Understanding Compliant Privacy in Web3

In a recent AMA session hosted by Cointelegraph, industry experts gathered to unveil unique solutions for compliant privacy in the dynamic world of Web3. Speakers included Cristina Stavila from Occam DAO, Michael A. from Galactica Network, and Cyrus Fazel, founder of SwissBorg. They emphasized that setting robust standards for compliant privacy is essential for the mass adoption of cryptocurrency.

The Dystopian Threat and the Role of Compliance

It’s not every day you hear that compliant privacy may be the last barrier between us and a dystopian world run by Central Bank Digital Currencies (CBDCs). According to Michael, “Compliant privacy is the only technological component between a nightmarish dystopia of CBDC and a high-profile Web3 world of obfuscated identities.” This alarming outlook reveals the necessity for regulations and KYC (Know Your Customer) processes on the blockchain, but with a crucial twist — respecting user privacy.

Zero-Knowledge Tech: The Hero We Need?

The conversation then turned towards the innovative zero-knowledge technology employed by the Galactica Network. This L1 protocol facilitates KYC-based transactions while maintaining privacy. Its applications include:

• zkCertificates: Non-transferable NFTs disclosing minimal data.
• Reputation Root Contract (RRC): Smart contracts that assign reputation scores to users based on their interactions.
• Contingent Transactions: Flexible transaction rules based on RRC, which adapt according to user behavior in decentralized applications (dApps).

Building for the Future with Protocol Citizenship

Taking a step into the ambitious realm of governance, Galactica Network is pioneering the concept of Protocol Citizenship. This idea is akin to national citizenship, embedding rights and responsibilities within a Sybil-resistant network. By crafting a Cypher State, they aim to create on-chain political institutions offering citizens perks like universal basic income and access to real-world assets.

The Promise and Pitfalls Ahead

While innovation is exciting, Michael also warned of potential downsides, such as reputational risks and liquidity fragmentation. Yet, it’s the partnership between zero-knowledge proofs and collaborative efforts that could bridge Web3 with traditional institutions. “This approach represents uncharted territory in the blockchain space,” they concluded, but believe it’s pivotal for mass crypto adoption.