Privacy Preserving Oracle Feeds
As we explored in our article on Encryption and Scalability, ORAO has chosen to prioritize development for chains that already scale, and allow for cheap encryption. This allows for a more sustainable data marketplace by enabling data providers to control who can get access to the data they provide. But it also allows for something new — publishing data without outsiders knowing what the product is.
The Cost of Transparency
From the old Silk Road days of people buying drugs with BTC to DeFi, it’s important to remember just how transparent public blockchains are. When Silk Road fell, law enforcement agencies were able to connect individual Bitcoin holders to addresses belonging to Silk Road, and so track those individuals down. Although governments at the time had little interest in people who simply bought drugs for personal use, they learned an important lesson in on-chain transparency. Similarly in 2021, there exist companies like Chainalysis that explicitly track all on-chain transactions, trying to link as many traders and holders as possible to addresses and transactions and build individual profiles, then analyze and sell that data.
And that’s just private actors; for profit companies. The EU, the US government, China, Russia, and many other countries have all dedicated resources toward identifying and tracking crypto users, whether for tax enforcement purposes or to clamp down on illegal transactions. It’s an inescapable aspect of public blockchain — anything that is included in a block is visible to everyone, for all time.
There are chains like Monero, of course, where transactions can’t be tracked. But Monero does not support Smart Contracts, nor do the developers have plans to ever do so. A few projects are working on privacy-by-default Smart Contract capable chains, but so far they are relatively obscure. Transparency, for good and ill, is part of blockchain forever.
Reclaiming Privacy for Data Feeds
In the case of oracles, encryption is necessary to create sustainable data markets, where providers can sell the same data more than once if they have multiple customers. The encryption comes at the cost of bloated transaction size and cost of decryption — but if the underlying chain can support the larger transactions without extreme gas fees, that’s a fair price to pay for a sustainable market.
Since encryption is happening anyway, though, by a happy little coincidence that opens the door to reclaiming a higher degree of privacy. The encrypted transaction is visible to all, but if the key to read it is available to only one customer, there is no reason why any outside observer should even know what category of data the encrypted feed contains.
Of course, if only a few feeds were encrypted, that would single them out as cases where someone was willing to pay extra for the higher gas fees. But as encryption is the cost of doing business for all providers regardless, most data products won’t be private for the sake of privacy but as a side effect of market forces, allowing a degree of legitimate privacy for everyone.