Ruby Protocol — What To Do When Regulation Starts Killing Innovation
Lessons From Celsius Network Bankruptcy Filing
Before we start this post, we would like to direct your attention to the tweet thread below. It details how Celsius Network, with deficits on its balance sheet, filed for bankruptcy while allowing anyone to access more than 14,500 pages of information that relates to the financial dealings of the platform’s co-founders, but also the names, wallet IDs, and crypto transactions data of those who had invested their funds with Celsius Network.
The information above reveals each user’s financial information and enables observers to analyze the blockchain and de-anonymize on-chain addresses. Putting it all together, it becomes clear that users’ privacy got invaded and their security compromised.
Why did Celsius Network make it public?
Well, they were, in a way, forced to expose customer information as part of its restructuring process, given the necessary transparency demanded by U.S. law. While that usually applies only to the company’s assets, since Celsius held customer assets in custody, they were also affected.
In a nutshell, they did not want to, but they had to.
We highly recommend you read the appeal process on whether to make the extensive database of consumer information public. It was also a heated debate on whether to respect individual information.
However, in short, first, Celsius argued that such an extensive database of consumer information was too valuable for the company to be made public. Moreover, doing so would “significantly decrease the value of the customer list as an asset in any future potential asset sale,” the company claimed.
Second, Celsius argued that if the information requested is made public, customers could become targets of “identity theft, blackmail, harassment, stalking and doxing,” per the court document.
Finally, the court ruled against the majority of Celsius’ requests. It dismissed the differentiation between U.S. and U.K./EU customers based on the arguments above and allowed the company only to redact home and email addresses.
It denied the anonymization motion completely.
Time to rethink crypto regulation?
Regulation, in nature, is responsive. Crypto innovation, or any form of innovation, is the complete opposite. Therefore, innovation should not be regulated because it is logically contradictory.
Almost all state governments are putting forward regulatory frameworks to keep a tight rein on the crypto movement, claiming it is the responsible way to move forward. However, the example of Celsius Network unmasked the critical assumption underlying this approach: our policymakers are equipped beforehand to know what will and will not work in crypto. But they don’t.
The existing framework still operates imperiously and disdainfully to individual privacy rights.
Innovation means the new markets are different, creating something new. It’s unlocking latent demand that the previous approaches didn’t reach, and it is a competitive threat to the incumbent industries and the old way of thinking.
We argue rethinking regulation is to consider regulation as a wise man who cannot keep up with new technology, which is not to say no to all regulation (wise men). We need to follow the rules because you should follow the rules most of the time. But now and then, the rules get pathological, and you must stand up.
We all lose when the actual land of opportunity is turned into a land of missed opportunities because of the omnipresent regulation.
To Make Privacy a Default Setting For All
Making privacy a default setting means changing the rules we operate on. It means asking the right questions because a bad question can halt, freeze, deflate, and derail thinking.
How can we design a working environment where people are in charge of data? First, we need one that is privacy-first.
At Ruby Protocol, we believe the following features are indispensable to a promising privacy-first tool, and we build this private data management framework for Web 3.0 entirely around them.
- A privacy-first approach to preserving anonymity must hide individuals through its privacy-preserving technologies. (Ruby utilizes Functional Encryption (FE) that enables users to encrypt sensitive information)
- To enable the privacy-first feature, the data processing must be decentralized to avoid one single point of failure and inefficiency. (Ruby is a private data management framework for Web 3.0, built on the blockchain)
- Privacy is intimate, whose definition differs from one to another. It must allow users to customize its control. (Ruby will be compatible with different blockchains and offer access control)
- It must be compatible with larger organizations in preserving data privacy to avoid adoption friction. (Ruby is ready to open a brand-new chapter for regulation-compliant decentralized financial services and institutions)
References:
https://twitter.com/superanonymousk/status/1578458504503123969?s=46&t=es-m51fk6z-eM9_v_0Hwqg
https://knowledge.wharton.upenn.edu/article/how-to-regulate-innovation-without-killing-it/
https://hbr.org/2021/03/can-the-eu-regulate-platforms-without-stifling-innovation
https://bitcoinmagazine.com/business/why-celsius-exposed-users-and-what-you-can-do
About Us
Ruby Protocol is a cross-chain, privacy-first infrastructure, powered by Polkadot. Our layer-1 protocol utilizes Functional Encryption (FE) cryptography, which allows users to adopt a modular approach to data privacy and ownership. This novel solution will allow users to encrypt sensitive information on-chain, which can only be decrypted by holders of an approved private key.
Ruby’s FE Substrate-pallet will serve as the building blocks for privacy-first smart contract DApps building on the native Ruby Chain, while also acting as a privacy layer for Parachains and Web3 DApps across the Polkadot ecosystem.
