Arianna Simpson is the Founder and Managing Director of Autonomous Partners, a fund focused on cryptocurrencies and digital assets. She is also a partner of Crystal Towers Capital, a start-up venture capital fund, and has previously worked for Facebook and BitGo.

The following article is an exclusive contribution to the 2017 edition of CoinDesk.

For all the claims made over the years that bitcoin is a haven for criminals, it is becoming increasingly clear that capital flows on the blockchain are not private.

Bitcoin indexes badly on the fronts of anonymity and confidentiality, because the addresses offer at best a pseudonym, and the balances are completely public. Companies like Elliptic and Chainalysis are building companies around blockchain forensics, and as the network grows in value, incentives to track capital flows are only growing.

Growing awareness about this is largely responsible for the growth of private parts in 2017, many of which have seen price and transaction increases.

For those who are new to the field, getting to work can seem like a daunting task, but it's important to remember that we're still in the early days, and it's also easy to become familiar with a handful of key issues and projects that may be of interest for the coming months and years

Practice or ideology

There is never a shortage of ideological differences in the world of cryptocurrencies.

When it comes to privacy protection, one of the most important is whether techniques that prevent data sharing should be default methods. Two of the biggest pieces in the industry – monero and zcash – are emblematic of this issue.

Of the two, monero offers private default, a feature that its leading developers and community value highly. However, the zcash model includes the possibility of armored or transparent transactions.

And there are reasons to want to see both models continue.

Although confidentiality by default may seem like an obvious solution, we see that zcash may be suitable for use cases such as personal or commercial banking situations in which confidentiality is generally desired, but verifiability is required . Indeed, JPMorgan recently went so far as to implement zcash's zero-knowledge security layer on its quorum blockchain, and we could see even more lawsuits while corporate interest for progress on advance confidentiality.

Beyond ideology, however, practical considerations still occupy an important place.

Most transactions that allow increased privacy require much more space on the blockchain than those that are public, and with concerns about scalability already ahead and center, it is difficult to justify adding to this burden.

Advanced Cryptography

Fortunately, developments are underway at the intersection of mathematics and cryptography that will likely continue to reduce the tradeoffs between privacy, efficiency, and trust.

And make no mistake, there are big tradeoffs today.

Zk-snarks, the zero-knowledge proofing technology currently implemented at the heart of zcash, can be considered the most advanced blockchain privacy tool, but it even has drawbacks. Namely, researchers have disputed the fact that it requires a configuration of trust sophisticated enough to work properly.

Solutions are emerging now that are aimed at tackling the problem, and they will likely continue to spark interest and attention next year.

Zk-starks, for example, have developed much more recently, do not rely on public-key cryptography at all, but rather use unpredictable hash functions, allowing for the elimination of the secure configuration. Still, the technology is in its early stages at the present time.

More immediate could be "Bulletproofs", an article published in late 2017 by a notable group of great cryptographers. But aside from the big names involved, the concept is meant to offer a substantial reduction in the size of the rangeproofness needed to make private transactions.

This is considered a big step forward to save space, faster verification times and lower costs.

Monero has already announced that he is activating the functionality on testnet, with the ultimate goal of bringing them to his blockchain, although that may also be far away.

2018 and beyond

At this point, it is still difficult to predict how these technologies will progress.

The key questions are whether advances in these crypto-currencies will continue to require the existence of dedicated block chains (with unique tokens), or whether they will simply serve as test benches for features that will migrate to dominate parts.

Up to now, it seems that the leaders of the main blockchain ecosystems are hoping that the result could be the last.

The recent blog by Ethereum creator Vitalik Buterin about zk-snarks and zk-starks suggests that the blockchain developer community is thinking about the problem. Still, we do not know where we can go to see a full set of privacy features live on ethereum.

Regarding Bitcoin, the implementation of beneficial changes to privacy seems even less likely in the near future – if we have seen anything this year, it is non-trivial to reach consensus for everything major change to the protocol. ]

But if there are no answers, it seems reasonable to think that private parts will continue to peak in 2018. Interest and enthusiasm are just beginning. to manifest.

You do not have to stay private … In your opinion! CoinDesk is looking for submissions for its 2017 series in review. Send an e-mail to news@coindesk.com to present your idea.

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