Why Blockchain’s Operators Have Failed Satoshi
Contrary to his original intentions, cryptocurrencies and DeFi platforms are now more vulnerable to privacy breaches and hacking than traditional banking.
In his original bitcoin manifesto, creator Satoshi Nakamoto talked specifically about how the “traditional banking model” maintained privacy by “limiting access to information to the parties involved and the trusted third party”.
Here, the weak link is the trusted third party, which is usually the financial institutions that control the bank accounts and electronic systems we use. These institutions could be pressured by law to turn over information or simply hacked by malicious actors.
In contrast, using a distributed ledger technology called blockchain, Satoshi designed the bitcoin system to use a network of volunteer computers across the Internet (called nodes) to keep records and process transactions. Counterparties can only be identified by encrypted key pairs which are regenerated each time a transaction occurs. This prevents transactions from being consistently traced and “linked to a common owner”.
Unfortunately, the way most cryptocurrencies work today, your identity as a counterparty is far more easily ascertained compared to using traditional banking channels or cash. This was stated by blockchain expert Gurvais Grigg in an interview with CNBC recently.
“Unlike other forms of fraud in fiat, with cryptocurrency in the blockchain… there’s a record… and that transparency and speed of accessing that record globally makes investigations of these types of fraud accelerate over traditional finance. ”
— Gurvais Grigg, Chainalysis CTO and former FBI…