Privacy in Web3 Communities: Balancing Transparency and Anonymity
“When it comes to privacy and accountability, people always demand the former for themselves and the latter for everyone else.” -David Brin, science fiction writer and futurist.
Web3, as it currently exists for a large chunk of the population, is seen as a modern version of the Wild West, where tech-savvy individuals behind anonymous accounts and strings of numbers and letters can take advantage of beginners trying to enter the space. However, for active participants in the space, often the experience is that the anonymity and privacy afforded by web3 technology allow them to build and create identities for themselves free of the traditional biases and stigmas often found in real life.
On the one hand, the prevailing principle behind using decentralized currency and blockchain technology is to allow anyone, anywhere, to be able to access their funds in a way that is both publicly verifiable and visible (via tools like Etherscan) while remaining private and secure behind their wallet address which in and of itself, has no identifiable information attached.
On the other hand, web3 in its current state empowers and encourages creators to build brands and identities in ways that were previously much harder, if not impossible to scale at this pace, by connecting people across the world through this technology and using NFTs and PFPs as well as traditional social media channels.
NFT PFPs have the unique potential to level the playing field for traditionally marginalized communities by masking the holder’s identity behind a non-intentionally gendered character or abstract digital art, which helps individuals avoid implicit biases tied to their real-world identities. This anonymity or pseudonymity fosters a community where users are judged based on their ideas, contributions, or chosen digital personas rather than their race, gender, or socioeconomic status. For example, when I go to IRL events, I often do not get recognized as the 30-year-old white man named Tyler, but instead, I am recognized by my digital persona represented by a Cool Cat wearing a knight helmet and a sweater and chain. While I have occasionally leaned into that persona (see Halloween 2021), I am not often wearing any of the things I am most easily recognizable as.
For women, people of color, and members of other marginalized communities, this dynamic of pseudo-anonymity may offer a refreshing change. These communities often face prejudice in traditional spaces, stemming from systemic stereotypes, entrenched racism, and predispositions from life experiences one may or may not have had. The ability to 'wear' an NFT PFP introduces a level of identity fluidity that bypasses these potential biases and allows them to more easily share their creations or passions without prejudgment. Anonymous PFPs may also encourage participation from those who may have otherwise been hesitant to engage due to fear of discrimination or harassment, general anxiety of the public spotlight, or inability to participate due to the societal confines of their careers or backgrounds.
One important note here is that anonymity and privacy are not necessarily identical. Anonymity allows the person to remain unknown, while privacy determines how much information that person chooses (or unfortunately, sometimes does not get to choose) to reveal about themselves. Many individuals in this space have confided in me that they do not feel comfortable revealing any part of their identity for fear of parasocial relationships or even threats of harm they’ve received.
I was threatened leading up to NFT NYC 2022 by a community member and was unsure about how to proceed. Fortunately, wonderful individuals and founders all across the space sent me messages of support, offers to provide security, and more, so I could enjoy my time. However, as kind as these gestures were, it was also incredibly sad that these generous, amazing individuals had so much practice gathering resources and ensuring their safety at events that were supposed to be about rallying communities and connecting with friends.
Also, anonymity can embolden malicious actors to perpetrate scams or fraud with a decreased fear of repercussion. This is a common critique of the space, with outsiders often perceiving it as akin to a digital Wild West - lawless and dangerous, and actions like these have set the space back by scaring away more risk-averse investors and individuals who don’t feel comfortable getting over the technical hurdles that currently exist in the onboarding process.
While the decentralized nature of blockchain technology ensures transaction transparency, it does not inherently provide a safeguard against fraudsters posing as trustworthy entities. Rather, as it currently stands, lessons are often learned on an expensive and individual basis, with some people considering getting scammed a sort of “tuition” crucial to getting introduced to the space.
Moreover, the same privacy that protects marginalized individuals could potentially be weaponized to hide hate speech or toxic behavior. Certain NFT communities have allowed bullying, hate speech, personal attacks, and worse by not actively discouraging their members from taking these actions. Community moderation and governance have become more complex since groups of 5,000 or more individuals often own these PFPs, and since project team members have limited to zero ability to manage behaviors on traditional social media forums like Twitter and Reddit. However, strong projects in the space often rely on other prominent holders to put members taking non-representative actions in their place by calling them out publicly and disavowing the holder’s behavior.
Lastly, transparency in web3 projects was a primary selling point for early investors. The prospect of not only getting to become part of a community but also being empowered to shape and grow the project alongside the founding team was a new and novel idea that had not been accessible to many people previously. The NFT space, and crypto markets at large, exist on a cyclical plane consisting of bear and bull markets. The promise of transparent leadership was extremely enticing during the bull market when everything was “up only” and energy was good.
However, as the bear market has intensified, I have noticed that many of those communities have faded into the background in large part due to a lack of transparency from teams regarding how they will be adjusting to the changing market conditions. The strongest communities have either maintained clear communications about their plans and how they will adapt considering the state of the market, either via direct team communication or through the formation of a representative community council that can bring up concerns to the core team.
It is important to note that many people conflated the idea of transparency from founders as "my opinion as a holder is equal to, or more important than the founder’s opinion.” This notion led many holders to over-invest, demand change due to the size of their financial investment, and then obliterate the floor price and project when they did not get their way.
Transparency in web3 instead was intended to allow holders a peek behind the curtain and the opportunity to voice their opinions about decisions that had been made. I believe that this misconstrued understanding of “transparency” set the space back once the bear market set in, because overinvested holders enticed by the promise of more and more money had to realize that they did not have the final say in project decisions, and as a result, they were not in the position of power they believed they were in.
Overall, balancing transparency and anonymity is the key to mitigating these challenges. Web3 communities must strive for inclusivity and security, foster spaces where individuals feel safe to engage and contribute to the project’s success, and disavow members whose behaviors do not match the general ethos of the project.
Additionally, user education about common scams and safe online practices can go a long way in protecting community members from malicious actors in the space. As we all navigate this transformative phase of web3, I believe the focus should be on leveraging the benefits of anonymity to promote inclusivity and diversity, while mitigating risks through robust governance and informed user behavior. It is an ongoing balancing act that will take a fair amount of effort from many of us, but it is essential to the sustainable growth and vibrancy of the Web3 communities we know and love.
