Transparency ≠ Freedom: How Blockchain Can Make Us Vulnerable

Blockchain and the Illusion of Privacy

We have spent years chasing a decentralized future, only to realize we’re living under a powerful digital microscope. 

Wallet addresses, transactions, virtual connections, and smart contracts are all public. Enthusiasts celebrate blockchain’s transparency and auditability. But is it always something to be proud of?

When you first step into the world of crypto, the idea feels powerful. Everything is fair, everything is open, and everyone is equal. But as time passes, you begin to realize that anyone can trace where your money goes. It starts to feel like being on Big Brother.

Trading from the same wallet, sending crypto donations, signing DAO votes, or engaging in any on-chain activity slowly builds your digital portrait. More precisely, it creates a dossier—one open to anyone, from hackers to authoritarian regimes with strong financial and law enforcement systems.

Pseudo-Anonymity and the Spirit of Cypherpunks

This is the pseudo-anonymity that has been discussed since the earliest days of Bitcoin. Your public key may not carry your name, yet it’s still tied to every on-chain action you’ve taken. 

For example, in one interview, Edward Snowden stated that most blockchains pose a risk to privacy. He argued that they stray from the original cypherpunk vision, which aimed to protect personal freedom, not expose it.

For more on this, read our feature: ‭Is Bitcoin Pseudo-Anonymous?

Cypherpunks and crypto-anarchists do not simply believe in code. They believe in the right to live without external surveillance. 

Among their ranks were figures such as:

• Timothy May, author of the Crypto Anarchist Manifesto
• Eric Hughes, who wrote the Cypherpunk Manifesto in 1993
• Julian Assange, who was active in cryptographic communities under the pseudonym “Proff” before founding WikiLeaks
• John Gilmore, a co-founder of the Electronic Frontier Foundation and a committed advocate for open networks, encrypted internet traffic, and free communication

Each of them defended the idea that privacy is not a privilege. It is a fundamental requirement in the digital era.

In his landmark manifesto, Eric Hughes wrote, “Privacy is the power to selectively reveal oneself to the world.”

For the cypherpunks, privacy was never about secrecy. It was about the right to choose when and to whom personal information is shared. 

Yet today, Web3 often makes that choice for us. By default, nearly every personal action is exposed to public view.

Digital Paranoia Is Not Paranoia When It Is Justified

One of the most striking examples is the case of Tornado Cash, a cryptocurrency mixer that was sanctioned by OFAC in 2022. 

The protocol, designed to enable anonymous digital asset transfers, was declared illegal. The case set a troubling precedent. Those targeted were not the individuals laundering funds but the developers who had written open-source code. It was as if the blame had been placed not on the killer, but on the maker of the weapon. 

As a result:

• The Tornado Cash repository was removed from GitHub.
• Developers faced searches, arrests, and criminal investigations.
• One of the project’s co-authors, Alexey Pertsev, spent more than a year in detention. 

In 2025, the charges against him were dropped. However, the shadow of the case still lingers.

For more on the allegations against Pertsev, read our feature: Tornado Cash Boost: TORN Soars 800% After Sanctions Repealed.

The deeper issue facing blockchain protocols is the absence of clear and consistent regulatory frameworks. In this environment, any project focused on privacy can suddenly come under fire, no matter its intentions or declared purpose. Today it is Tornado. Tomorrow it could be anyone. 

This does not create a fair and competitive market. It creates fear. One day, you are building tools that support the right to privacy. The next, you are seen as a threat to public order and suspected of every deadly sin.

The fact remains: the myth of Web3 anonymity is heavily overstated.

However, some promising solutions are beginning to take shape. The idea of privacy with trust is already being developed by:

• zk-SNARKs 
• Manta Network 
• Railgun 

Still, these technologies remain far from reaching widespread adoption.

Freedom Without Privacy Is a Stage Without a Curtain

Decentralization, as a concept, holds great promise. But without privacy, it does not resemble real freedom. 

It becomes a system where every move you make can be:

• Viewed
• Recorded
• Analyzed 

And not just by governments. Anyone can watch: a neighbor, a journalist, or someone who sees you as a threat or a rival.

Today, as Web3 moves closer to becoming the new standard, it is time to talk not only about freedom but also about the personal boundaries that must come with it. 

The right to disappear. 

The right to stay silent about where your coins went and why. 

When everything is visible, you become exposed. And freedom without protection quickly turns into an illusion.

How to Restore Privacy Without Losing Web3

No, the answer isn’t abandoning blockchain. Instead, the industry should integrate privacy tools as a baseline feature, not an optional add-on.

We need interfaces where private transactions are not a rarity but the default setting. 

There are already examples of projects moving in this direction: 

• Aztec Network 

A privacy-focused Layer 2 built on Ethereum, where all user activity is hidden from observers by default. 

• Railgun 

Applies Zero-Knowledge primitives to maintain privacy while staying fully compatible with existing DeFi protocols.

Beyond technology, clear legal frameworks are just as critical. 

Unfortunately, regulators still often view privacy as a red flag. This perception makes new users wary of even the slightest hint of anonymity in the protocols they interact with.

The right to privacy should be defended just as strongly as the right to free speech. Legally, it’s achievable. All it takes is recognizing a private transaction as a legitimate expression of basic civil liberties. 

One example is the European Court of Human Rights and its stance on digital communication (see ECHR, 2018, Benedik v. Slovenia). The court examined whether police access to user data linked to a dynamic IP address violated the right to respect for private life under Article 8 of the European Convention on Human Rights. (Spoiler: The court fully sided with the applicant.)

What is also required is a cultural reevaluation. 

Not everyone who values anonymity is acting with criminal intent. And not everyone using privacy coins is a terrorist or part of a criminal network. 

Sometimes, it’s just someone who wants peace and prefers not to show the contents of their wallet to every curious onlooker.

The cypherpunks once said, “Privacy is power.” It is time to remind the Web3 world that privacy is also a natural right. Along with that right comes a responsibility to choose what should be visible and what should remain private.

Without that choice, we are not building a free decentralized world. We are building a digital prison with no exit and no option to delete your account.

For more insights, read our feature: Debunking Common Bitcoin Myths.