The following is a guest post through Matthew NiemergCo-founder of Aleph Zero.
In the Grand Halls of Florence’s Palazzo Medici, during the Renaissance, the legendary banking family led their affairs with a complicated dance of transparency and confidentiality. While their grandbooks followed every florine with careful precision, access to these records was monitored as carefully as the gold in their safes. This delicate balance between accountability and confidentiality was not only good business – it was essential to survive in the complex web of Renaissance politics and trade.
Five centuries later, since block chains innovate both finance and companies, we seem to forget the risk of being fundamental lesson. The idea that all transactions must be permanently visible on public grandbooks is not only naive – it is catastrophic for the acceptance of the business community.
Companies consider privacy as a matter of course
Consider a modern manufacturer that negotiates with suppliers. In traditional banking, while transactions are verified and recorded, the details remain confidential – only known for the parties involved and their financial institutions. Now imagine that you perform the same negotiations on a public blockchain where every payment, every contract term and every business relationship is visible to competitors, customers and market manipulators. It is equivalent to the forcing of companies to publish their entire accounts that pay and receive in real time, complete with transaction amounts and counterparty identities.
Transparency should mean that transactions follow agreed rules, so that not every business decision is exposed to public investigation. Just as the introduction of SSL by made E-commerce viable by Netscape in the nineties by securing online transactions, blockchain networks need robust privacy mechanisms to achieve mainstream business acceptance.
In a 2020 McKinsey surveyHealthcare and financial services achieved the highest score for consumers trust. Both industries are also two of the most important adopters of blockchain. Without safe and confidential infrastructure, these sectors risk the confidence that they have spent for decades building. The recipe of a doctor, the treatment plan of a patient or the financial restructuring of a company cannot be broadcast to the world on a public ledger – how safe the verification mechanism is not safe.
The effort is even higher today. As companies consider moving more activities at the chain-from Supply Chain Management to licenses of Intellectual Property, the need for confidentiality is acute. A pharmaceutical company that develops a breakthrough medicine cannot run the risk of exposing its research investments by transparent blockchain transactions. A retail chain may not broadcast its strategies for stock management to competitors through visible smart contracts.
The permanently readable public ledger
Moreover, the permanent nature of blockchain records reinforces privacy problems. Historical transaction data ultimately becomes less accessible in traditional systems. But on public block chains, every transaction remains visible forever – creating an indelible record that can reveal business strategies, price patterns and relationship networks to future competitors or opponents.
The solution is not to give up the promise of blockchain technology of improved verification and automation. Instead, we must enclose the privacy in these systems from the ground. Zero knowledge of cryptography offers a path, so that transactions can be verified without revealing their content. This technology can enable companies to use the benefits of blockchain while maintaining essential confidentiality.
Some blockchain purists could protest that this approach contradicts the foundation principles of the technology of transparency. But they have read history incorrectly. The innovation of Bitcoin was not in order to make all transactions public-it was in solving the problem with double spending without requiring trust in a central authority. Privacy -saving technologies can retain this confidential verification and at the same time protect sensitive company information. The two do not exclude each other.
Trust and combine confidentiality
The history of bank privacy, from old temples to modern Swiss banks, shows that confidentiality is not in contrast to trust – it is essential for that. The religious role of temples gave them a reputation for integrity and discretion. SOCILY, the medicine Did not survive and thrive for centuries by sending the financial affairs of their customers to the whole of Florence. They have succeeded in innovating an accounting system with double input that kept customer information accurate and private, which guarantees trust by discretion.
While we architect the future of the business community on blockchain networks, we have to learn from this history. The next generation of blockchain protocols must record privacy as a fundamental feature, not a side issue. Zero knowledge destinations, confidential smart contracts and private transaction pools are not only technical innovations-they are essential building blocks for practical business adoption.
The deployment goes beyond individual privacy problems to the architecture of our future financial systems. Without robust privacy solutions, public block chains run the risk that companies are forced to private, authorized networks – a trend that we already see. JPMorgan’s Kinexys Platform and the networks that are used on Hyperledger that are used by Walmart and Maersk for Supply Chain Management show how large companies choose controlled environments above public infrastructure. Although these private networks meet immediate business needs, they fragment the blockchain ecosystem and limit the network effects that make public chains so powerful.
Just like how business intranets in the early internet age ultimately took place for the public web As soon as security measures are adults, public blockchain’s privacy -retaining technologies need to prevent them from being sidelined by company -specific solutions.
Fortunately this remains a limited trend, because large companies such as Ubisoft, BlackRock and Warner Music Group continue to use public block chains for their business usage scenarios. However, this progress could reverse unless chains build confidentiality in their core infrastructure.
The Renaissance bankers understood that privacy was not about hiding crimes – it was about creating the trust and safety needed for trade to flourish. As value increasingly moves onchain, we would do well to remember their wisdom.
