Nocturne announces suspension. Why is the privacy track so ill-fated?

After three months, @nocturne_xyz, the privacy infra project that @VitalikButerin participated in, announced that it has been suspended, and the team will change direction and invest in other new products. After Tornado was punished and privacy coins were delisted from exchanges, we originally thought that privacy projects were expected to emerge in the on-chain environment. Now it seems that they are still too optimistic. Why, without going into details, just briefly comment on the possible reasons.

1) In mainstream society, it is still difficult to rationally accept "decentralized products" such as public chains, digital wallets, and decentralized exchanges. In this context, if decentralization is nested with a layer of "privacy" application scenarios, it is difficult not to become an area hardest hit by compliance and review. In this context, privacy projects will be regarded as accomplices of terrorist financing, money laundering and other illegal activities, and will receive "key attention". Especially in countries with strong supervision of Crypto, they can easily be regarded as hostile existences. Based on this background, are those VC-driven projects strong enough to endure government scrutiny? There is a high probability that the team will not be able to bear the pressure and give up.

2) Current privacy projects will build an independent "black box" environment. Users can transfer assets into the black box and then use Stealth in the black box to Address and Commitment Tree, ZK, etc. are used for Token obfuscation. Generally, the larger the black box pool and the more users, the more mature the privacy construction conditions are. However, the way this type of scheme handles compliance issues is usually,Blacklist It is easy to solve the deposit problem through screening and proof of innocence methods, but if there is any involvement with the stolen money link after the withdrawal, it will cause a lot of trouble.

3) The key is that in order to achieve this underlying architecture of asset trading environment switching, commonly used privacy solutions are to build a set of private transactions mechanism, and then the user must first deposit to the privacy environment before completing a series of subsequent operations. This requires the platform to bear the technical challenge of screening all possible illegal transactions on the one hand, and on the other hand it has to face the operational pressure of slow user development and difficulty in expanding the capital pool. Not only do we have to keep a sharp sword hanging over our heads to prevent any mistakes from being investigated and punished by regulators, but we also have to explain to the majority of users the fairness and impartiality of the platform (resistance to censorship). The latter will be even more difficult at this stage.

About this issue, I exchanged opinions with Mr. Madao, who also belongs to the privacy track @ZKTNetwork, and we all agreed that a rigorous privacy product can be used in a practical environment. It will be very complicated, and there is also the possibility that some privacy teams will choose to jump off the road due to R&D pressure;

4) Nocturne mentioned layer2 and AA account abstraction in the statement It must happen before privacy application scenarios. Many people don't realize why, because layer2 and AA are the basic infra of Mass Adoption implementation. The underlying meaning of this sentence is that before the arrival of large-scale application scenarios, privacy problem solutions are more likely to become "evil" accomplices rather than addressing real privacy needs. The logic of this sentence is not difficult to understand. After all, users in the existing market value more the financial attributes of industry DApp applications, and privacy issues are not the primary issue.

5) In my opinion, the compliance issues that privacy projects must solve must precede the privacy issues themselves, that is, there must be a way to intercept illegal assets. The perfect strategy for circulation comes first, and on this basis we will discuss privacy issues on the user demand side. After the population of the layer 2 market expands on a large scale, the layer 3 application environment built on layer 2 will have a privacy solution that is highly recognized by both regulatory authorities and market users. After all, in the application environment, supervision is better penetrated, funds are better isolated, and users are better managed. By then, privacy applications will become an optional entry point for large-scale users to connect to the on-chain environment, and user preferences in the mainstream market will drive privacy DApps market is growing.

Instead of expecting privacy to bring Mass Adoption, is it more realistic to promote universal privacy after Mass Adoption?

In short, the privacy trading track also has a certain degree of "legitimacy" in nature. At this stage, compliance > privacy under various factors Only by advancing the strategy can we continue to implement it. Who can take up the holy grail of encryption in the privacy field is destined to be a difficult journey.