The debate about privacy has existed since a century before the digital age, and the privacy of blockchain is often misunderstood as "dangerous transparency" or "a breeding ground for crime." This article is based on a piece written by a16z and organized, translated, and authored by Foresight News. (Background: The Hong Kong stablecoin bill has been released: KYC requirements for holders raise controversy, bans on DeFi and privacy protocols) (Context: From privacy evangelists to 'money laundering' defendants, Tornado Cash co-founder Roman Storm faces a fateful decision) From telegrams and telephones to the internet, the birth of new technologies always incites anxiety over the impending demise of privacy. Blockchain is no exception; its privacy is often misunderstood as "dangerous transparency" or "a breeding ground for crime." However, the real challenge is not to choose between privacy and security, but to build technological and legal tools that accommodate both. From zero-knowledge proof systems to advanced encryption techniques, privacy protection solutions have been gradually developing. Blockchain privacy extends far beyond the financial sector, opening doors to numerous user-friendly applications such as identity verification, gaming, and artificial intelligence. With the recent signing and enactment of the US stablecoin bill, the demand for blockchain privacy is more urgent than ever. Stablecoins provide an opportunity for 1 billion people to enter the cryptocurrency space, but to ensure users can confidently use cryptocurrencies to pay for everything from coffee to medical bills, the privacy of on-chain activities must be assured. Now is not the time to fabricate myths, but to start building. The debate about privacy is not new, and the answer has long been clear: innovation, not myths and misunderstandings, shapes the future of privacy. Misconception 1: The internet is the root cause of modern "privacy issues" Truth: As early as nearly a century before the internet emerged, the communication revolution of the late 19th century had already propelled the development of privacy rights in the United States. At that time, the technologies developed by entrepreneurs (the first commercial telegraph, telephone, typewriter, microphone, etc.) enabled unprecedented dissemination of information (news, text, images, etc.). Historian Sarah Igo points out that during this period, "privacy controversies emerged alongside new forms of communication," raising a series of new questions: Can media outlets use other people's names and images for commercial purposes? Can law enforcement wiretap phones or use photography or fingerprint technology to establish criminal identification profiles? After these technologies emerged, legal scholars quickly began to address the privacy challenges they posed. In 1890, future Supreme Court Justice Louis D. Brandeis and lawyer Samuel D. Warren published an article titled (The Right to Privacy) in the (Harvard Law Review). Throughout the 20th century, privacy law steadily developed in the realms of legislation, tort law, and constitutional law. It wasn't until over a century later (in 1993) when the first popular commercial browser, Mosaic, was released that internet-related privacy issues gradually increased. Misconception 2: The internet can function normally without privacy Truth: The early internet, lacking privacy protections, severely hindered its proliferation. In fact, before the internet emerged, people's privacy levels were higher. As Simon Singh described in (The Code Book), cryptography pioneer Whitfield Diffie pointed out that when the (Bill of Rights) was passed, "two people only needed to walk a few meters to confirm no one was eavesdropping to have an absolutely private conversation—this level of privacy is unmatched in today's world." Similarly, past transactions conducted in goods or cash had privacy and anonymity that most digital transactions today lack. The advancements in cryptography alleviated privacy concerns, giving rise to technologies that allow for the secure transmission of confidential digital information and ensure data security. Anticipating that users would demand basic privacy protections for digital activities, Diffie and other cryptographers developed solutions such as asymmetric public key encryption. These cryptographic tools have now become the cornerstone of e-commerce and data protection, laying the groundwork for confidential information exchange in the blockchain realm. The development of the Hypertext Transfer Protocol Secure (HTTPS) is a typical example of privacy tools driving the prosperity of the internet. The early internet used the HTTP protocol, which transmitted data unencrypted, allowing malicious attackers to steal sensitive information submitted by users. A few years later, Netscape developed HTTPS for its browser, protecting sensitive data through an encryption layer, enabling users to safely transmit credit card information online and engage in private communications. With the help of encryption tools like HTTPS, users were more willing to submit personal information such as names, birth dates, addresses, and social security numbers online, which propelled digital payments to become the most commonly used payment method in the US, and businesses were also willing to take on the risks of receiving and protecting such information. These changes in behavior and processes have spawned numerous new applications, from instant messaging and online banking to e-commerce, making internet activities an essential component of today's economy and bringing unprecedented communication, entertainment, and social experiences. Misconception 3: Public blockchain transactions are anonymous Truth: Public blockchain transactions are transparently recorded in publicly shared digital ledgers, making them "pseudonymous" rather than anonymous—this distinction is crucial. Pseudonymity is not a new concept and played an important role in early America: Benjamin Franklin published articles in (The New England Courant) under the pseudonym "Silence Dogood"; Alexander Hamilton, John Jay, and James Madison signed (The Federalist Papers) as "Publius" (Hamilton also used multiple pseudonyms). Blockchain users transact through wallet addresses, which consist of unique alphanumeric strings (i.e., keys) generated by algorithms, unrelated to real identities. Understanding the distinction between pseudonymity and anonymity is key to recognizing blockchain transparency: although wallet addresses cannot be directly linked to user identities, the privacy protection of key holders is far lower than expected, let alone anonymity. The function of a cryptographic address is akin to a username, email, phone number, or bank account number; once a user interacts with others/entities, the counterpart can associate the pseudonymous address with the user, exposing their complete on-chain transaction history and even revealing their identity. For example, if a store accepts cryptocurrency payment, the cashier can see the customer's past spending records and cryptocurrency holdings (at least the information of the wallet used for that transaction, while seasoned users usually own multiple wallets). This is equivalent to your credit card spending records being made public. The (Bitcoin White Paper) has long mentioned this risk: "If the identity of the key holder is exposed, correlation analysis may reveal all their transactions." Ethereum co-founder Vitalik Buterin has also written about the many challenges associated with "having a significant part of life subjected to public analysis" and proposed solutions like "privacy pools"—through zero-knowledge proofs, users can prove the legitimacy of their fund sources without disclosing their complete transaction history. Therefore, many companies are also developing solutions in this area, aimed not only at protecting privacy but also at achieving new applications that combine privacy with other unique properties of blockchain. Misconception 4: Due to the privacy of blockchain, criminal activities are rampant Truth: Data from the US government and blockchain analysis companies show that the use of cryptocurrencies in illegal financial activities remains lower than that of fiat currencies and other traditional channels, and illegal activities account for only a tiny portion of total blockchain activity (data has remained consistent over the years). In fact, as blockchain technology has developed, the proportion of on-chain illegal activities has continued to decline. It is well known that in the early days of the Bitcoin network, illegal activities accounted for...

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