selectively prove parts of their identity (e.g. that they are not on a sanctions list); and open and programmable.
“Programmable Privacy Will Create Exponential Growth Opportunities for Crypto”, explained the CEO. “Users need a way to link encrypted identities to cryptocurrency accounts. This would allow off-chain assets to be issued and traded on the blockchain without the need for intermediaries to manage them.”
The vision of the cryptographer is a future in which the needs of users for privacy and the “openness” of decentralized protocols will lead to two different spheres.
In ”compliant” networks, applications and crypto assets should “comply with the meaning of the existing regulations. However, regulations would have to be adapted in their wording”.
In ”dark“ networks, on the other hand, applications and digital currencies “would not have compliance at the protocol level“.
“If we continue on the path we have taken with the ban on Tornado Cash, then compliant networks will have no chance. Legitimate use would not be able to survive through fear and uncertainty”” Williamson warned, adding:
“There can also be regulations in Web3, but not at the network level, but at the application level. These include companies and institutions linked to the Web3 that provide services to users and companies. For example, access portals for cryptocurrencies and hosted wallets.”
The Tornado Cash sanctions are harming the US itself
Put simply, the Web3 is the idea of a decentralized Internet powered by blockchain technology and token-based economy. Most likely, NFTs (non-fungible crypto tokens) will play a key role in the Web3 as a medium of exchange.
The US Treasury Department imposed sanctions on Tornado Cash on August 8, claiming that the privacy tool has laundered $7 billion worth of crypto assets since 2019. As a result of the new measures, the use of this blender is prohibited for all US citizens and institutions.
The sanctions completely ignore the fact that the mixer committed in April to block addresses from the blacklist of the U.S. Office of Foreign Assets Control.
“With the Tornado Cash sanctions, the US is harming itself. The government is preventing the creation of wealth and jobs by this revolutionary industry“, says Williamson.
Decentralized crypto networks may have Reduced the power of the state to enforce laws, but according to Williamson,“could the state get back most of this power by working with the trusted entities of the Web3. The change in the status quo should be recognized and a new regulatory framework should be created.”