On-chain transparency makes employee crypto salaries visible, slowing business adoption of crypto payments.
Lack of fungibility and privacy keeps ordinary users from using crypto for everyday purchases.
Strengthening privacy could boost trust, payroll use, and broader mainstream crypto adoption.
Crypto adoption faces a critical roadblock as privacy concerns continue to hinder mainstream use, industry leaders warn. Binance founder CZ and investor Chamath Palihapitiya recently highlighted how the lack of robust privacy features prevents cryptocurrencies from reaching widespread payroll integration.
Currently, in blockchain technology, the transparency of blockchain means that employees’ salaries are revealed. Therefore, crypto payment is not as private as cash payment. This may deter more businesses from using crypto to pay their employees.
CZ argues, “Imagine a company pays employees in crypto on-chain. You can pretty much see how much everyone in the company is paid by clicking the from address.” CZ asserts that while cryptocurrencies have pseudo-anonymity, in actual fact, blockchain’s transparency coupled with the KYC requirements of exchanges means that users are traceable. Therefore, crypto payment loses its allure as a fast and cheap means of payment compared to traditional banking.
The Privacy Problem in Crypto
The issue does not end with salaries. Chamath and CZ believe that there is a lack of fungibility in most cryptocurrencies, including Bitcoin. This means that not all coins are the same, as the transaction history of every coin is being tracked. “I think my biggest issue with it is that there's a lack of fungibility, which I think is problematic to get to mega scale,” Chamath said.
CZ further emphasized that this privacy issue prevents cryptocurrencies from being fully utilized in society. People cannot buy digital goods or services without leaving a trace. In addition, blockchain technology does not have the feature of cash, as every movement in the blockchain is being permanently recorded.
Implications for Mainstream Adoption
This means that without these privacy enhancements, the adoption of crypto in businesses as well as in consumer payment systems can be a challenge. For instance, businesses might not want to engage in payroll systems in case their employees’ salary information becomes public. In addition, people might not want to engage in crypto in their day-to-day lives in case they feel they are being monitored. CZ said, “There are those use cases [illicit], but the overwhelming majority is you buy a pack of gum, or maybe a movie or video game. It’s not for me to judge.”
Moving Forward: Privacy as a Priority
According to industry experts, filling this gap could speed up mainstream adoption. Cryptocurrency requires traceability prevention and regulatory compliance solutions.
The addition of privacy layers would make cryptocurrencies fungible, allowing coins to be interchangeable while keeping users' data private from exposure. Besides fostering trust, this could pave the way for new opportunities for cryptocurrency payroll and other financial inclusions.
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