Compilation of the original text: Hu Tao, Chain Catcher

Original title: "Why Privacy Coins Haven’t Taken Off》

Compilation of the original text: Hu Tao, Chain Catcher

《Cypherpunk Manifestoopens with the words: “An open society in the electronic age needs privacy.” But privacy coins — cryptocurrencies with strong privacy features — failed to take off. Both Monero and zcash are worth less today than they were in 2018. In contrast, ETH is worth more than double its 2018 high.

source:

source:rand corporation

Less than 10% of existing zcash tokensis masked orPrivate. Growth in users and transactions is generally mediocre compared to smart contract platforms.

Privacy coins are disappointing. Why didn't they take off?

There are four main reasons.

1. No one wants to transact with privacy coins

While people may want their money to be private, they don't want to pay each other in privacy coins. When most people think of "privacy cryptocurrencies," they think of privacy BTC or ETH, or possibly privacy stablecoins. Few people actually want to pay off debt with a special token whose only defining characteristic is that it can be private.

that's whyTornado CashCompared with other privacy systems based on Ethereum, there are so manyutilization rateSource: Dune Analytics

Source: Dune Analytics

Another reason for Tornado's success is that it internalizes the cost of privacy onto users who actually care about it, rather than forcing everyone to bear the cost of privacy.This brings us to the second reason why privacy coins have not been successful.

2. Privacy is not easy

HTTPSis the encryption protocol used to access nearly every website today, and its history tells us that people only choose privacy when it's easy.

Website links used to be in plain text. Originally, HTTPS was only used for websites that handled credit card or banking data because it was slow and cumbersome. HTTPS became the default only after computing became cheap enough that websites could enforce it without users noticing.

Something similar happened with messaging services. WhatsApp, the largest end-to-end (E2E) encrypted service, quietly turned on E2E encryption in 2016 without ever consulting users.

Both of these changes probably affected internet privacy more than anything else, and neither involved users making deliberate decisions to be more private.

Compare that to the difficulty of doing day-to-day transactions with monero or zcash. Both require complex technology and impose very high friction to protect individual privacy.

This brings us to the third reason why privacy coins fail.

3. Most people don’t care about privacy

This is the disturbing truth behind the failure of privacy coins.

Look at the preferences people reveal. They use social media applications that openly sell data to third parties. They use Venmo and expose their payments to the world. They use text messages, which are stored in clear text and can be subpoenaed by law enforcement, while WhatsApp, Signal and Telegram are all free and readily available.

source:

source:Pew Research

Privacy is a public good.The iron law of economics is that free markets undersupply public goods.If only a few users use privacy-preserving technologies, the use of these technologies will become stigmatized. Compare normal WhatsApp, which makes end-to-end encryption ubiquitous, to Monero, which is equally private but immediately flagged as suspicious.

There are two kinds of potential people here. First, some people simply don't care about serious privacy and just want their immediate neighbors, spouses, and friends not to know what they're doing. Blockchains like Bitcoin or Ethereum will do just fine. Their immature friends will not be able to track their activities.

Then there are the privacy conscious, who want privacy controls strong enough to fend off sophisticated third parties. When used correctly, technologies like Monero are powerful enough to deter corporations, governments, and motivated attackers. But all of this came at a high price.

Few are willing to pay what privacy conscious groups are willing to pay for privacy. We shouldn’t expect to see an HTTPS-style shift into the cryptocurrency space until the cost of privacy has dropped significantly.

Which brings us to regulation.

4. To survive a bear attack, you don't need to outrun the bear - you just have to outrun the person behind you

Privacy coins have been a top target of regulatory investigations. When regulators are asked to “don’t just stand there, do something,” the easiest place to regulate are shady privacy coins.

USASouth Korea、Japan、U.K.andUSAherehere、hereandhere）。

Crypto Hallgetting bigger, a large number of retail companies and professional institutions now own BTC and ETH. But few institutions are willing to defend privacy coins. Rather than taint the entire industry, many would rather make privacy coins a victim.

I appreciate the bold work Coin Center and the Electronic Frontier Foundation are doing to protect the civil liberties of Americans in the use of privacy-preserving technology. But I fear they are fighting a losing battle when it comes to privacy cryptocurrencies.

Until then, expect regulators to continue to scapegoat privacy coins, and expect their acceptance and liquidity to suffer as a result.If I were a gambler, I would expect painless privacy solutions combined with decentralized finance and stablecoins to be the biggest growth area in privacy.