Seeking Thoughts on Balancing Blockchain Privacy and Government Compliance

Hey friends,

I'm currently diving into the complexities of blockchain privacy and would love to get some input from the community. Most of us want to send transactions from one wallet to another while preserving our right to privacy. For example, let's say you want to pay a vendor $10,000 for a service without revealing the total worth of their services to them, preventing them from inflating their prices or demanding more next time.

However, the challenge with privacy protocols or tools is that they often clash with governmental regulations. Without KYC (Know Your Customer) and AML (Anti-Money Laundering) measures, it's tough to ensure the longevity of such protocols. A prime example is Tornado Cash, which faced sanctions due to its non-compliance.

Here are a few questions and thoughts I have:

1. **Should we work with the government?** I'm developing a protocol that allows users to transact privately, but should we integrate KYC and store the data? If the government requests information to track taxes or investigate potential fraud, we would have to provide it.

2. **Complete privacy vs. compliance:** Would you prefer a protocol that ensures complete privacy, giving users full control over their data? The downside is the high risk and the likelihood of limited investor interest, as governments hold significant power and influence.

3. **Survivability and ethics:** How can we balance the ethical considerations of user privacy with the need to comply with legal requirements? Is it even possible to find a middle ground that satisfies both users and regulators?

I'd love to hear your thoughts on these issues. How important is complete privacy to you in blockchain transactions? And do you think it's feasible or even desirable to create a privacy-focused protocol that operates within the bounds of the law?

What would you prefer?

Looking forward to a great discussion!

Cheers.