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What is Privacy 2.0?

Privacy 2.0 represents a evolution in privacy systems, introducing the concept of "Private Shared State." This innovation allows public and private states to coexist and interact seamlessly, addressing critical privacy and composability challenges.

The Foundation of Shared State​

Blockchains function as state machines, transitioning from one state to another through transactions. This shared state serves as a decentralized, immutable, and verifiable record of data—like balances, token ownership, and smart contract logic.

Think of it as an infinite whiteboard accessible to all participants. Anyone can propose changes, but the decentralized network ensures validity before updates are permanently added. While this openness underpins blockchain’s trustworthiness, it also introduces significant privacy vulnerabilities.

Why Privacy 2.0 is a Game-Changer​

Privacy 2.0 resolves these vulnerabilities by enabling private shared states alongside public ones. Private states restrict visibility of sensitive information while preserving the decentralized principles of composability and transparency.

Key Innovations:​

  1. Private State Integration:

    • Private states coexist with public states, enabling selective access to sensitive data.
    • Example: A corporate treasury can securely store token balances without exposing them to the public.

  2. Off-Chain Computations with On-Chain Verification:

    • Private computations occur off-chain in secure environments like ZK circuits, Trusted Execution Environments (TEEs), or using Fully Homomorphic Encryption (FHE).
    • Cryptographic proofs validate these computations, updating the public state without revealing sensitive data.

  3. Enhanced Composability:

    • Applications can leverage both public and private states to create innovative models, such as:
      • Confidential Payroll: Employee payments encrypted on-chain, maintaining transparency and privacy.
      • Private Gaming: On-chain poker games with encrypted player hands.

Privacy-Enhancing Technologies (PETs) in Privacy 2.0​

The backbone of Privacy 2.0 lies in advanced cryptographic techniques and PETs:

  • Fully Homomorphic Encryption (FHE):

    • Allows computations on encrypted data without decryption.
    • Example: Encrypt two numbers, perform addition on their ciphertexts, and decrypt the result to get the correct sum.

  • Multi-Party Computation (MPC):

    • Enables multiple parties to compute a function collaboratively without revealing their individual inputs.

  • Trusted Execution Environments (TEEs):

    • Secure hardware environments that isolate sensitive computations from potential threats.

Benefits of Privacy 2.0​

  1. Privacy Without Sacrificing Decentralization:

    • Private shared states maintain blockchain’s composability while securing sensitive data.

  2. Regulatory Compliance:

    • Selective transparency allows for compliance with audits and regulations.

  3. New Application Models:

    • From secure on-chain data monetization to innovative DeFi services, Privacy 2.0 unlocks a wealth of possibilities.

The Future of Privacy 2.0​

Privacy 2.0 marks a paradigm shift, enabling secure, private, and compliant interactions on blockchain systems. As adoption grows, this approach will redefine trust and innovation in decentralized ecosystems, paving the way for broader participation and usability.

Encifher is at the forefront of this evolution, bringing Privacy 2.0 to life by blending cutting-edge PETs with user-friendly solutions.