Privacy and blockchain: What does it really mean?

3 min readApr 20, 2023

Web3 promises privacy and decentralization for all. But do we really understand what this concept entails for how we develop and experience blockchain in the search for a more secure and anonymized Internet?

At Dandelion, we leave no room for guessing. Let’s take a closer look at what privacy really means in Web3 with our expert, Co-Founder & VP of Engineering, Jason Xu.

Starting with the definition

A fact that may be surprising to many: privacy and anonymity are not the same thing.

Privacy is about having control over the personal information that you expose to other parties and the public;

Anonymity is used to conceal your identity, but not your actions.

When you are anonymous, you can reveal facts about yourself without actually compromising who you are because there is little to no traceable correlation to you directly. For example, you can freely expose your preferences below at no cost to your identity:

● How much you are spending on rent;

● Your favorite video game;

● Preferred color of dad hats.

Of course, there are overlapping aspects to privacy and anonymity, even in our example. There’s data that you can expose that can be correlated to you, such as “favorite local restaurant” that can point to your approximate location.

This type of information leak can’t be prevented by blockchain: that’s where user errors come into the picture for exposing your personal information in the first place.

Where blockchain comes in

The rise of blockchain technology has brought significant changes to the way we store, process, and manage data. As you might have guessed, it’s also a game-changer for privacy.

One of the most significant benefits to privacy and anonymity of using blockchain is its decentralized nature. Instead of personal information, you are identified with a cryptographic key. As much as Web3 advocates argue for it, blockchain does not in fact completely eliminate the need for a third party and does not necessarily grant complete anonymity.

Why so? Most users will have to exchange fiat to obtain crypto. There is critical information that you have to expose to exchanges just to create an account. The degree of how much personal information can differ from country to country, but user verification with your driver’s license or passport, email, and phone number etc. is commonplace. And what is less compromising that connecting your ID to your crypto wallet?

This, however, doesn’t mean that you should give up on having privacy and anonymity completely. You can be more careful by:

● Choosing trustworthy 3rd parties and triple-checking their credibility;

● Data obfuscation techniques, such as encryption, storing hashes on the blockchain, and securing actual data in a different location;

● Having multiple accounts you transact from to prevent tracking;

● Use a DEX (decentralized exchange) instead of a centralized one;

● Using blockchains that support privacy through technologies such as zk-SNARKs and zk-STARKs. These technologies use zero-knowledge proofs which allows you prove that a piece of information is accurate without actually exposing what the information is.

All in all, privacy cannot be taken for granted, even as we speak about Web3 and the blockchain promise to secure your identity. User error and centralized systems still make it harder for users to go completely dark.

Yet, as we pursue the true Metaverse privacy will continue to evolve. Follow us on Twitter and Telegram to see how we make it happen with no Layer-2s.